Tag: lockdown

Retailers pessimistic about the future

By Lameez Omarjee for News24

A potential third wave of Covid-19 infections, and possible renewed restrictions will likely harm the retail sector and traders are generally pessimistic about the future.

The trade sector reported declining confidence across the board according to the retail trade survey for the first quarter of 2021, which was released by the Bureau for Economic Research (BER) on Tuesday. During the quarter, the country moved from lockdown level 3 restrictions – in which an alcohol sales ban and a lengthened curfew was implemented in January and February – to lockdown level 1 in March. Most of the responses were received during the last two weeks of February, when the peak of the second wave of Covid-19 infections had passed.

“As expected, the trade sector experienced another tough start to the new year. Much of the performance of the sector still largely reflects a Covid-19 narrative.

“Be it in terms of its restrictions on trade or its impact on the labour market, the pandemic’s sustained influence on business and consumer sentiment remains concerning amid the uncertainty about its trajectory,” the report read.

After making a recovery from its 29-year low of 11 points in the second quarter of 2020, to 50 points by the fourth quarter, retailers’ confidence levels declined by 13 points to 37 during the first quarter of 2021.

“This was to be expected considering that much of the momentum gained in the final quarter of last year was from pent-up demand for alcohol, anticipated festive season sales and the vital social grant top-ups, which all petered out by the first quarter,” the report read.

During the fourth quarter, retailers also benefitted from demand in durable goods – related to home improvements and home office equipment and furniture, but this was reversed during the first quarter. Sales volumes of durable goods and semi-durable goods, such as clothing, footwear, sporting equipment, declined. Sales volumes of non-durable goods like foods, beverages, tobacco, pharmaceuticals and cosmetics sales volumes held steady.

Price increases

“… Retailers in general kept selling prices elevated, and durable goods retailers in particular hiked their prices,” the report read. Price hikes are linked to increases in import prices and high food inflation. “Costs associated with Covid-19 related hygiene protocols also remain an extra expense to retailers. Looking ahead, rising fuel and electricity prices will also have an impact on prices,” the report read.

Wholesaler confidence levels remained relatively flat, declining from 59 points in the previous quarter to 58 points, this despite a deterioration in business conditions, lower sales volumes and a lack of pricing power. According to the BER, the sustained confidence may reflect optimism about business conditions in the second quarter.

“Consumer goods wholesalers expect to profit from a pick-up in alcohol sales amid eased trading restrictions, winter clothing sales and, more importantly, the resilient agricultural sector which has benefitted from favourable weather conditions and bumper crops,” the report read.

Non-consumer goods wholesalers – such as those selling building materials, chemicals and metal ores are expected to benefit from better global growth in 2021.

Weak economic growth, low business and consumer confidence and a fragile labour market knocked the domestic motor trade industry.

New vehicle trader confidence declined from 41 points to 35 points in the first quarter. “… Sales remain depressed and well below the 12-year average reading for this indicator,” the report read.

However, new vehicle dealers expect business conditions and sales volumes to improve in the second quarter. “Much of the optimism is fuelled by the prospect of a further recovery in the domestic economy and more people returning to work, which could boost sales volumes given that interest rates remain low,” the report read.

The BER highlighted that the overall retail sector is pessimistic about business conditions and sales volumes, going into the second quarter.

Other consumer pressures such as fuel and electricity price hikes, higher food inflation coupled with below inflation adjustments to social grants and the special relief grant and the Temporary Employer/Employee Relief Scheme drawing to a close in April, will negatively impact non-durable goods sales volumes.

“The weak labour market as well as the power supply crisis at Eskom also do not bode well for the trade sector in general,” the report read.

The BER noted that pent-up demand for durable goods, have mostly been met. Second quarter performance will likely depend on semi-durable goods retailers, especially linked to sales of winter clothes and school uniforms.

 

Source: Eyewitness News

Master KG’s Jerusalema was the sound of 2020. It was the song that launched countless homemade challenge videos and even found its way into a presidential address last September.

“There can be no better way to celebrate our South Africanness than joining the global phenomenon that is spreading across the world, and that is the _Jerusalema_ dance challenge. So I urge all of you to take up this challenge.” – President Cyril Ramaphosa, 16 September 2020

Many South Africans and others across the world took up the challenge. Workplaces got involved and people marshalled their kids to join in, posting their videos on social media.

