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The Death Of Shopping In Africa?

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By Melitta Ngalonkulu

A sad story; the death rattle of an African legend. On this Friday, the lights shine brightly but the shelves are gloomy. The manikins lay in a pile, stripped of their designer labels and dignity. The shop assistants wear black as sombre as the day. Outside stand the last two flimsy racks of cut-price clothes; like the store itself, everyone wants to see the back of them. A sorry end to more than a century of tradition.

“When one door closes, another one opens,” says one shop assistant, through a smile as empty as the shop.

These were the last heavy hours of 159 years of South African department store – Stuttafords. An economic slump and the shift to online shopping has seen many retail stores shut across the continent. On August 1, the last Stuttafords stores in two Johannesburg malls, Eastgate and Sandton City, took their final bow after years of struggle.

“Stuttafords just became more irrelevant to the customer. There was no individuality to it, it just became a portfolio of global brands. It became a departmental stocking global brands, which were stocked in the centers independently anyway,” says portfolio manager at 36ONE Asset Management, Evan Walker.

When the first shop was opened in Cape Town, in 1858, by English immigrant Samson Rickard Stuttaford, the vision was to establish a Harrods-like department store in what was then a Crown Colony. Its main store opened in 1938 in Cape Town. It was designed by in-house Harrods architect Louis David Blanc and echoed the British store’s famous frontage in London’s exclusive Knightsbridge district.

It went through many hands, including winemaker Graham Beck,  who died of lung cancer in 2010. Beck bought Stuttafords in 1978 with its six department stores from the Stuttaford family for R12 million ($900,000), and shortly thereafter delisted the company from the Johannesburg Stock Exchange (JSE).

However, it stayed focused on the middle- and upper-class market, despite the economy’s failure to recover from the deep recession of 2009.

Stuttafords Chief Executive Robert Amoils, who declined to be interviewed, told business website Fin24 that the damage had already been done.

“I believe the path we set was correct. We ran out of time. The market downturn was so swift, so severe,” says Amoils.

Then came President Jacob Zuma’s surprise removal of South Africa’s former finance minister Nhlanhla Nene. In December 2015, the rand dropped, which raised the prices of stock that Stuttafords had committed to buying up to a year in advance.

The company filed for voluntary business rescue in October, cutting 50 jobs – out of 800 employees. The store had 61% independent creditors, and owed R836 million ($63 million). They included Nedbank, Estée Lauder, Levi Strauss, Tommy Hilfiger and Polo.

The rescue plan was amended four times. There was conflict between shareholders and management as well as creditors and management.

Months before its closure, the department chain launched a slew of promotions which were a mix of high discounts and three-for-two promotions. This was to raise money for stock for the winter season.

The single largest shareholder Ellerines Bros, which currently owns 26.4%, withdrew from its commitment to inject R12 million ($900,000) in exchange for a 76% stake.

It left Stuttaford’s in liquidation. Its assets would be sold and some creditors will only be paid three cents for every R1. Creditors, whose debt is secured against Stuttafords’ assets, would be paid 90 cents for every R1.

The South African Revenue Service (SARS) would be the first to receive its R28 million ($2.1 million) in taxes. Creditors with secured debt and other shareholders, including Ellerines and Vestacor, will also receive what is due to them, leaving the employees last in line.

“I am really worried about finding another job. I am a mother of two and I support my brother as well because our parents passed away. Last year I moved to Stuttafords for greener pastures, little did I know that I would find myself in this crisis,” says a distraught employee at the Sandton store.

Stuttafords employees stand next to empty shelves at the store in Sandton. (Photo by Motlabana Monnakgotla)

“They did nothing themselves in turning around the store. They had zero output for the customer. I would say that they have been outdated for the past 10 years. I think what has kept them more relevant is the fact that, I think that they had more relevant regional locations and sub–centers, and the brands in South Africa have taken a long time to get here,” says Walker.

“Big stores, like H&M, Zara and Cotton On, keep introducing new product lines all the time and they keep having different footprints and different handwritings all the time, at way more affordable prices. I do not see any future for departmental stores, there is very little future growth. Globally, we have seen the added footprint of online shopping that is destroying the retail market.”

EY’s analysis on the 12 largest retailers in South Africa accounts for about R600 billion ($45 billion) in annual sales. The analysis focused on groceries, clothing and speciality items, like stationery.

