'I don’t want anybody else to go through this': SA's business cost of COVID-19

SMMEs are not coping with the effects of the pandemic, while fraud and suspicions hovering over temporary relief schemes has not given businesses much faith.

Following the strict lockdown regulations currently in place in South Africa, many breweries and micro-brewers are struggling to keep their doors open. Owner of Just Brewing Co. Julian Pienaar had to close a restaurant he co-owned and let some of his staff go, but managed to keep three out of his eight employees, including the chef who now works in his brewery. Picture: Xanderleigh Dookey-Makhaza

JOHANNESBURG - While the global community has praised South Africa for its ability to flatten the COVID-19 first and second waves without vaccines, it has come at a great cost for small- and medium-sized enterprises one year after the first case was reported in the country.

The past 12 months were characterised by ups and mostly downs for the business community following the regular enforcement of lockdown restrictions to curb the spread of the virus.

"We just thought, close for three weeks, we closed and then we’ll open with a bang. Six, eight months later, and now since 23 March [2020], I lost my restaurant and we never opened again. I couldn’t pay my March and April rent, so my landlord locked the doors," Nolene Potgieter told Eyewitness News.

Potgieter owned a popular 400-seater franchise restaurant in Polokwane, with 60 employees, and was on track to living a debt-free life just before the pandemic hit.

She struggled to contain her tears as she recounted the uphill battle she faced since the lockdown was enforced and businesses were forced to shut down.

"It's something that I don’t want anybody else to go through. Oh my goodness, I’m already getting so emotional and I haven’t been like this for the last year. Oh my goodness, I didn’t want this to happen..."

ADAPTING AND BOUNCING BACK

Potgieter has tried to adapt to the new normal. With about R3 million worth of debt to her name, she partnered with a new independent restaurant with the hope of changing her fortunes. But this lasted just three months between October and December last year. The business only made about 15% of its income when the lockdown levels were once again heightened before being relaxed this year, compared to the same time last year.

In the midst of all the turmoil, the country’s economy declined by 7% last year. While the figure attached to negative growth is alarming and has broken records that date as far back at the 1920s, economic experts say it could have been worse.

Founder and director of business valuation company Worth.Business Johann De Lange said: “I think when you look at the 7% there was an expectation that it will be worse. So it is a little bit better and also businesses are bouncing back, they are adapting to the new normal. If you look at households, the same will apply. A lot of people lost their jobs, it is incredibly sad and disruptive but there needs to be an adaptation to the new normal whether it would be to be more entrepreneurial or need to be a little bit more flexible in terms of employment maybe take on some freelancing work and contract work, you do what you need to do to survive”.

Events company owner Reabetswe Mabotja said to Eyewitness News that she followed the advice of experts and became innovative when she could no longer host weddings and events of 250 people and more.

"I started cooking everyday meals for lunch deliveries and home deliveries, for six people, eight people. We started doing gift packs instead of having these big celebrations that we used to. We would do balloons and cakes here and there."

But her agility was not enough to see her through the economic storm that was brought on by COVID-19.

"That is actually something that I can do on my own and that means my employees are not coming into work at all. And I've got equipment. I have five, six storages that need rent," she explained.

The Department of Small Business Development introduced a R500 million SMME support intervention for six months from April last year, meant to assist businesses with soft loan funding. But both these women said that despite applying, the service was not availed to them.

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The department’s Minister Khumbudzo Ntshavheni refused to be interviewed by Eyewitness News about the workings of the fund, saying the president already addressed the issue.

Meanwhile, the loan guarantee scheme - established in partnership with major banks, National Treasury and the SA Reserve Bank - was meant to offer support to businesses but failed to take off.

The COVID-19 pandemic filled the year with many firsts for governments, households, businesses and economies the world over. At home, the local business confidence declined by over 80% as businesses were forced to shut down due to lockdowns. This saw the GDP's annualised rate decline by over 50% in the second quarter of 2020 after the first hard lockdown was enforced.

With economic activity brought to a halt and no insight into what the future would bring, many expected the worst as Citibank economist Gina Schoeman explained.

"It is very much in line with what we were expecting. And that is okay because it is one of the biggest pandemics we have ever had to realise as a country and the world... as a result, we have never seen the economy having to go through a lockdown. A 7% contraction is never okay. But certainly, I think how we climb out of it and how we recover in 2021 is going to be absolutely key."

There is, however, a government-initiated intervention, which has been instrumental in rescuing millions of jobs during the past year.