Type “Jerusalema challenge” into YouTube and the results go on for pages. The official music video has clocked over 344 million views on YouTube. Master KG bagged the Best African Act award at the MTV European Music Awards, beating Nigerian superstars Burna Boy and Rema among others.

News in the past few days that Warner International sent royalty invoices to various video posters in Germany sparked an outcry on social media – and just a little bit of panic.

The music giant charged various German government entities for using the song in their versions of the challenge. So what does that mean for us? Can anyone who filled some bored downtime during lockdown perfecting the moves and sharing their effort expect a bill for their troubles?

Eyewitness News spoke to Dumisani Motsamai, an entertainment lawyer and the man who takes care of legal and business affairs for Open Mic Productions – that’s Master KG and Nomcebo Zikode’s record label.

He said some people took the challenge on for their own gains.

“We have followed the news that Warner, our partners internationally, has actually been taken to task by many people on social media saying ‘you guys are being greedy, ‘we are doing this thing because of social [distancing], we are all down because of COVID’, and I think it’s quite on point. But there’ve been different versions of this challenge. There are situations where a child and their family are in their living room and they are doing the challenge, or they are outside and doing the challenge. That’s perfectly fine. But we have seen these challenges taking it a little bit too far, where really, what has been happening here is that people have been pushing their brands,” he said.

Companies and brands using the song to enhance their own social capital is the problem Open Mic will also be targeting, he said.

“I saw brands where you would see a drone showing a view of a company yard, then you will see their workshop, they dish out products, they make sure they give you a picture of every product they sell. The song is playing in the background, and because it is playing in the background, now I have an interest in seeing what this particular company is doing,” he said. “If it’s for private use and has nothing to do with commercialising the song, in other words, using the song in order to exploit the brand, in order to make a specific brand visible, there is totally nothing wrong with that.”

Picking out the companies and brands taking advantage of the feel-good song in between people who are using it for a bit of fun isn’t cut and dried, he said.

“There has been a thin line. Some of them will show maybe their logo at the beginning and it’s all about the dance. But some of them when you look at them, it’s all about the brand, the company that is doing the challenge and little about the challenge. Those are the ones that Warner and Open Mic has found. If the challenge is taken and someone is dancing with their family, individually, and has nothing to do with brand endorsement, has nothing to do with using the song to push a particular brand and put the brand in the face of people with the song in the background, then that’s fine.”

So what constitutes a brand or an advert? Presumably, those heart-warming videos of frontline healthcare workers at taking up the challenge won’t be targeted.

“Those are the critical examples that we will certainly not go after. You can see they were using it within the context of uplifting spirits during difficult times and within the confines of the call that was made by the president,” he said.

So if you did it for fun or to lift the nation’s spirits, you’re good. But if you used the music to shill for business, not so much. Motsamai said Open Mic was looking at local examples of brands exploiting the song and will request payment from them too, just as Warner International has done. While he didn’t have an exact number of companies they were going after, he did say there were “quite a few”.

“We will start politely [asking for fees] locally because we have seen there has been a lot of skipping of the line. We do owe it, not just to Open Mic, but to the people who were part of it. [Open Mic] owns the master, but we also have a duty to pay royalties to the people whose sound is embedded, whose performance is in the master, and in this case it is Master KG and Nomcebo,” Motsamai explained.

He also explained how royalties were due when a song was used for commercial outcomes.

“There’s royalties that, as Open Mic, we pay arising from synchronisation licences. So it is upon us to ensure that we pursue this instance and make sure that some or other kind of licensing is paid so that we can pay them as well. Yes, it’s income that comes to us as master owners, but it’s also income we have an obligation with our artists to pay over.”

It’s worth remembering that all the artists who make this music have to eat too. It’s been a very rough ride for their community as global lockdowns wiped opportunities off the board for them.

So if you took up the challenge, herded your kids into formation and posted the results online, you’re not going to get a hefty bill – or any bill – for that matter.