Last year, return on equity (ROE) was strong for specialty retailers at 51.6%, grocery retailers averaged 22.3% and clothing ROEs were 41.1%.

The grocery retailers had a 62% share of total retail spend, specialty retailers had 23% and clothing retailers achieved 15%. In terms of share of profits, grocery retailers achieved 66%, while speciality and clothing retailers had lower shares at 18% and 16% respectively.

Many of Africa’s retailers are gloomy. The sector is trying to recover from weak and declining Gross Domestic Production (GDP) growth, low credit growth, and low investment levels.

In the difficult retail business of Africa there are no sacred cows – just ask Stuttafords.

Empty shelves are becoming common in stores across Africa. (Photo by Motlabana Monnakgotla)

Empty Shelves, Unpaid Bills And Angry Workers

In East Africa – where the tills used to jingle all year round – the picture is even grimmer. The big retailers are on the ropes, yet the developers plan even more shops. Crazy?

By Allan Akombo

In the once bustling supermarkets of Kenya, acres of shelves are empty; the once maddening queues are no more; disgruntled and unpaid shop workers are threatening to join the exodus of customers.

This has become the face of the two big names in retail in East Africa: Nakumatt and Uchumi Supermarkets.

Just three years ago, homegrown Nakumatt supermarkets were a signature success story in the region with expansion in mind to capitalize on a growing middle-class.

Today, Nakumatt – which runs the highest number of supermarkets in East Africa – is a shadow of itself, choking with debt and battling insolvency lawsuits by suppliers, as well as industrial action by its workers over unpaid wages.

“The situation is not good but we hope it will be handled fruitfully,” says Kenya’s Trade Principal Secretary, Chris Kiptoo.

Nakumatt’s financial struggles have already seen the chain shut down two stores in Kenya, and another three in Uganda, as part of a restructuring program to curb debts of more than  $145 million.

The debt crisis has sunk Nakumatt into serious cash flow problems to the extent that it can’t pay its 5,700 workers on time. Its woes have been compounded by cautious suppliers who now demand upfront payments. Others have cut their shipment of products to Nakumatt altogether, while some, such as Africa Cotton Industries and Gold Crown Beverages, have filed insolvency lawsuits against the supermarket chain for non-payment of debt.

“We had a delay in some salary payments. The restructuring has taken longer than anticipated and affected some of our liabilities,” Andrew Dixon, Nakumatt’s Marketing Director, admitted in June.

Insiders say Nakumatt’s financial troubles stem from an ambitious brick-and-mortar expansion gone wrong. Agitated by the entry of new rivals into the region – including Choppies of Botswana, France’s Carrefour, South Africa’s Game and Walmart of the US – Nakumatt and other Kenyan retailers expanded their footprint to ward-off competition for the dollars of East Africa’s growing middle-class.

The debt-driven expansion, partly through acquisitions, backfired because of a shaky economy and competition from new entrants.

“The management should share the blame because some of the expansion decisions defied basic economic sense. A responsible management should have engaged professional counselling to strategize the expansion,” a government source said.

Nakumatt looks to a long awaited $75-million cash injection from an undisclosed private equity fund to help shore up its stores. Despite the crisis, Nakumatt has 45 stores running in Kenya, eight in Uganda, three in Rwanda and five in Tanzania.

Uchumi Supermarkets faces the same trials as Nakumatt. Shelves at its stores are either empty or filled with single-line products as suppliers stay away due to lack of payment.

The chain, in 2016, closed stores in Kenya, leaving Uganda and Tanzania in an attempt to climb out of a financial hole. Uchumi is also selling assets, like land, to improve its cash reserves; it is hoping to obtain fresh funds from its shareholders that include the Kenyan government. The partly-owned government retailer was declared insolvent on May 30, 2006.

A decade on from this insolvency, Uchumi survived a winding-up suit and is currently banking on a Sh1.8 billion ($17.6 million) Treasury bailout package, of which only Sh500 million ($4.9 million) has been released so far. Another Sh3.5 billion ($34 million) is needed from investors to help Uchumi restock its shelves and pay supplier and bank debts.

But even with all of this debt and despair, developers in East Africa plan ever more retail space.

