Eastern Cape businesses feel lockdown pinch

Eastern Cape businesses are feeling the impact of the Covid-19 pandemic.
Eastern Cape businesses are feeling the impact of the Covid-19 pandemic.

Almost half the businesses surveyed by the Border-Kei Chamber of Business fear shutting down permanently because of the Covid-19 crisis.

That is the frightening reality as Eastern Cape businesses across all sectors face huge challenges to remain viable.

The knock-on effect of the lockdown in the long term is almost impossible to imagine.

Though some businesses have reserves to carry them through 21 days of downtime, others have warned they will run out of cash by next week.

In the chamber’s survey, most businesses say they have already suffered financiallosses due to the virus, with half stating their employees have been forced into short-time, paid and unpaid leave.

Border-Kei Chamber of Business executive director Les Holbrook said the weekly feedback the chamber was co-ordinating from its members to pass on to the government showed businesses were  “concerned with wages, permits, travel”.

The 100 businesses surveyed  covered the services sector, manufacturing, tourism, construction, finance, ICT and textiles. 

Of the respondents, 44 foresaw business closure, with the remainder confident that they would continue operating.  

Asked if they had suffered financially as a result of Covid-19, 90 firms said yes, eight said n’ and two did not respond.

Though the survey does not provide upper limits onlosses, if the minimum loss per business based on size is calculated, the total loss will exceed R45m.

However, based on published annual financial figures, the daily loss of Mercedes-Benz SA across all operations around SA will reach R170m.

Mercedes-Benz SA in East London stopped operations at the start of the lockdown. It is envisaged manufacturing will start again on May 4.

On dairy farms in Keiskammahoek, Whittlesea, Ncora, Middledrift and Alice, small-scale farmers who constitute the country’s biggest black-owned dairy operation, Amadlelo Agri, producing 30 million litres of milk a year, it is business as usual for now.

However, farmers will anxiously watch how much milk housebound consumers lap up in coming weeks.

Mercedes-Benz SA  is among companies that have agreements with unions to continue to pay wages during the lockdown, with advances being deducted from workers’ wages after the crisis is over.

The government’s interventions include using R30bn through the Unemployment Insurance Fund to assist companies unable to continue paying workers who are now sitting at home.

The UIF assistance, managed through the department of labour, is over and above its funded commitments to workers who claim compensation for being unemployed, ill, or pregnant.

People affected by the lockdown have been receiving contradictory messages. 

For example, unions had told their members employers may not deduct the lockdown days from annual leave, but employers had a reasonable expectation that they could recover their ongoing payments to workers later.

Holbrook said: “Members have goodwill — especially those companies that are still in good standing, but a couple of our members are saying that by the end of the third week they won’t have money left.”

Amadlelo Agri CEO Simpiwe Sondyala said the Covid-19 outbreak had not yet affected the company’s dairy operations and piggery in the province.

The company draws together small landowners into a co-operative arrangement to leverage economies of scale in milk production.

It was still benefiting from a consumer “uptick” in demand for long-life milk, even as demand for “high-end products”, such as speciality cheeses, has fallen off, with restaurants being shuttered during the lockdown.

“Some producer prices have gone down by 45 cents a litre. We have not been affected by price yet.

“But  ... if demand lowers on long-life milk, we may have an oversupply.”

Some Amadlelo farmers have seen their monthly dividend income halved from R5,000 to R2,500 as a result of the drought.

If there was a lingering negative effect from Covid-19 on dairy production, these farmers would earn almost nothing from their ownership of their land, Somdyala said.

Mercedes-Benz SA spokesperson Thato Mntambo said unionised workers at the West Bank-based company would be paid in full during the lockdown, in line with the agreed tools available to the company to mitigate any planned production shutdown.

The lockdown is regarded as a force majeure (unforeseeable circumstances) in relation to the company’s supplier and sales agreements.

National Union of Metalworkers of SA (Numsa) official Phumzile Nodongwe confirmed the Mercedes-Benz agreement, saying the company would recover the money from future payments once the crisis was over.

However, it was a factory-based agreement and not a bargaining council one, with two companies in Nelson Mandela Bay also agreeing such terms with the union.

“The lockdown will affect workers heavily in the long term. Some will struggle to recoup whatever they lose in terms of deductions.”

In the public interest, none of our coronavirus news coverage will be placed behind our paywall and will be available free for all to read. If you would like to support our mission of delivering award-winning, independent local news, please consider taking out a subscription by clicking here.

Would you like to comment on this article?
Register (it's quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.