Companies in the liquor, leisure, travel and tourism industries have been battered by the fallout from the latest Covid-19 lockdown measures by government, with some stocks plunging on Monday.
There are growing calls for the state to urgently introduce support packages to cushion those affected by the new restrictions on economic activity.
In a blow to SA’s already sputtering economy still reeling from the previous restrictions, which started in March of 2020, President Cyril Ramaphosa moved the country to a stricter lockdown on Sunday in a bid to curb the third wave of Covid-19 from spreading.
The new lockdown measures, which will be in place for at least two weeks, include a ban on the sale of alcohol, a tighter curfew, and outlawing all gatherings.
Travel to and from the country’s economic hub, Gauteng, for leisure purposes is prohibited and restaurants and other eateries will only be permitted to sell food for takeaway or delivery. Players in the alcohol, leisure, travel and tourism sectors had previously warned that tighter lockdown measures would signal the death knell for recovery efforts.
On Monday, shares of resort hotel chain and casino destination Sun International dropped more than 9% to R18.02 in their biggest one-day drop in about 11 months on the JSE, giving it a market value of R4.7bn. Other game and hotel stocks were also caught up in the selling frenzy, with Tsogo Sun Gaming losing 8.55% to R7.91 and Tsogo Sun Hotels 9% to R2.66. City Lodge shed 4% to R3.58.
The JSE’s travel and leisure index tumbled the most since the first Covid-19 lockdown began in March 2020, falling by as much as 7.53%. The index includes Sun International and Tsogo’s gaming and hotel listings.
Sun International said given the new restrictions on leisure travel into and out of Gauteng‚ alcohol and the curfew‚ its hotels and resorts will struggle to operate‚ so it has taken a decision to temporarily close them.
“The impact of these two-week or longer measures are simply devastating for our tourism and hospitality industry — especially coming off the back of so many companies being so already significantly financially compromised,” Rosemary Anderson, the chair of the Federated Hospitality Association of SA, the national trade association for the hospitality industry including accommodation and catering sectors, said on Monday.
Anderson said placing the leisure travel ban on Gauteng has also severely negatively impacted on all the other provinces’ accommodation establishments since up to 75% of their business comes from Gauteng.
“On top of this add the prohibition of alcohol and no leisure travel [to and] from Gauteng. One might just want to call it a day taking all of this into account. All of the above basically means hospitality is closed for all intents and purposes and definitely not financially viable trading,” Anderson said.
She said the repeated lockdowns and the fourth ban on alcohol are no longer sustainable. “Each time this is done more companies close down, more jobs are lost, more lives are lost due to suicide and despair. The only solution is to get mass vaccination yesterday.”
As the market digested the latest lockdown including the ban on liquor, Distell, SA’s major alcohol producer of brands such as Savanna and Klipdrift, fell 2.27% to R163.88 in early afternoon trade on Monday, trimming its year-to-date gains to 72%.
The latest ban will hurt the sector which shed thousands of jobs due to the three previous bans. The National Liquor Traders Council, which represents about 34,000 tavern owners across the country, has threatened to defy the fourth ban on the sale of alcohol to avert potential job losses and business closures.
Rico Basson, the MD of wine producers’ body Vinpro said lawyers are being consulted on the way forward. Before the latest ban Vinpro had approached the courts arguing that provincial authorities, specifically the Western Cape, should have the power to determine lockdown regulations regarding the sale of alcohol as they have both control over running provincial hospitals and the authority to issue liquor licences to bars and bottle stores. The matter was postponed in April.
The government introduced alcohol bans on three separate occasions in 2020, totalling about 20 weeks, in a bid to reduce the number of trauma patients in hospitals overwhelmed by Covid-19 cases. The bans attracted widespread condemnation for the devastating effect on the economy, including R38bn in lost liquor sales, R27bn less tax revenue, job losses and billions in cancelled investment.
The airline industry, which has been struggling to take off since the beginning of 2020 when SA moved to its first lockdown, will also be hit by the latest regulations especially the tighter curfew and the ban on leisure travel to and from Gauteng.
Kirby Gordon, FlySafair's chief marketing officer, said the restrictions are likely to have a severe impact on domestic travel.
“We anticipate a steep decline on demand for flights, especially in and out of Johannesburg which is a key hub .... At this stage it’s hard to determined, but we anticipate needing to reduce our flying to between 30% and 40% of our capability so it will be a large reduction,” Gordon said.
Brian Kitchin, Comair executive manager for sales and marketing, said the company that operates Kulula and British Airways (BA) in SA would need to make adjustments to its flight schedules over the next few weeks. All late-evening flights will be cancelled due to the new curfew hours. Kitchin said the reduced schedule and restrictions on travel into and out of Gauteng will negatively impact revenue.
The Western Cape provincial government called on the national government to introduce a support package for business whose operations are limited or shutdown due to the stricter lockdown regulations. But government finances are dangerously over- stretched despite the recent boom in commodity prices. /With Karl Gernetzky
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