“The demand for brick-and-mortar retail is still high in East Africa, unlike in other markets where online commerce has disrupted things, leaving shopping malls empty. More new smaller retailers are emerging to service customers at their respective residential estates,” says John Ndirangu, a property agent in Nairobi’s Lang’ata suburb.

According to a report by Broll Property Group, an estimated 135,985 meters squared of retail space will be added to the Nairobi market in 2017.

“The opening of Garden City in Kasarani in mid-2015, The Hub in Karen in February 2016, and now Two Rivers, which opened in February 2017, have added an additional 120,000 meters squared of prime retail space in less than 20 months,” says Gordon Bell, Director and Head of East Africa Operations for Broll Property Group.

There is also the rise of international brands.

“Ultimately, landlords want tenants who can do the most business. The result is numerous international brands are now entering the market and local retailers feel the need to expand their number of outlets, in spite of the pressures on their financial and management structures,” says Bell.

“If we look at global retail trends, there is continuing debate about online shopping versus physical storefronts and changing consumer habits.”

Several online outlets, including Jumia, are attempting to grab a bigger share of the retail cake, sending those with brick-and-mortar stores turning to smaller and cheaper shops to cut costs.

“Across East Africa, we are seeing an emerging trend of smaller strip malls… where more favorable cost structures and the convenience aspect may better suit the much-needed up-and-coming retailers,” says Bell.

They may find it a rollercoaster ride in the uncertain world of East African shopping.

The Alara store in Lagos, Nigeria. (Photo supplied)

Trouble In Store Unless You Go Online

A falling naira and oil price may be crippling stores of Nigeria, but there is hope online and in pandering to the whims of the mega-rich.

By Peace Hyde

Alara is a store that nestles into the heart of the busy and prosperous Victoria Island district in Lagos. It could as easily be in London or Paris; it sells designers from Dries Van Noten to Valentino and Stella McCartney. Rich customers spend thousands of dollars every day here in contrast to the poor pickings in the rest of Nigeria’s retail industry.

“The biggest influencers of Nigeria’s retail transformation are the proliferation of the internet and the impact of globalization. We realized that people were craving the luxury shopping experience they had in places like Paris or London and did not always want to travel outside Nigeria to get it. They wanted the retail experience at home, without the hassle of flying around the world,” says Reni Folawiyo, the founder of Alara.

“Even in these turbulent economic times, we have found that our high net worth clients still crave exclusivity of products and the convenience of shopping at home. So we do everything we can to supply them with the very best,” says Deremi Ajidahun, who opened the first boutique selling the luxury watch brand, Ulysse Nardin.

These stores are a couple of lucrative spots on a dingy canvas. Nigeria has 180 million customers to sell to, but the country’s short-term retail prospects are gloomy.

“The foreign exchange (forex) crisis, which is largely the result of the falling demand for the naira from foreign buyers of Nigerian oil and gas, which accounts for a significant balance of payment for the government, is a strong catalyst for these challenges. The Central Bank of Nigeria (CBN) proceeded to cut about 680 categories of items from the list of those it would provide forex at the official rate, forcing retailers to secure US dollars through the black market at a much higher exchange rate,” says Bismarck Rewane, Managing Director and Chief Executive of Financial Derivatives, a financial advisory firm in Lagos.

This has led to an exodus by international retailers in Nigeria. South African shopping giant Woolworths – that has easily ridden hard times at home – ran from Nigeria in 2013, even before the forex problems. The reason: high cost of rent, taxes and supply-chain management. Then, clothing retailer Truworths, also of South Africa, followed in February 2016, citing a struggle to stock its outlets and manage the forex challenge. Many of the items subject to the CBN’s import controls, like textiles, clothes and woven fabrics as well as glassware and utensils, affect the retail sector, making it more expensive to stock these products.

“The old or traditional brick-and-mortar retail system, which accounts for almost 90% of retail activity in Nigeria, has continued to decline because of the government’s policy, changes in the composition of Nigeria’s population and increasing sophistication of the Nigerian consumer,” says Rewane.

These old school stores are increasingly facing stiff competition from digital and e-retail. The rise of Nigerian online seller Jumia is a sign of disruptive times. It is backed by big hitting investors: the US’s Goldman Sachs, Germany’s Rocket Internet, South African telecommunications giant MTN, and Sweden’s Millicom. It claims millions of customers.

