By Helena Wasserman for Business Insider SA
Large companies have been urged to pay their creditors early this month in an effort to bolster small and medium businesses.
The CEO Initiative, whose members include 200 company bosses, has called on businesses to settle their bills with suppliers on 20 April.
According to Discovery’s CEO, surveys among small businesses show that 60% of them are either considering retrenchments, or have already started.
Business for South Africa estimates that less than 50% of the economy is currently functioning.
The CEOs of Standard Bank, Discovery and other large companies have called on businesses to pay their suppliers earlier this month, as small firms face a struggle to survive during the national lockdown.
There are some 525,000 formal small and medium businesses (SMEs) in South Africa, which employ 6.6 million people.
“Given the lockdown, the vast majority are unable to pay their rent, utilities, and importantly, their employees. Initial surveys indicate that 60% of SMEs are either considering retrenching employees, or already have,” says Adrian Gore, CEO of Discovery.
Gore joined 200 other company bosses, as part of the CEO Initiative movement, in calling on companies to pay their creditors by Monday 20 April 2020.
“We believe early payment is the right thing to do and will have a significant impact on their ability to survive and keep paying their employees,” says Sim Tshabalala, CEO of Standard Bank.
“They are under enormous strain and we are already seeing many businesses having to close their doors, which has a significant impact on their ability to sustain their employees. Even outside of the lockdown, many of these businesses often do not have the cash flow needed in order to maintain sustainability.
It is estimated that less than 50% of the South African economy is currently functioning, according to Martin Kingston, spokesperson of Business for South Africa, a new organisation that coordinates the corporate response to Covid-19. He told a media briefing on Tuesday morning that the trade in liquid fuels is down 80% since the lockdown started
Kingston says companies in the accommodation, tourism and transport sectors are worst affected. He expects “a very significant contraction” in South Africa, with a large increase in unemployment.
Following a surprise 100 basis point interest rate cut on Tuesday, Reserve Bank governor, Lesetja Kganyago warned that South Africa’s economy will shrink by 6.1% in 2020. GDP is expected to grow by 2.2% in 2021 and by 2.7% in 2022.