BUSINESS MAVERICK 168

Business liquidations and store closures show how economy is hurting while politicians fight factional wars

By Ray Mahlaka 23 May 2021

As the governing party squabbles over factional battles and the step-aside rule for its members facing corruption or criminal charges, South Africa is burning – literally and figuratively. Protests over service delivery failures are rising and the economy is crashing. Politicians are losing sight of the real issues. 

Ray Mahlaka

First published in the Daily Maverick 168 weekly newspaper.

Tryston Stretton, the co-owner of a restaurant in Joburg’s hippy suburb of Melville, has offered a searingly blunt description of how his eatery has managed to survive the Covid-19 lockdown that has ripped through the economy.

“We have been busting our balls to keep our doors open and all of our staff employed. We’ve managed to do so without any support from anyone, including the government,” Tryston, who owns Spilt Milk with his brother Jarrod, tells DM168.

The timing of their foray into South Africa’s battered hospitality and leisure industry was bad. The Stretton brothers bought Spilt Milk nine months ago when the country was in level four of lockdown, which prevented patrons from dining at restaurants because public life and movement were heavily restricted. It was a bargain purchase from the previous owner, who opened Spilt Milk in Melville three years ago, says Tryston.

To keep the doors of the restaurant open and all eight of its staff members employed, the Stretton brothers immediately moved to make menu changes. They kept menu items simple and prices affordable, with the top-selling item being the R40 “recession breakfast”. A similar meal would ordinarily cost double the price in Joburg’s northern suburbs.

“It has been a big priority for my brother and me to keep people employed. We’ve had the restaurant for nine months and for six of those months, my brother and I haven’t taken a salary. Every cent has gone to keep the restaurant going,” says Jarrod.

Other eateries in Melville’s famous 7th Street have, sadly, not survived. Before the lockdown, the street was vibrant – attracting students, hipsters, working professionals and others. Walk the street today and you’ll be confronted with an arresting sign of business failures or relocations. At least seven vacant spaces that previously housed small businesses are now displaying “to let” signs. Pre-lockdown, the street was fully occupied.

The Melville story is a proxy for South Africa’s economic decline as the script of vanishing businesses has played out across the country.

Underscoring this is a recent report by Statistics SA, which shows that a total of 216 companies (mainly small and medium-sized businesses) in various sectors were liquidated in March 2021, compared with 178 in February 2021 – a 21% jump. Liquidations increased by 50% in March 2021 compared with the same period last year.

A liquidation involves a financially distressed business permanently closing its doors, which comes with job losses. Already South Africa faces an unemployment crisis as the joblessness rate, based on its broadest definition, is north of 40%.

 Factional squabbles

The person in the street doesn’t need any reminders of how tough things are. But pampered politicians, enjoying sheltered employment at taxpayers’ expense, clearly need reminding that South Africa is in deep trouble.

Take the governing ANC, for instance. Its National Executive Committee (NEC) has arguably spent an inordinate amount of time and energy in recent months debating factional politics and the step-aside rule for those facing corruption or criminal charges instead of on the socioeconomic crisis gripping the nation.

A DM168 analysis of statements about the outcomes of the NEC’s recent meetings issued by the ANC this year indicates that the party’s factional machinations and internal organisational issues have dominated its discussions and priorities.

The statements usually reflect the NEC discussions and decisions taken by the party’s head honchos. But the four statements issued this year go into detail about the step-aside rule, unity and cohesion within the ANC, and are less about demonstrable ways to reform the economy or speeding up the Covid-19 vaccine roll-out, which would stimulate the economy as it guarantees a return to normality.

In its statements, the ANC briefly mentions President Cyril Ramaphosa’s economic reconstruction and recovery plan, which was launched in October 2020 as a roadmap for how the economy would recover from the Covid-19 pandemic.

Implementation of the plan is moving at a glacial pace. Some of the pro-economic growth structural reforms proposed by Ramaphosa – such as the release of radio-frequency spectrum and bringing more renewable energy players on to the national grid – are facing administrative and legal delays.

Other worrying economic problems are the resumption of load shedding by Eskom ahead of the winter season; worsening consumer financial pressures as most of the government’s Covid-19 relief measures (such as the R350-a-month social grant and Unemployment Insurance Fund pay-outs) have ended; and an increase in consumers turning to debt counselling (DebtBusters, a debt counselling company, has seen the number of consumer inquiries for its services rise by 31% in the first quarter of 2021).

The economy aside, there is social unrest with more protests linked to service-delivery failures. The lockdown has intensified the incidence of gender-based violence and homophobic attacks.

It has taken a terrible toll on the education system. Primary school children in poor areas learnt between 50% and 75% less in 2020 than they did the year before, according to the National Income Dynamics Study – Coronavirus Rapid Mobile Survey.

A way around the politics

These are the problems that should be at the forefront of ANC NEC meetings, says Iraj Abedian, a senior economist at Pan-African Investment and Research Services. “But the NEC spends its time deliberating whether this faction should outmanoeuvre that one. It’s a case of leaders fiddling with their toys while Rome is burning. South Africa is burning,” said Abedian.

So, can the NEC afford not to focus on party politics?

“Possibly not,” he says. “If the Ramaphosa reform camp sleeps, the other guys in the fightback and Radical Economic Transformation [RET] camp are going to take them out – politically. They know that it is a case of sudden death. And that’s how they justify the full attention at NEC meetings on factional battles.”

Abedian is encouraged by a nation that is not apathetic; it’s vocal and proactive in calling out the governing party and government, especially on social media, for its bad decisions.

There’s a bigger problem that goes beyond factional battles, says Dr Azar Jammine, the chief economist of Econometrix. “Even if the RET camp is eliminated and Ramaphosa’s power base is strengthened, the huge challenge is how to fix the state’s capacity and get capable people to run the country and make the right decisions. It is like turning a massive oil tanker around. It can’t be done quickly; it is going to take ages.”

In the interim, the nation will continue to be bystanders to political processes.

The Stretton brothers of Melville’s Spilt Milk are nervous about the future. The third wave of Covid-19 infections could see the government reintroducing strict lockdown measures.

“It would be a final blow to small businesses,” says Jarrod. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.

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  • I think this is indicative of a government in which the majority of high level office-holders do not actually know what they are doing, and the continual court case after court case is a (till now) very effective way of ensuring that no-one finds out just how incompetent they really are!

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