There is no doubt that the Covid-19 pandemic has had a devastating impact on millions of businesses globally. Many people have lost their livelihoods and some of the biggest firms have crumbled under the stress of sustained lockdowns over the past 18 months.But it is also clear that not all businesses have suffered equally, indeed for many the pandemic has been a bonanza: pharmaceutical groups boosted by their hunt for a Covid-19 vaccine; technology giants buoyed by the trend for working from home; ecommerce, telemedicine and gaming.
The second-quarter lockdown in 2020 led to a drop in output of the most economically productive sectors in South Africa. The highest decline in output – 76.6% – was in the construction sector, followed by the 74.9% fall in the manufacturing sector. The mining sector declined by 73% (Department of Stats South Africa, 2020). Insurance, banking, business and real estate services fell by 28.9%.
But perhaps the hardest hit sectors have been those related to travel and tourism. Economic activity in the communications and transportation sectors fell by 67.9% due to the halt in air travel, while the closure of hotels, other accommodation, and the ban on alcohol and tobacco sales resulted in a 67.6% decline.
This is particularly worrying when one considers that one in every 23 of the total workforce in South Africa (both formal and informal) were directly employed in the tourism sector in 2016. In fact, the tourism sector’s 686,596 employees outnumbered the combined workforces of utilities (118,000 employees) and mining (444,000 employees).
As a result of the lockdown measures, unemployment reached 30%, economic growth stagnated and the national debt as a percentage of gross domestic product (GDP) has reached the 64% mark. This debt is expected to increase to up to 82% in 2020/21 due to a ZAR300 billion revenue shortfall, and is projected to build continually unless there is a significant GDP growth.
So if all these traditional economic big-hitters have been laid low, who have been biggest winners during the pandemic?
- Online retailers and e-commerce – It is not just the global e-commerce giants such as Amazon, Alibaba, JD.com, Mercado Libre and eBay that have flourished, but also those closer to home. There have been many small to medium-sized enterprises (SMEs), as well as independent retailers, who have grown their market share. Those who were ready to adapt their place of business from retail stores to online avenues have seen few of the contraction’s experienced by ‘bricks-and-mortar’ retailers.
- Delivery services and courier companies – Closely related to the above, those businesses who have handled the logistics of the lockdown world have won in a big way. For every online retailer and restaurant selling their food for remote enjoyment, there is a company that is employing delivery personnel. We are all aware of the likes of Uber Eats and Mr D, which were in the right place at the right time to provide a much needed service. A number of supermarkets have also followed suit with ingenious solutions. Checkers, owned by Africa’s biggest food retail group Shoprite Holdings, has launched an innovative Sixty60 mobile app that aims to offer delivery of groceries and over 15,000 products within 60 minutes. Businesses that used to depend on footfall have had to reinvent the way they allow their customers to shop.
- Digital entertainment and streaming providers – Many of us subscribe to more than one entertainment provider. Satellite TV providers have done well in the turbulent economic times, when more of us have been housebound and in desperate need of entertainment. The real winners have been the streaming services that have enabled access to vast and diverse content. Netflix and Amazon are the well-known ones, but there are smaller players that have also been able to get paying audiences via livestreaming. Even when our physical presence is prohibited, there are inventive ways of feeling part of the crowd.
- Online education – Whether it the children who are being schooled from home, university students attending lectures and tutorials remotely or those people who want to take the opportunity to learn a new skill of language, online learning has taken a giant leap in terms of its acceptance and outcomes. Analyst Brandon Hall has reported that e-learning within corporations typically requires 40 to 60% less employee time than learning in a traditional classroom setting, not to mention 90% less energy and 85% fewer CO2 emissions.
- Home and personal improvement – With more of us now working from home – and realising that we are likely to spend far less time in the office in future – and with more time on our hands, there has been global trend towards undertaking home improvements. Likewise, more time at home and with many gyms and leisure centres closed, a lot of us have taken up esoteric exercises using mobile applications as our personal trainers. And of course, as with much of modern life, this also affords yet more opportunity to show off on social media.
So what can we learn from all these examples of businesses succeeding in such tumultuous times? Firstly, that technology-enabled solutions are key. The success of many start-ups depends on keeping costs low and reaching the widest audience as possible. The ability for an online / app-based sales mechanisms to prosper without real estate and to reach a huge audience irrespective of their actual location means a much greater chance of great success. Much consideration, however, should be given to where you register you trademarks and software (as well as any other intellectual property) because your achievements may encourage any number of potential competitors to replicate your success and because any prospective buy-out of your business will depend on where the value is held. Often entrepreneurs are so keen to start selling that, with a little upfront planning, they can secure their USP and internationalise their real value.
Secondly, the ability to service and sell to those outside your country or continent is vital. The pandemic has shown how any country can suddenly close its borders and institute lockdowns, so it pays to be able to hedge your bets. Any new or existing business should seriously consider seeking its customers from a wider pool. If your target market is too narrowly defined, you will be much more susceptible to disruption. Set up a business that can call on overseas suppliers and sell to overseas buyers. Your business need not be confined to where you live and you should consider setting up the company in a location that best fits your international goals and not your national perimeters.
Finally, make sure that you create low barriers to entry. Whether you are selling goods or services, it must be easy for your customers to find you and buy from you. This is what ecommerce provides. A great way to ease the move from a physical place of business to online-based is to partner with an established overseas business, using their platforms, supply networks or just to distribute your product. You don’t always need to start from scratch.