Empty eateries and stalled supplies — how coronavirus is hurting local businesses
It’s shortly after 8pm on a mild Cape Town summer evening as the kitchen doors swing open in the Sea Palace Chinese restaurant and a man emerges with a tray of food. It’s not destined for diners but for his family upstairs.
Not a single table in the cavernous establishment is occupied. A lone crayfish stirs in a slowly bubbling tank at the entrance and music echoes from the loudspeaker as the Sea Palace prepares to close for the night.
“I’ve had this business since 1992. This has never happened before,” says its manager, Qing Chen. “Usually 70%-80% of my business is Chinese tourists. Now they are not coming,” she says.
Chen is at the front line of SA businesses hard hit by the novel coronavirus outbreak that emerged in China late in 2019. China has borne the brunt of the epidemic, but the virus, called Sars-CoV-2, and the disease it causes, Covid-19, have rapidly spread. By March 8, Covid-19 had sickened more than 107,300 people and killed more than 3,640 people across 107 countries and territories, according to the Johns Hopkins tracker.
Last Thursday SA became Africa’s seventh nation to confirm a case, a 38-year-old man who had travelled to Italy, the epicentre of Europe’s outbreak. His wife and a woman who travelled with them to Italy have since been diagnosed with the illness, and the government has deployed tracer teams to track down their contacts.
China cancelled all outbound group tours in late January, as it aggressively sought to contain the virus, which is said to spread mainly from person to person through droplet infection. The tour ban delivered a direct hit to local businesses such as Sea Palace that have over the years carved out a market niche almost entirely dependent on Chinese tourists. The outlook remains bleak, says Wesgro CEO Tim Harris.
Travel from China to SA is projected to decline by 85% in the next six months, he says, citing research by ForwardKeys. While Chinese visitors account for 3.5% of the international arrivals to the Western Cape, the local tourism industry is reporting that potential visitors from other destinations are also cancelling or postponing bookings, he says.
“We anticipate that this decline will mirror global trends,” he says.
As the world’s largest exporter, China contributes about a third of the world’s manufacturing output. Chinese authorities shuttered the “factory of the world” to contain the virus, with a knock-on effect on the myriad supply chains it feeds.
Industries as diverse as construction and retail face supply chain risks, says Cape Chamber of Commerce & Industry president Geoff Jacobs. “Should ships be delayed or prevented from leaving China to deliver to us, it would cause bottlenecks,” he says.
Biggest trading partner
The ramifications are already being felt in SA, which counts China as its biggest trading partner: imports from China topped $17bn in 2018, according to the UN Comtrade database on international trade.
JSE-listed companies ranging from gem producers to retailers have been issuing warnings to investors. Rough-diamond seller De Beers said sales fell by more than a third in February as concerns about Covid-19 affected customers that supply China, while alcoholic beverage maker AB InBev lost out on $285m in sales and $170m in earnings in the first two months of 2020 due to the virus.
Retail giant Shoprite projects a R100m knock in turnover due to difficulties sourcing products such as heaters and electric blankets from China, while Woolworths is expecting trouble procuring imported items in coming weeks.
Local pharmaceutical manufacturers say they are keeping a close eye on potential disruption to the supply of active pharmaceutical ingredients used to formulate medicines, and SA’s medicines regulator has promised to expedite the process for approving supplier changes should the need arise.
Exporters face both a slump in demand and potential problems unloading their cargo if dock workers are affected by the virus, says Jacobs. SA’s agricultural sector could lose as much as R39.23bn in export revenue due to the outbreak, as Asia accounts for a quarter of its exports, according to the Agriculture Business Chamber.
Even companies that do not have direct links to China have felt pain, as investors abandoned emerging-market stocks and sought havens in gold and US Treasuries. The coronavirus has battered financial markets and sent global stocks tumbling at a rate last seen during the 2008 global economic crisis. Almost R1-trillion was wiped from the JSE all share index in the last week of February.
Though SA businesses may be able to swiftly source alternative suppliers, the reality for most is that it takes time to build trade relationships and establish new markets.
“The Chinese government prevented tourists (coming in) to protect the world. It’s good to protect the people, but I just hope it can finish quickly,” says Chen, as she finalises plans to launch a buffet to lure new customers.