How SA Companies Can Survive Challenges Brought On By COVID-19

“By failing to prepare, you are preparing to fail,” Benjamin Franklin.

Most South African businesses are not prepared for the challenges brought on by the COVID-19 pandemic.

Due to the duration of the Covid-19 crisis, most businesses might report a lower income. The economy had a bleak 2020 before the impact of the coronavirus. Economists say that without the additional crisis of the coronavirus, South Africa’s economy would have grown by around 0.5% in 2020.

The Reserve Bank projected that the 21-day lockdown could result in a 2.6% contraction of GDP from the production side of the economy. It also projected about 370 000 job losses and about 1 600 businesses going insolvent.

Speaking on a webcast briefing last month, Reserve Bank Governor Lesetja Kganyago said forecasting had become “nightmarish” given the many moving parts at play. Meanwhile, Investopedia layoffs are reaching historic highs just as most countries try to reopen economic activities.

Industries hard hit by the deadly virus include logistics, hospitality, tourism, airlines, movie theatres, construction, wedding planners, event organizers, hair salons, live sports and many others.

According to research released by the United Nations University’s World Institute for Development Economics Research, poverty levels in developing countries could be set back by up to 30 years. Meanwhile, Investopedia reports that layoffs are reaching historic highs just as most countries try to reopen economic activities.

Where does all that leave business owners who are struggling to adapt to the changes brought on by the coronavirus? A continuity plan can be a solution.

In this newsletter, we offer our latest insight into the COVID-19 pandemic, which is the Business Continuity Plan.

What is a COVID-19 Continuity Plan?

Investopedia defines Business Continuity Planning (BCP) as the process involved in creating a system of prevention and recovery from potential threats to a company such as COVID-19.

Some of the questions the plan should address include, what are the options to re-address the balance of supply and demand? Can production scale back or amended to protect scarce stock? Is buffer stock or a safe alternative supplier available?

Once the risks identified, the plan should also include:

• Determining how those risks will affect operations;
• Implementing safeguards and; procedures to mitigate the risks
• Testing procedures to ensure they work;
• Reviewing the process to make sure that it is up to date.

Based on several sources of information from the wider PwC network, they compiled the following five steps to assist South African businesses to protect themselves against the disruption in global trade:

1. Create a view of critical products and suppliers

According to PwC, it could be challenging most organizations to quickly, identify every one of their direct and indirect suppliers if they do not already have a transparent view of them (or at least the available data). Focusing on the most critical imported products and top tier suppliers should help to prioritize and expose key vulnerabilities to trade disruption.

2. Have contingency plans in place

What are the options to re-address the balance of supply and demand? Can production

Scale back or amended to protect scarce stock? Is buffer stock or a safe alternative supplier available?

3. Consider the financial and legal implications

What will be the impact of supply chain disruption on margins, cash flow, loan repayments, and terms? Are there legal implications if you are not able to deliver supply to customers?

4. Communicate

Supply chain disruption brings the risk of unintended reputational damage. A clear strategy for transparent communication with customers, external stakeholders, and employees, as well as along the supply chain, will be critical and can become a competitive advantage in these situations.

5. Conduct scenario analysis

PwC says careful planning, as well as respect for the unpredictability of such an event, will help to see businesses through the coming months.

“Businesses likely to be affected by the trade disruption caused by COVID-19 should act without delay to assess the potential implications and develop a plan to mitigate risk and remain operational. Admittedly, despite taking action, there is no certainty as to how long we will experience challenges caused by trade disruptions — it could be weeks or months,” says the PwC repo

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