Image credit: Open Source Productions

By Mike Schüssler and Phumlani Majozi for IOL

Nearly 1.4-million formal and informal jobs are at risk in the South African economy with the present Level 3 restrictions impacting directly across at least seven sectors.

The sectors are travel, tourism, entertainment, leisure, manufacturing, agriculture, and services that are not elsewhere classified.

The total number of people employed across these sectors equates to one in 12 jobs being directly at risk of destruction. If one includes family and dependants as a reflection of the normal size of households, the level 3 restrictions could impact millions more as they rely on the breadwinner’s wages.

As many also help dependants outside the immediate family, the overall number of people impacted could be as much as 10 percent of the South African population.

Remember, too, that South Africa is often credited with the highest unemployment rate in the world. The impact will be felt even if only half of the jobs at risk are destroyed.

Some provinces, such as the Western and Northern Cape, have even higher numbers: One in six jobs in the Western Cape and one in five in the Northern Cape are at risk.

While the Eastern Cape has only one in 13 jobs at risk, the impact could be greater as the provincial extended unemployment rate could increase to close to 60 percent. Measured differently, the risk for the Eastern Cape is that only one in four adults will have a job if the jobs at risk are destroyed.

While metropolitan unemployment rates are generally lower than rural unemployment rates, all eight metros in the country could end up with extended unemployment rates above 40 percent.

One, Nelson Mandela Bay, would have an unemployment rate of more than 50 percent. Two others, Mangaung and Ekurhuleni, could have unemployment rates of close to 50 percent.

Limpopo and the Eastern Cape already have the highest unemployment rates in the country, so any, even a small, increase would have a devastating impact.

Overall, South African unemployment could rise from 43.1 percent to 51.6 percent within a year, driven by the potential level 3 job losses. And increasing job seekers.

In addition to these unacceptable job losses, the level 3 restrictions are having detrimental repercussions for the turnover of industry as well.

The formal private sector turnover of the industries impacted by the restrictions was R69 billion a month in 2019. The formal private sector is at risk of losing 8.1 percent of its turnover every month that the restrictions remain, using annual financial statistics.

The estimated impact across these sectors is a reduction of at least 60 percent in turnover. This means that R41.4bn is lost every month that the restrictions remain.

The formal salaries paid to employees in these sectors is R9.6bn per month. Personal income tax is estimated at R1.5bn per month. Adding agriculture and informal employee income would be close to R10.5 million.

The knock-on impact can be seen by the fact that these industries buy R38.7bn worth of goods from other sectors every month, and spend R1.5m on advertising as well as fixed costs such as rent, leases, and interest of R4.6bn per month.

Moreover, these sectors pay R7.6bn in taxes every month (excluding employees’ PAYE mentioned above).

These taxes are made up of VAT, excise duties and company taxes.

The total taxes combined are well over R9bn for the formal sector alone per month. Adding things like passenger taxes and tourism spend along with the informal sector VAT spend, the impact of the level 3 restrictions on the fiscus is certainly well over R10bn a month.

The fact that the government extracts more than R10bn a month from these industries during normal times, but cannot find any funds to help them when they are in trouble, is economically short-sighted.

Keeping these businesses alive and operating as far as possible, while they take precautions against the Covid-19 pandemic, will help pay for the now bigger deficit even in the short-term.

Over a maximum period of six years, a relief package that helps the whole industry for three months at a rate of just more than R10bn will have been more than paid back.

Government relief on that scale will also mean that banks will be more likely to help restructure repayments, and suppliers would also be able to help with more finance, too.

Moreover, paying employees extra via the Temporary Employee/Employer Relief Scheme would also help greatly. No one can go 10 months with reduced earnings as a result of harsh restrictions without any government relief.

The government has a moral duty to not cause business failure, as well as to avoid mass hunger. It must immediately open the economy up again and allow businesses to take the necessary hygienic precautions without undue interference.

 

South Africa’s economy rebounds by 66.1% in Q3

Source: eNCA

The latest GDP data has just been released and as expected, the third quarter of this year saw a rebound after a major contraction in the second quarter.

The country’s gross domestic product saw an expected surge in growth between July and September this year.

It rose by an annualised rate of 66.1% after contracting by 51% during the lockdown in the prior three months.