“People told us when we started about six years ago that it won’t work, people don’t trust the internet in Nigeria so they have to feel and touch the product. Our response was to build Jumia as the first Amazon of Africa,” says Jeremy Hodara CEO and founder of Jumia.

With the increasing growth in internet and mobile penetration, satisfying the demands of an increasingly tech savvy millennial consumer has become integral to survival in Nigeria.

“It is simply a case of those who dare, survive. Numerous stores have transformed by adopting fully-integrated solutions, collaborating with retailers rather than competing with them,” says Rewane.

“I use Jumia and other online retailers, like Konga, to shop mostly for clothing because it is faster, much more convenient and I can get the best prices and deals all from the comfort of my home. Due to growing competition, especially from international brands like ASOS and Amazon who now deliver worldwide, the choice for consumers are practically endless,” says Stephanie Bello, an MBA student at the Lagos Business School.

Data is at the heart of this transformation.

“Companies in this space are quickly differentiating themselves and streamlining their operations by employing cutting-edge cognitive technologies to help them gain insights. Most of these online retailers use hyper-personalization software to map user behavior and are able to recommend items based on consumers’ past shopping experience,” says Mawuli Nunya, an independent software analyst.

Deloitte forecasts that e-retail in Nigeria will grow at a compound annual growth rate of 37.7% from 2013 to 2017. The CBN recently announced a review of the current currency policy, which experts believe is the most important factor for the retail sector, especially for those importing global brands.

If old-school retailers don’t feel threatened; they should. Rapid change is needed in Nigeria’s retail business as only the swift will survive.

Stores Of The Future?

Shops are closing across Africa; still they come like lemmings to a cliff.  Entrepreneurs are prepared to throw good money after bad.

By Melitta Ngalonkulu

Mbukwashe Zwide. (Photo by Motlabana Monnakgotla)

Shops are closing around Africa and yet still they throw in more money. Entrepreneur Mbukwashe Zwide is one of them.

“I took a decision of balancing social media, pop-up sales with brick-and-mortar. This was informed by the understanding of the market. The type of clothing one sells, being vintage, tends to be tricky selling it online, seeing a picture looking all pretty online as compared to seeing the garment and feeling the fabric,” she says.

Vintage-meets-urban chic fashion is her game. Zwide, who holds a national diploma in information technology, ditched her permanent job to pursue her passion for clothes.

“It was then that the fashion bug bit and it was just too strong to ignore and I left the corporate world to pursue what was dear to my heart and soul; fashion,” she says.

In 2014, she started Hombakazi Vintage Cabin (HVC) from her mother’s garage in Port Elizabeth, and with just R10,000 in stock. She advertised her clothes on social media and would travel to different provinces in South Africa, with a black plastic bag, to sell. As the demand grew, she opened a shop.

Zwide turns over R1.3 million ($98,000) annually across the counter, making 20%. Her profits online are 30% and pop-up sales [temporary store] are 50%.

She has 75,000 followers on Facebook and over 2,000 followers on Instagram.

“Social media still gives us the reach, marketing and online orders, while pop-up sales is part of our customer touch points and market development across the country. Retail has its own function [over social media and pop-up sales] of growing and sustaining my business,” says Zwide.

Not everything has been a perfect fit.

“My biggest challenge is the conversion rate of walk-in customers. Since I have opened my store, I have observed that during certain periods of the month I have high volume of traffic in the store but a low percentage of converting the traffic into sales. This could be caused by not finding a specific garment at that particular time, and also size tends to be an issue at times. …I plan to introduce an incentive-driven program for my team to work on a 30% conversion rate of traffic during certain periods of the month,” she says.

Zwide says it is up to newcomers, like her, to make sure that retail does not die.

“The industry reports predict continuous decline in revenue generation from store traffic holds, as we have seen with the 159-year-old retail giant [Stuttafords], and probably a consolidation of retail businesses… these open opportunities for emerging players like HVC to come up with unique offering to your counterparts. That way one can then convert these newly unattended customers from affluent areas and traditional in-store shopping to online and pop-up sales. Given my background in information technology, I’m considering the use of emerging technology, such as virtual reality and digital innovation, with the sentiment of improving store productivity and aggressively enhancing customer experience,” she says.

Zwide is also concerned that not all likes and shares mean money.

