COVID: Which businesses have thrived under lockdown?

The national lockdown, which came into effect in March, has had a dramatic impact on local businesses. Some have been forced to shut down, while others have found new opportunities to thrive.

In this part of our Covid-19 series, we find out which businesses have managed to excel – in spite of the economic shut down – and which have been forced to shut down themselves.

Tip: Ready to start your own business? Find out whether you qualify for a loan by clicking here.

Uncertainty in the market

According to Wichard Cilliers, head of dealing at TreasuryONE, the current Covid-19 shock is a “non-financial”, which means that the root of the problem can’t be cured, and the endogenous effects of such a shock are that it sticks its fingers in every aspect of the economy.

He believes there’ll be a severe contraction in asset values, demand, and production, which ultimately means a deeper than expected recession.

“We have seen some of this already happening in the oil market where demand has been suppressed, while supply goes on due to oil producers needing to produce or face going out of business. This has caused a glut of supply and a dramatic drop in oil prices. These rapid price movements also prove that volatility in markets is alive and well,” says Cilliers.

The impact on SMEs

Trevor Gosling, CEO and founder of Lulalend, has been tracking the impact of Covid-19 on Small and Medium-sized Enterprises (SMEs) since the start of the outbreak.

“Before the first case was reported in South Africa, some SMEs were already taking a knock. These were businesses who depended on Chinese suppliers for stock. For example, SMEs that sell electronic goods or construction companies requiring raw materials,” says Gosling.

He explains that once the State of Disaster was declared, SMEs in the events and tourism industries were the hardest hit. Currently Lulalend’s data shows businesses in almost every sector have been affected by Covid-19.

“We recently surveyed 941 SME owners about the impact of Covid-19 on their businesses. Most businesses are in manufacturing, construction, retail, and business services,” says Gosling.

The results were: 

• 68% said turnover is down by more than 75%
• 6% needed funding for working capital
• 9% needed funding to pay salaries

Pandemic leading to cyclical and structural changes

Alison Collier, managing director of Endeavor South Africa, points out that successful industries during the lockdown are in line with global trends.

“These businesses are able to reach their markets incredibly efficiently and effectively with social distancing. The businesses that are doing particularly well are offering better value-for-money offerings or meeting a basic need,” says Collier.

She explains that the Covid-19 pandemic is driving both cyclical and structural changes. The cyclical impact includes mass job losses and salary reductions, which dramatically reduces spend, and shifts consumption to basic needs. Structurally, social distancing and financial constraints have accelerated technology adoption across the board.

“Digital life has evolved rapidly due to the forced, en masse work-from-home schedule, home schooling, online shopping, and mobile banking,” says Collier.

She believes entrepreneurial businesses are extremely well placed for times like these, specifically medium-sized entrepreneurs with strong tech plays. Entrepreneurs are nimble and able to rapidly adapt their business offering to meet changing market needs.

“At Endeavor, a global consulting company that actively supports scaling of fast-growing, medium-sized entrepreneurs, we’ve seen evidence of this over the past two months across the portfolio of entrepreneurs we support,” says Collier.

Which industries are doing well?

In a changing world, where governments are referring to “the new normal” as a given, the economy has been forced to adapt. The following sectors have seen large positive changes during this time:

1. Basic needs

Collier says that businesses that have been successful in the current crisis are those that are fortunate given their market position and those that are able to scale rapidly and others who’ve adapted quickly to changing needs.

“Examples include online grocery delivery companies, like OneCart and Zulzi growing 5-10 times compared to historic growth, and Checkers with the launch of its Sixty60 App,” she explains.

2. Fintech and insurtech

Collier points out that fintech and insurtech players are also enjoying rapid market share growth – with the likes of Ozow, Entersekt, and Guidepost all seeing acceleration in customer acquisition.  Likewise, call centres and Business Process Outsourcing (BPO) are seeing a huge surge in demand due to remote working. 

“CallForce has increased its headcount by 50%, hiring 450 additional staff members to launch a new project due to opportunities that arose through the lockdown,” says Collier.

3. Communications

“Wyzetalk – a software company that connects large organisations with their frontline employees to improve communication – has similarly seen a massive increase in demand. The need for effective, two-way communication with frontline workers is all the more critical in a time of crisis,” she explains.  

4. Healthtech

Collier says that any type of telemedicine, healthtech, and online education portals have also seen a surge as these services can be accessed remotely.

5. Online entertainment

“Then lastly, all forms of internet service providers, online entertainment, and video communication platforms, which have been used extensively during the lockdown, have seen an incredible increase in demand,” she says. 

“Companies such as Vodacom, Rain, Zoom, and Netflix have seen the rapid rise of use and consumption of their services and they have benefited greatly,” she adds.