Manufacturing, trade, and mining were the biggest drivers of growth as lockdown restrictions eased in the third quarter.

However, the recovery remains vulnerable, with power shortages and slow structural reforms likely to weigh on sentiment.

The country needs a growth rate of at least 5% to remedy its unemployment crisis.

But current projected growth for the year is expected to be -8%.

 

200 000 job on the line if SA reverts to Level 3

By Lameez Omarjee for News24

If we move to lockdown Level 3, amid fears of a second wave of Covid-19 infections, SA’s economy could shed 200 000 more jobs.
B4SA estimates it would take until 2024 for formal employment levels to return to the pre-Covid levels of employment, if the correct measures are taken.

Government needs to provide certainty that there will not be another hard lockdown to restore and boost investor and consumer confidence.

Another hard lockdown would be detrimental to the SA economy, a shift to lockdown Level 3 in particular would result in 200 000 more job losses, warned Business for South Africa.

The business lobby, representing the majority of SA businesses partnering in their response to Covid-19, on Tuesday issued a statement calling for certainty that government would not implement another hard lockdown amid fears of a second wave of Covid-19 infections.

In the second quarter 2.2 million jobs were shed, as a result of the hard lockdown (lockdown level 5) which lasted five weeks. Economists expect these job figures to recover during the third quarter, coinciding with the easing of lockdown restrictions.

The South African economy is expected to contract anywhere between 7% and 13% this year- its worst performance in 90 years.

B4SA warned that bankruptcies of small and medium enterprises, which increased from 4% last year to 6.5%, could reach over 10% – this as credit extensions and tax relief expire.

“If all nine provinces remain on Alert Level 1 – the lowest alert level – B4SA estimates a 9.3% decline in GDP for 2020,” the statement read. This figure accounts for the fiscal and monetary policy interventions as well as the Temporary Employee Relief Scheme benefit.

One of its downside scenarios which considers SA moving to lockdown Level 3 from mid-November and December – sees a further 200 000 job losses and a 10.6% decline in GDP for the year.

“We estimate that formal job losses have already reached 1.4 -1.6 million, with a further one million lost in the informal sector, and that it will take until 2024 for formal employment levels to return to the pre-Covid level of employment assuming that we pivot the economy onto a sustainable inclusive growth path,” said B4SA’s steering committee chair Martin Kingston.

“South Africa can ill afford additional job losses and compounded economic difficulty,” he added.

B4SA said certainty that there will not be another hard lockdown would help restore and boost investor and consumer confidence.

B4SA has suggested that instead of a hard lockdown government implement targeted interventions by sector. For example, all industries should remain operational – unless specifically identified as “uniquely high risk”.

Other measures include limiting the numbers of people at social and religious gatherings, and possibly reintroducing an extended curfew. “Reintroducing cigarette or alcohol bans should be avoided due to their significant adverse economic effects,” B4SA said. Appropriate behavioural and safety protocols must also be applied to mass public transport.

 

Fears of a second wave grow

By Mia Lindeque for EWN

There has been a steady rise in COVID-19 cases in South Africa with the last week showing more than 10,000 new infections.

The cumulative number of cases is now at over 737,000, as experts notice a rise in the numbers in the Eastern Cape, the Western Cape and Gauteng.

READ: SA COVID-19 resurgence no surprise due to ‘complacent’ citizens

Scientists said that this could be attributed to super spreader events.

The Eastern Cape has confirmed more than 4,000 new COVID-19 cases in just the last week.

ALSO READ: SA can learn from Europe’s COVID-19 second wave, say experts

The Western Cape, once the epicentre of the outbreak, has seen an increase of more than 1,600 new coronavirus cases in the last seven days.

In Gauteng, the number has spiked with more than 1,300 over the same period. In the last seven days, 398 people have died, nearly half of them in the Eastern Cape.

ALSO READ: ‘Exhausted’ Swiss doctors reel as second virus wave hits

As the world focuses on the second wave of infections sweeping Europe, there are concerns that the resurgence in cases here at home could increase rapidly as well.

 

Sales in laptops, stationery and toasters boom

Source: Business Insider SA

Between January and August 2020, South Africans newly working from home showed a serious appetite for office equipment and stationery, with year-on-year growth of 83% recorded.