“My social media posts directly generate 1,000 likes on clothing items we post, however, this is translated into 10% sales from likes; my ambition is to have a 100% conversion rate,” she says.

Economy

The Turn of Events: Will Local Tourism Lead The Recovery Of The MICE Sector?

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With the grounding of the global aviation industry, the money-spinning meetings and events sector is also on a downward spiral. Will local tourism lead its recovery?

Mauritian bride-to-be, Olivia Maurel, was all set for the wedding of her dreams at the end of April. But with Covid-19 playing party pooper, she had to make the heart-rending decision of postponing her nuptials. With three-quarters of her guest-list expected to fly into the sunny island of Mauritius, from every corner of the globe, she had no other option.

“The risks of countries closing borders and key people, such as my fiancé’s grandmother, being unable to come from England, was a huge motivator for us to [postpone],” says Maurel.

The billion-dollar global wedding industry will probably not see any big bridal gatherings for months to come. The cognac and crystal will have to wait so long as Covid-19 is the only attendee that has RSVP-ed.

With the coronavirus cancelling significant conferences and business gatherings worldwide such as the Adobe Summit and the Game Developers Conference; as also mega sports, social and entertainment events such as Coachella, the Cannes Film Festival and the 2020 Tokyo Olympic Games, the meetings, incentives, conferences and exhibitions (MICE) industry is facing the annihilating prospect of empty venues and nil revenue. Closer home, in Africa, events such as IAB Bookmarks Awards and Summit; and lifestyle and entertainment events such as AfrikaBurn, the Cape Town International Jazz Festival and the Bushfire Festival hosted in Swaziland every year, have all been casualties. And alongside that reality, life-changing events such as graduations, anniversaries and funerals are now being conducted on laptop screens.

The meetings and events industry has been impacted disproportionately by the virus. Unlike many other economic activities, the events industry is based on physical interaction between people. It’s a type of tourism in which conventions of large groups, usually planned well in advance, are organized at a physical destination.

Securing major conference events can benefit the local economy of the host city or country – particularly attracting business travelers. Research shows that business travelers are the golden goose in the travel industry. Unlike leisure travelers, they, or their sponsors, often spend more money.

 According to the South African Tourism (SAT) board, the events industry, directly and indirectly, sustains more than 250,000 jobs and contributes an estimated R115 billion ($6.2 billion) to the country’s economy.

“Every year, South Africa hosts 211,000 regional, national and international meetings, conferences and exhibitions,” says the CEO of SAT, Sisa Ntshona. “The industry has undoubtedly been heavily hit by this pandemic, which also has negative bearings on employment and the continuity of businesses in the tourism sector.” Annually, the country attracts a million international delegates for business.

As the virus continues to sweep the continent, abandoned halls and venues are being transformed into field hospitals to be used as treatment centers for patients. South Africa’s minister of health Zweli Mkhize announced in May plans to convert the Cape Town International Convention Centre to become a temporary hospital with 857 beds for patients unable to effectively self-isolate until they are no longer infectious. This comes after the FNB Stadium in Johannesburg was earmarked for the same.

A report issued at the end of March by the World Tourism Organization (UNWTO) estimates international tourist arrivals could decline by 20% to 30% in 2020 based on the latest measures taken by governments, businesses as well as the patterns observed from previous global crises. The impact thereof translates to a loss of $300 billion to $450 billion in international tourism receipts (exports). Ntshona cautions to interpret data prudently given the magnitude, volatility and unprecedented nature of the crisis. “The true effect may only be accurately calculated and reflected much later,” he says.

 It’s crucial to understand how Africa was positioned pre-pandemic. Henk Graaff, who runs SW Africa, a boutique destination management company in Johannesburg specializing in inbound tourism in the MICE, luxury, golf and leisure travel segments in Africa, affirms the continent has been an attractive destination for tourists, corporates, event planners, weddings and honeymoons. Countries such as South Africa, Namibia, Botswana, Victoria Falls (Zimbabwe and Zambia), Zanzibar (Tanzania), Kenya, Rwanda and Uganda were seeing increased interest and growing in popularity as events destinations.

It’s unsurprising as Africa offers a vast array of exceptional, customized and personalized locations that exceed expectations. This is strengthened by improved infrastructure, accessibility, expansion of flights and connectivity services within the region from major source markets such as Europe, Asia and America. Attractions such as the wilderness, the Masai Mara and the mountain gorillas of East Africa are now easily accessible.

