There are few parts of the economy that have come to an almost complete halt under the Covid-19 lockdown.
But virtually every component that makes up the tourism industry – from airlines and car-hire firms to hotels and lodges, tour companies and meet-and-greet services – has shut down in the battle.
‘By December there will be a bloodbath across the industry,’ says a South African tourism industry veteran. Should that happen, the country will pay a heavy price in lost jobs.
The tourism industry is important as a huge employer, particularly of the unskilled, and as a big foreign exchange earner. At last count, the sector directly contributed 2.3 percent to GDP, but its indirect contribution was nine percent. Tourism generates 600 000 jobs directly and an additional 1.5 million jobs depend indirectly on the sector. That is a sizeable share of the 10.2 million non-farm jobs in the country.
Under Level 4 lockdown regulations, our current status, some sectors of the economy have reopened. Tourism will be the last sector to reopen. It is only at Level 2 that restrictions will be lifted on inter-provincial and domestic travel.
And then it will take time for international air travel to restart and it could be some time after that for people to think of long-distance holidays. Many in the industry are hoping that domestic holiday travel might start up by about September, and international travel toward the end of the year. But no one really knows.
Put food on tables
The government’s Unemployment Insurance Fund (UIF) Temporary Employee Relief Scheme is helping many firms retain staff and put food on tables. It would seem well-targeted, but will only last until the end of July.
The Department of Tourism’s R200 million Covid-19 financial fund to help small businesses in the sector with a turnover of under R2.5 million does not seem to offer bang for the buck when it comes to preserving jobs. The scheme might be more about supporting small BEE companies. It is not as though other companies do not also offer empowerment opportunities to staff through promotions and management positions.
Examples of running firms in an industry that has come to a halt are worthy of inclusion in business school case studies to highlight quick thinking and versatility.
Robert More runs More Family Collection, which consists of nine high-end luxury safari lodges and six hotels. About 80 percent of his clients come from overseas. He employs 875 people who mostly come from poor rural areas and are unskilled. The largest share of his costs is payroll.
The company was getting ready to reopen on 1 May, but then with the extension of the lockdown by two weeks, the business plan had to change.
More says the company has made a commitment to employees not to lay off in hard times. In March, employees were paid their full salary, but in April, with no revenue coming in, there were pay cuts.
Lower-paid staff are receiving 80 percent of their previous wages, the next tier, 70 percent, and senior management, 60 percent. As boss, More is not being paid until the business starts trading. The company has supplemented the contributions from the UIF scheme with pay funded by its cash reserves.
Commitment to employees
More says the company’s low debt level has allowed it to meet its commitment to employees. It has helped that the banks have granted a three-month moratorium on debt service and that he has been able to access working capital loans. That will allow him to continue to supplement employees’ pay.
Over the years, he says, he has been careful to build up cash reserves, as ‘we have known that white-owned businesses need to make their own way and not rely on subsidies’.
Without the UIF scheme, he says, many more in the industry would lay off staff, despite the costs of three months’ notice and a week’s pay for every year worked.
‘We are fine for now. However, if the restrictions are not lifted by June or July and the UIF temporary scheme is not extended we will be forced to mothball a number of our operations,’ he says.
‘I see a catastrophic picture in our industry if the current lockdown regulations do not change soon. I hope they (government) have the ability to support all who have lost their jobs and will be dying of starvation.’
Valor Hospitality is a privately owned company that earns management fees from the owners of hotels and restaurants. In South Africa, the company runs seven hotels, which employ about 600 people.
Tony Romer-Lee, the company’s co-founder and managing partner, has had to act fast, with revenue being cut off. At the Spier wine estate, where the company manages the hospitality end of the business, 250 staff have been retained on almost full salary.
In the other operations, staff have had to take bigger cuts, but those on the lowest pay rung are receiving 85 percent of salary with the help of the UIF temporary employee scheme. One of the restaurants has been repurposed as a retail outlet.
The company’s first step was to put in new hygiene measures. Then ‘we took a look at every expense line to see if it was needed. The aim has been to prioritise the retention of our teams,’ says Romer-Lee.
Capital spending on hold
DSTV subscriptions were cancelled, cleaning services provided by external companies were brought in-house, and insurance premiums have been renegotiated. The company also put capital spending on hold and has cut maintenance to basic necessities. Some spending has been diverted to buying personal protective equipment for staff. Even hand-sanitiser production has been brought in-house by the Spier estate winery.
‘We understand that this passes on the stress, but it also shares it out,’ he says.
‘We only have glimmers of hope of revenue with food delivery and opening our hotels for stays by essential service providers, like medical staff.’
The Department of Tourism has a budget of about R2.5bn this year, but many in the industry are sceptical about its real value added to the industry. The bulk of spending to promote tourism is done by the private sector and some in the industry feel the department has little in-house industry experience or weight in government.
Over the years government has been responsible for some mammoth own goals in the promotion of tourism. The rule that parents must travel with the full birth certificates for children led to some tourists being barred from entry as well as widespread confusion. This has now been dropped for overseas visitors, but South Africa’s bureaucracy remains a hindrance to tourism.
The process of applying for visas for South Africa remains troublesome. Application for SA visas online, the eVisa scheme, is restricted, and most applicants must still take time to appear in person at an embassy.
Airline slots SAA has at Heathrow have not been used or sold. This could have brought many more people into the country. Tourism industry representatives also complain that not enough is being done to attract airlines to open new routes to South Africa. Should SAA not emerge from rescue, some in the industry say other airlines will step into the gap.
Last week the Department of Tourism said it was working on a recovery plan for the sector. This might usefully include taking a lesson from private business and looking at every expense item, including perhaps its own future existence.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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