'WE PUT FOOD ON THE TABLE FOR SIX PEOPLE WITH EVERY CLAIM'

With the unemployment rate now at 32.5% , the Employment and Labour Department is certain that, had it not been for the Unemployment Insurance Fund’s Temporary Employer–Employee Relief Scheme (TERS) - which comes to an end on Monday - the situation would have turned out much worse.

The TERS scheme has helped put food on the table of workers over the past year as the COVID-19 pandemic ravaged the economy, destabilising job security in the process.

Since the scheme came into effect in the last 11 months, 6.5 million workers benefited multiple times from the R59 billion spent.

"It makes my heart warm hearing that I could put food on the table for every beneficiary of the fund. We normally say we put food on the table for six people with every claim. There are stories that you hear from people who say to you that 'I have not had food on the table and the payment came through'," said acting UIF Commissioner Marsha Bronkhorst.

Her sigh of relief follows months of hard work by her and other officials who had to re-engineer the fund’s systems to cater to workers' unique needs, which arose as a result of the pandemic.

In its normal business, the UIF pays out statutory or ordinary benefits of between 850,000 and a million payments a year.

But when social partners at Nedlac decided the UIF was the tool that would be relied on to rescue workers who had to sit home for months without income – it rose to the occasion.

"You can appreciate with the same staff and the same capacity in terms of other infrastructure. We had to change our systems to make these massive amounts of payments. I must be straight and say I am very proud of the work that was done by the officials of the UIF," she said.

But even Bronkhorst admitted the UIF's business was not yet done, with thousands of beneficiaries still waiting for payments.

"Our biggest challenge with the few that we have not paid yet is that we are battling to verify bank accounts, the employer has not declared the employee to the UIF. So people can just make sure that their banking account details are declared to the UIF and they have declared their workers to the UIF."

With much still unknown about the future of the pandemic and whether the country may have to return to the hard lockdown, Bronkhorst told Eyewitness News she couldn't confirm if the fund would be able to afford another extension. The first application period was between 16 September and 15 October 2020. In President Cyril Ramaphosa's State of the Nation Address in February, he announced it would be extended for some sectors to March this year. The sectors were tourism, hospitality and liquor.

The UIF already dipped into its reserves to finance the relief after initially budgeting R40 billion to struggling ailing businesses. Despite this, Bronkhorst assured Eyewitness News that the fund was still intact.

The TERS benefit was, however, not without its fair share of challenges.

FRAUD

Since the start of the scheme, the UIF has handed over 84 cases to the police relating to employers who are suspected of defrauding employees paid out by the TERS benefit.

There are already 14 cases in front of the courts following the detection of suspicious behavior, while the rest are still being investigated by the police.

Bronkhorst said they already audited payments amounting to R774 million, and of that, R170 million in payments were identified as suspicious.

“Unfortunately, there are stories where you heart that you have made payment and the money has not reached the workers. Which for me there is a moral issue here, apart from the legal issue. Where the employer claimed and did not pay the amount over to workers or the employer claimed and paid the wrong amount to the workers or fraudulently claimed,” she said.

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The UIF’s problems, however, do not end here.

SUSPENSIONS

Just a few months after the TERS programme was implemented, the entity faced a leadership crisis after its executives were placed on precautionary suspension and remain barred from work six months later.

The Employment and Labour Department’s director-general Thobile Lamati described the decision as “unfortunate” and “difficult”.

So far, only the head of supply chain, Maria Ramoshaba, was charged along with six subordinates.

“There are glaring ones with regard to the supply chain issues, you know it doesn’t matter whether you are in an emergency situation, there are basic things that you need to do and you just cannot ignore those things. And as we looked at the report that we got – we think that the fact that we suspended for instance the head of supply chain, we took the right decision,” Lamati said.

The charges followed discoveries of non-adherence with basic principles of the Public Financial Management Act regarding supply chain procedures

The other executives including UIF Commissioner Teboho Maruping were suspended after the Auditor-General flagged errors in the TERS payment system such as “illegal action, risks and control gaps”.

Lamati said: “There was a lot of work that needed to be done within a short space of time, but we think that a number of the things could have been done in a way, the ball was dropped by a number of our colleagues. That is why we said we are not judging them, can we do an investigation and see if there is a need for us to take any disciplinary action based on the outcome of the report”.

The department is now waiting for the Special Investigating Unit to complete its probe into the conduct of Maruping, the Chief Financial Officer Vuyo Mafata and Operating Officer Judith Kumbi.

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