6. Events industry

According to Craig Green, co-founder of United Safety Services, the advent of Covid-19 has created an enormous amount of additional work and pressure on the traditional workplace.

“Companies that specialise in event safety protocols are well versed to tackle the challenges that these new processes bring. To many, the lists and lists of processes are cumbersome and at times, scary,” says Green.

However, he explains that in the events industry the processes required to become Covid-19 compliant are not that different from the event compliance processes that have been followed for many years.

Cryptocurrency gaining traction

According to Artur Schaback, co-founder and COO at Paxful, a peer-to-peer Bitcoin marketplace, cryptocurrencies have become more popular since March. 

“Our platform has been very busy during the lockdown. It appears many people are interested in cryptocurrency at the moment. For example, we observed a spike in new user registrations globally at the beginning of the lockdown in March 2020,” says Schaback.

“There was also an increase in the number of traders willing to pay above market rates for bitcoin. We see this phenomenon on occasion, specifically when there’s uncertainty in the world. However, the reasons for the increased appetite for bitcoin are complex,” he explains.

“In some cases, people find bitcoin to be less volatile than their own country’s currencies. For others, the benefit is that bitcoin is electronic and allows for the types of contactless transaction methods which are being encouraged due to Covid-19,” says Schaback.

READ MORE: Cryptocurrencies are exploited without regulation.

Businesses struggling to make ends meet

According to Daniel Goldberg, CEO of Bridgement, remote working can help maintain productivity and greatly reduce the chances of employees contracting Covid-19.

He explains that working from home is especially relevant for SMEs in professional services, but it’s less applicable to SMEs in the manufacturing, wholesale, retail, and restaurant sectors.

“Many companies are seeking support from their banks and FinTechs like Bridgement in the form of revised repayment plans and small capital injections to keep them going through this difficult time. Businesses have also negotiated payment deferrals with their suppliers and landlords to conserve cash in the business for paying salaries and other essential payments,” says Goldberg.

READ MORE: How to apply for government funding for your start-up business.

Adapting their business models

Goldberg points out that some SMEs have pivoted their business models to sell online and to offer essential goods and services. Some examples include:

• Beer breweries creating non-alcoholic product lines and repurposing their equipment to manufacture food and hand sanitisers.
• Retailers moving to e-commerce.
• Alcohol delivery apps shifting to a delivery service for a large supermarket chain.
• Fitness trainers beginning to run classes online and over Instagram attracting larger international audiences.
• Eventing and production companies repurposing their delivery vehicles to assist with the logistics of essential goods.

Gosling was chatting to the owners of Granadilla Swim, a swimwear manufacturer, the other day. In addition to swimwear, Granadilla Swim also manufactures kombucha, which was sold at a farmer’s market.

“At the start of the Covid-19 outbreak, the company realised the farmer’s market would likely be shut down. So, Grannadila Swim started working with other traders, mainly small businesses who sell organic produce,” says Gosling.

“Now, Granadilla Swim deliver these SMEs’ products using Granadilla Swim’s existing online platform and distribution. These SMEs are able to trade without needing to set up any new, advanced systems,” he explains.

According to Seb Patel, COO at Franc, a new investment app, some businesses have been selling vouchers for future use at a discount. For example, a restaurant sells you a voucher which costs you R90 but you can exchange it for R100 worth of food or drink when you use it.

“This gets some cashflow to the business, but the consumer must also realise that the restaurant may not be around in a month or two if they’re forced to close,” says Patel.

How can you safeguard your income?

According to Tom Manners, co-CEO of South African advertising agency, Clockwork, every South African has been affected by lockdown – some more than others. In some situations, the negative impact on ongoing employment has been inevitable.

“It’s incredibly sad and I can’t imagine how difficult it must be to face an uncertain future without the security of employment. That being said, this also presents an opportunity to think out of the box,” says Manners.

“I strongly believe this event will create a vacuum in the broader economy that will need to be filled – either by new entrants replacing less agile organisations that have gone out of business, or by entirely new business models that we’ve only just begun to imagine,” he explains.

“It sounds strange, but this is one of the best times to start a business. Consumers are hungry for services that cater to their needs, not old industry norms. Start-up organisations are perfectly poised to react quickly. If you’ve been thinking about making a change and going into business for yourself, now might be the time,” says Manners.

But what if you’re fortunate enough to have an ongoing job during this time? According to Ryan Nienaber, owner of Green Fish, you can protect your job by making yourself so useful to your employer that you’re irreplaceable.

“Changing your skillset my not be the right approach now, as there are many skilled, experienced people without work who may get placed over someone new to an industry,” says Nienaber.

To access other parts in our Covid-19 Content series, click here.