Of South Africans who buy online, 52% now own laptops, compared to 40% last year.

But broadly speaking, technology sales weren’t great during lockdown, the latest market insight from consumer experts GfK South Africa shows – despite the work-from-home boom. In the first quarter of 2020, technical goods showed a 1% year-on year increase in sales, then revenues plummeted by 25% during hard lockdown (April to July), when the sale of non-essential goods were banned.

South Africans, it appears, had to improvise, or do without.

The move to Alert Level 4 in May saw a sudden surge in demand for smartphones, tablets and small domestic appliances.

“Consumers snapped up appliances for making quick meals and drinks, including toasters, sandwich makers, coffee machines and microwaves,” says Nicolet Pienaar, head of market insights at GfK South Africa. “Performance for content creation devices such as laptops and tablets was strong, since sharing a device between people in the household was not an option in a time of remote working and home schooling.”

These isolated gains in the technical consumer goods market coincided with 10% revenue growth associated with small domestic appliances and 8% in mid-level information technology systems. But those were offset by steep declines in the supply of multifunctional technical goods, photographic equipment, and telecommunications.

Retailers were quick to capitalise on the announcement of Level 2 lockdown in August, redoubling promotional activity and running tailored marketing campaigns.

That seems to bode well for the upcoming Black Friday and Cyber Monday promotional period.

“After a gruelling year that has hit many South Africans in the pocket, we’re expecting to see demand from two types of consumer over Black Friday: the reset spender, looking for genuine bargains after months of holding back and the revenue spender, looking for deals that let them trade up to premium products,” says Pienaar.

Comparative growth in the second quarter of 2020 is expected to boom, with 69% of brick and mortar retailers anticipating Black Friday sales to be at least as good as they were last year. Additionally, 36% of online retailers anticipate that Cyber Monday will be at least as good as last year, and 36% expect it to be better.

Is a second hard lockdown looming?

Murmurs of a second “hard” lockdown started last week, and grew louder over the weekend after KwaZulu-Natal Premier Sihle Zikalala said at a press conference that “looking at the statistics around us, we can now safely say that we are definitely going back into a hard lockdown – if there is no urgent and drastic change in behaviour.

“Let me make this clear: a second wave of Covid-19 will be stronger and deadlier, not only in terms of taking human lives, it could deal our economy a major blow,” Zikalala said.

Zikalala was talking about the increasing infection rate in KwaZulu-Natal, but he was backed up by statements from Free State health spokesperson Mondli Mvambi, and Mangaung metro spokesperson Qondile Khedama.

Last week, Minister of Health Dr Zweli Mkhize and his wife both tested positive for Covid-19, and he reiterated his call for preventative hygiene measures and social distancing.

As Europe and the US both battle with a second wave, South Africans have started paying closer attention to the number of cases.

Minister Mkize said at a recent press conference that “our epidemiological reports are showing that in the country, over the last seven days there has been an increase of 9.1% in new cases. Similarly, over the last 14 days, there has been an increase of 10.7%.”

He said that in the last seven days, there was a marked increase in the number of new cases in the Western Cape. The province recorded a 42% increase in new infections, and that the government’s terminology defines this significant spike in new cases as a “resurgence”.

However, President Cyril Ramaphosa on Tuesday addressed the rumours during a question-and-answer session between the president and the National Council of Provinces.

He said that rumours that the country will be placed under another hard lockdown were untrue.

“I don’t want people to be alarmed. That is simply not true. If it gets there, I will advise the nation.”

Disposable income has halved in South Africa

Source: Supermarket & Retailer

In a presentation ahead of finance minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS) next week, the PBO said that household consumption also dropped markedly by 49.8% in the second quarter of 2020, following a marginal increase of 0.2% in the first quarter.

The sharp decline reflected reduced outlays on all categories of goods, the PBO said. “Spending on durable and semi-durable goods contracted the most because most were classified as non-essential during the lockdown.

“Overall, consumer spending by households contracted by 7.5% from the first half of 2019 to the first half of 2020.”

The PBO said that this decline was consistent with the decline in both consumer confidence and credit extension to households.

