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While companies wait to find out what other sectors may resume operations next in South Africa’s “risk-adjusted” approach to reopening the economy, it’s not just small businesses that are worried about whether they will survive the current collapse.
Hosken Consolidated Investments (HCI) [JSE:HCI], Which owns stakes in Tsogo Sun, the casinos, eMedia and the Gallagher Convention Center, said that even with its size, “it will be interesting to see how a holding company like this survives.”
Because HCI’s major investees are in manufacturing, hotels, and casinos, most have closed entirely, and CEO John Anthony Copelyn said they will not reopen when the closure is lifted and they will likely operate under this cloud. during most of 2020, except for manufacturing. To make matters worse, as an investment holding company that spends money to acquire new companies, HCI’s balance sheet is highly leveraged.
“We are a business with much more debt, in relative terms,” Copelyn said, speaking at a roundtable discussion hosted by the Center for Enterprise Development on Wednesday. “So it’s much more threatening for us to shut down.”
At the opposite end of the spectrum are companies such as Sanlam and Anglo American Platinum, which have adapted without major setbacks to the current situation.
Anglo-American Platinum [JSE:AMS] President Normal Mbazima noted that before treating TB, HIV, and general occupational health diseases in mines, the company was relatively better prepared to treat the coronavirus (Covid-19), although this time the challenges are more intense. For example, in the past, Anglo-American platinum could process ore even if its other operations had to stop. But with Covid-19, it was unable to produce anything, forcing the company to declare force majeure on March 20.
Now that mining is allowed to resume limited operations, things are improving again, except for uncertainty about demand as engine manufacturers in Europe and the US. USA They are still blocked.
“Recover? We are going to start very fast. That is really what we want to do, but we will not start anything until we are sure that we have done everything possible to protect our employees. But we must contribute very quickly to our economy because the economy he’s really suffering, “he said.
Sanlam [JSE:SLM], On the other hand, he said that “he will not let this crisis go to waste.” After being certified as an essential service provider, outgoing CEO Ian Kirk said 87% of the insurer’s employees are working, albeit remotely. Since the company is debt free, it is one that can continue to pay the same level of wages to employees and meet its financial obligations to owners and suppliers.
“But our business is affected, there is no doubt about it, the market impacts us,” said Kirk.
Like other insurers and banks, Sanlam had to give premium vacations to those who can’t pay right now, and lower overall premiums on some product lines, like auto insurance. But even then, Kirk said 2020 still presents opportunities.
“The next nine months is a pretty exciting time to do new things,” he said, adding that insurers may be able to design new products to cover emerging risk.
Meanwhile, CDE, which hosted the discussion, appeals to big-balance companies to help smaller players who are struggling more during the Covid-19 crisis.
The development think tank said all countries were learning along the way how to reopen their economies safely, and while SA is walking down that road, companies should not pass up the burden of Covid-19 by not paying their owners and providers when they can afford it.
“[We must] keeping companies alive and keeping as many jobs as possible We have to find a way to reopen our economy and rebuild so that we have a chance for economic recovery, “said CDE Executive Director Ann Bernstein.
