The Sound Advice series:

Five practical business steps to navigate through the pandemic

By Kuben Rayan, CEO of RentWorks

Following President Cyril Ramaphosa’s recent announcement that the lockdown would not end on 30 April, many South Africans are feeling anxious as no-one knows exactly what the coming months may hold for our country. According to an article by BusinessTech, the Health Department’s epidemiologists predict that the five-week lockdown will stave off the virus’s peak until September. Furthermore, South Africans can expect various forms of the lockdown levels over the next 6 – 8 months. Estimates such as these clearly show that as a country, we will have to adapt to a new normal. For South African businesses, a BUSINESS-UNUSUAL environment will become standard, meaning that survival will hang in the balance if practical, strategic steps aren’t taken.

As South Africans across the country are still digesting the news about the almost-as-strict lockdown level 4, it is becoming clearer that we are living in unprecedented times. Unfortunately, apart from the havoc that the coronavirus is wreaking on global health systems, our economic structures are being hard-hit as well.

What makes South Africa’s position even more precarious is that on 27 March, our country’s credit rating was downgraded to ‘junk’ status, following an extended period of economic underperformance and rising debt (Source: BusinessDay). This, together with the volatile rand, which was at a record low of R19,35 to the dollar, would have already painted a bleak financial picture – without the coronavirus.

It is, regrettably, a fact that this financial trifecta will increase South Africa’s unemployment rates and place further pressure on businesses’ survival – both large and small. This is why my advice is that, although difficult, the last thing we should do now as business owners, executive leaders, and entrepreneurs, is panic.

We need to be practical, adapt our strategies, and plan ahead for different scenarios.

Be informed, communicate, and be considerate
From an operational perspective, the coronavirus is threatening cashflow. This may seem like obvious advice, but this is why businesses should prioritise conserving their cash. What is not obvious for many companies at this stage, is how. Although everyone’s situation is unique, I suggest following these steps to shift your mindset from panic mode to that of survival.

  • Be informed about your options. There are various financial aids that government have made available to business owners. Investigate what options apply to your type of business, assess which solutions would benefit your cashflow the most, and get the process started. Some options that I suggest business owners look into include:
    • The South African Revenue Service is offering tax relief measures. For instance, companies can claim back up to R1,500 a month per employee who earns less than R6,500 (for those younger than 30), and R750 for those 30 and older.
    • One can also apply for Small Business Relief through the Department of Small Business Development and UIF through the Department of Employment and Labour.
  • Talk to your bank. For businesses with an annual turnover of up to R300 million, there will soon be the option to apply for government-backed loans from South Africa’s commercial banks. Benefits of these COVID-19 loans include no repayments for up to six months. You can read more here: How SA’s R200bn Covid-19 loan scheme will work.
  • Research payment holidays available. It is not only individuals that can apply for payment holidays in terms of pension fund contributions etc.; business have this option available to them as well. For instance, from the first of May, there “will be a four-month holiday for skills development levy contributions (1% of total salaries)” and the first carbon tax payments that were due by 31 July have been postponed to 31 October (Source: BusinessInsider).
  • Cutting down. One way to alleviate the pressure on your cashflow is to cut down on your expenses. Identify what expenses are essential and which are not. Remember, this is about survival – your focus is to ensure you have a business post-COVID-19. Through assessing what your actual expenses are, this will assist you to identify a new number that is needed in terms of income to remain a sustainable business. Keep in mind that due to the lockdown, certain expenses (such as utility bills) are either lower or non-existent, so these items would need to be adjusted accordingly in your projections.
  • Don’t damage your business relationships. Although it may be tempting when your cashflow is under pressure, it is very important to continue paying your suppliers on time. Alternately, discuss extended payment terms with your suppliers. The consequence of not doing so would have a knock-on effect on the entire industry. The resultant impact is that it would result in dire consequences for smaller businesses that don’t have a safety net as some larger corporates have. Apart from the financial implications, this will also cause long-term damage to your reputation and negatively affect professional relationships.

In essence, businesses should be thinking in extraordinary ways to navigate through these extraordinary times. Although it may not feel like it now, there will be life after lockdown. And the decisions you make now will determine whether your business stays afloat during this storm. The saying goes that whatever you do right now will determine your future, and never has this been more applicable for us as South African business leaders. This is why, in my next article, I will focus on what business can do post-COVID-19 to start rebuilding their businesses.

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