This aligns with data from payments clearing house BankservAfrica which shows that the last few months have seen massive disruptions to the country’s average take-home pay, as a number of payments were either suspended, terminated or adjusted.

The average take-home pay in August was R14,008 in nominal terms and R11,893 in real terms. However, it is unlikely that the real average take-home pay will continue on this positive trend as the next two months had a relatively high average real take-home pay in 2019.

“A more meaningful indication of the real salary trend in South Africa at present is the average real take-home pay for the first eight months of 2019, which was R12,200 per month, indicating that the August 2020 number is nearly 2.5% lower than the same reporting period in 2019,” said economist Mike Schüssler.

Debt

The PBO’s presentation also shows that there has been a decrease in household debt in the second quarter of 2020 – its first decline since the third quarter of 2002

The ratio of household debt to disposable income increased significantly from 73.6% in the first quarter of 2020 to 85.3% in the second quarter.

“The quarter-to-quarter decline in nominal disposable income exceeded the decline in household debt.

“The outstanding balances of most categories of credit extended to households decreased during the national lockdown.

“This decline in credit extension was probably due to socioeconomic uncertainty about household saving and spending patterns.”

Data from the National Credit Regulator (NCR) from March 2020 to June 2020 shows that the number of credit agreements entered into decreased by 47.73% quarter-on-quarter from 3.93 million to 2.05 million.

In terms of credit granted for the quarter ended June 2020:

  • The value of new mortgages granted decreased by R25.95 billion (66.65%) quarter-on-quarter and by R27.20 billion (67.69%) year-on-year;
  • Secured credit which is dominated by vehicle finance, decreased by R18.57 billion (47.51%) quarter-on-quarter, and by R20.69 billion (50.22%) year-on-year;
  • Credit facilities decreased by R9.71 billion (50.53%) quarter-on-quarter and by R11.60 billion (54.97%) year-on-year;
  • Unsecured credit decreased by R15.10 billion (59.64%) quarter-on-quarter and by R18.42 billion (64.32%) year-on-year.
  • Meanwhile, credit bureaus held records for 26.96 million credit-active consumers, which showed a decrease of 3.69% when compared to the 27.99 million in the previous quarter.
  • Consumers classified in good standing decreased by 559,318 to 16.96 million consumers.

“This amounts to 62.90% of the total number of credit-active consumers, a decrease of 3.19% quarter-on-quarter and 3.65% year-on-year. The number of credit-active accounts decreased from 85.99 million to 85.23 million in the quarter ended June 2020.”

 

Source: Business Insider SA

Online business registrations are surging in South Africa, FNB says.

The dire financial consequences for many during South Africa’s lockdown have forced business owners to change their strategies and business plans in order to survive, it believes.

Many have used the lockdown period to either open their own personal services, or to formalise existing business for relief funding and operating permits.

Online business registrations are surging in South Africa, says First National Bank, as South Africans change course to adapt to the impact of the coronavirus pandemic on traditional businesses.

The country’s strict lockdown meant that mining and manufacturing ground to a halt for weeks. The impact on the hospitality sector was also devastating, resulting in job losses for many South Africans and a sharp economic decline.

The dire financial consequences for many have forced business owners to change their strategies and business plans in order to survive, with many using the lockdown period to either open their own personal services, or to formalise existing business for relief funding and operating permits, the bank believes.

FNB data shows an increase in the number of businesses using a government initiative where entrepreneurs use the BizPortal.gov.za website to register their new businesses at the Companies and Intellectual Property Commission (CIPC).

Gauteng led with 44% of applications followed by KwaZulu-Natal at 13%, Mpumalanga at 10%, and the Western Cape at 9%.

“We are seeing a strong uptake through this portal as well as an increase in applications through our normal CIPC interactions, where clients can register a company on FNB’s website. This indicates that more and more entrepreneurs want to formalise their businesses in order take advantage of new opportunities presented as a result of Covid and further benefit from financial support provided by both private and public sector,” says Lauren Deva, head of sales for transactional products at FNB Business.

“When the BizPortal started, we initially had an average of 700 registrations a month. However, this significantly increased to 14,000 registrations during the lockdown period, between April and end of August. On average 2,800 businesses were registered per month via the portal,” says Deva.

 

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