But at this time, businesses such as SW Africa are strained and seeking relief. “We received both cancellations and postponements, some of which led to demands for refunds from us and in turn from our suppliers, some of whom have been more flexible than others, leading to tension in supply chain relations,” says Graaff.

 He is pleading with suppliers to become ultra-flexible post the lockdown with regards to price, pre-payment and cancellation terms. He believes this will minimize or eliminate the perceived risk in the eyes of potential clients, who will be both relatively budget-conscious and risk-averse.

Maurel was luckier as her suppliers were more accommodating. “Thankfully, everyone has been super-understanding, and we’re all working together to find something that works for everyone’s schedules,” she says. “Luckily, my wedding dress wasn’t finished when lockdown started, so it’s still at Robyn Robert’s studio – if it hadn’t been, I would’ve been so tempted to run around in it and have a Friends moment!”

 However, some suppliers in the value chain are grappling with an even tougher predicament. According to the International Air Transport Association (IATA), no airline, regardless of how well-capitalized, would be able to absorb the impact of the Covid-19 groundings for a prolonged period. The government-imposed travel ban, social distancing and maximum limits to gatherings have caused a steep decline in passenger demand for air flights to which airlines have responded by reducing their scope of operations and costs. Many airlines have been forced to park their fleets, with most seeking financial support and debt relief measures amid the low, in some cases, non-existent demand.

 All African countries will feel the impact relative to the scope of their aviation industries, according to aviation specialist and analyst, Joachim Vermooten.

“The regulatory imposition of travel bans to and from specific states and later to airline operations have brought most scheduled commercial airline operations to a halt. Some one-way directional charter and cargo opportunities have arisen, but these are insufficient to maintain any scale of network operations,” says Vermooten. As a result, airlines are now focused on cash retention and several relief measures, including compulsory leave for staff and issuing travel vouchers and re-bookings, instead of ticket refunds to customers. The battle is uphill as several African carriers have remained financially distressed ahead of the pandemic. Air Namibia and South African Airways (SAA), for example, have been facing severe operating issues.

As global citizens navigate the new ways of engaging and working during the lockdown, technology has been both an aid and a threat to the tourism and MICE sector.

Organizations and individuals have embraced and leveraged technology to facilitate interactions. This includes the massive adoption of tools such a Zoom, Microsoft Teams and Skype. We are also seeing national tourism boards innovating through virtual reality to give travelers delightful “insperiences” from the comfort of their quarantined corners.

 To avoid minimum job losses and devastating economic damage, South Africa’s department of tourism has made R200 million ($10.8 million) available to assist small-medium enterprises (SMEs) in the tourism and hospitality sector who are under particular stress due to the lockdown restrictions.

In addition, SAT is in the process of developing an industry-wide recovery plan. “To ensure that this plan is robust, we are consulting the tourism sector from the large listed players to the SMEs to input into this plan. This plan will be a blueprint on how we move forward as an industry,” Ntshona says.

 With the end of the pandemic indeterminable, it’s currently impossible to speculate what lies on the other side. Due to seasonality and strong preventative measures taken by most African governments, the entire continent has the least positive cases and deaths from Covid-19 than other sovereign states. This might be advantageous for marketing African destinations to be considered relatively safer during the recovery phase. “At the heart of our recovery, will be domestic travel,” says Ntshona.

Even so, domestic travelers may initially favor alternative modes of travel to air, such as motor vehicle travel, further adding strain to the aviation industry.

 This is echoed by Graaff who believes domestic travel will lead the recovery, and then demand will expand to neighboring destinations and eventually further afield.

It may be a while before a new recovery path is defined, but for now, everything hangs in the air.

– Mashokane Mahlo-Ramusetheli

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Economy

Start Of The Mask Economy

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Even the most unconventional businesses, such as a Cape Town candy shop, are selling masks to face off the economic crisis. 

In less than three weeks, ProudlySA’s newly-launched online portal for local manufacturers of masks hit 400 sellers. Collectively, these mask-makers have the capacity to produce around 14 million masks per week, says ProudlySA’s Deryn Graham, and those are only the manufacturers registered to the clothing sector’s National Bargaining Council.

Masks are a necessary accessory in the fight to prevent Covid-19 from spreading and companies around the world are shifting their core operations to crank out personal protection equipment (PPE).

Besides high-end designer brands like Louis Vuitton and Chanel now making eye-catching masks, many African businesses are pivoting their core operations to keep their businesses afloat.

“I decided to make masks purely to access a new revenue stream. I had been able to sell my socks online during the first level of lockdown, but I wasn’t authorized to ship them as they weren’t classified ‘essential goods’,” explains Chelsey Wilson, FEAT. sock co.’s co-founder and designer from Cape Town. What was holding Wilson back, initially, was that she didn’t want to make masks using generic, store-bought fabric.

“I wanted to keep true to my brand, which is all about bold and unique prints… I had to use custom-printed fabric I already had that made around 100 masks which all sold out in the space of three hours,” says Wilson, adding that given the demand, she should be able to sell around 300 masks a week going forward.

Jinae Heyns is the co-owner of Matsidiso, an ethical footwear and accessories brand with flagship stores in Stellenbosch and De Waterkant in Cape Town. For her, making masks was not a choice, it was a matter of survival: “We didn’t want to just make masks, we wanted to ensure that we were able to feed our team and do our part to support those who cannot easily afford or access proper masks.”

Matsidiso currently sells around 8,000 masks a month. Elastic is in low supply countrywide and what is left is being reserved for the medical industry. Matsidiso, which operates out of a family-run dancewear factory, uses lycra for their mask ties: “I care deeply about sustainable practices, and with masks, it’s no different. We have the material in-house,” adds Heyns.

Wendren Setzer from The Wren Design, a Muizenberg-based South African company that hand-makes environmentally-friendly bags and accessories using recycled cement packaging paper, had a unique challenge. With the capacity to create 1,000 masks a week, Setzer’s first obstacle was developing a paper prototype.

“We wondered how we could make a face mask out of paper? Several prototypes later, we developed two unique mask patterns. We also researched coatings and found a way to coat the paper to offer more – the paper is coated with Si02 and a second layer of SiAg02 is applied making the surface anti-microbial,” explains Setzer.

Although Cheaky Co traditionally sells confectionery, Lucas R Adams, its founder and Sea Point-resident in Cape Town, decided to launch two different masks into his online store.

“We’ve been selling weekly quantities within the hundreds,” says Adams. “There’s obviously been a massive spike in the production and sale of fabric face masks by those within textiles, but it soon dawned on us we hadn’t yet seen anyone within the food category offering them, so we thought, ‘why not add a small range for our community’? In the end, we thought that offering the option to add a mask to one’s cart when shopping our plant-based treats was a no-brainer…”

For many small businesses, the decision to make masks is the only way to potentially weather the pandemic. It’s about turning non-essential production lines into essential manufacturing businesses.

According to a Stanford University study, masks are the first step in reopening the economy (and may help with transitioning into a post-Covid world).

“These business owners are not only fighting for themselves; they do what they do to a great extent to ensure the safety of their entire team and because they want to see South Africa thrive. At the end of the day, these aren’t just masks, but actual protective gear that could help save a life,” ends Heyns.

-Tiana Cline

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Economy

Fast Virus. Slow Growth: Ghana And Nigeria Brace For The Economic Nightmare Ahead

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Ghana and Nigeria brace for the economic nightmare ahead, even as the region’s billionaires, entrepreneurs and innovators chip in for the fight against Covid-19.


The Labadi Beach Hotel, set amidst landscaped tropical gardens in the heart of Accra, is unusually quiet on the Tuesday morning FORBES AFRICA visits in mid-March. The usual bustle of the morning breakfast buffet frequented by the city’s elite has all but disappeared, and in its place, an air of uncertainty about the future of one of Accra’s longest-running hotels, at least in the interim.

You cannnot enter without going through the new mandatory protocols in place: hand-sanitizers, individual temperature screenings and metal detectors.

“Unfortunately, we are no longer accepting outside guests and the hotel will be closing until further notice,” says the bartender. The usually-packed lobby has only two in-house guests already scheduled to leave the hotel.

Ghana’s thriving hospitality industry was one of the first victims of the outbreak of the Covid-19 pandemic, once President Nana Akufo-Addo banned mass gatherings and ordered the closure of airports. Hotels in the Greater Accra region closed down, sending thousands of workers home, and leaving management to contend with the challenge of paying salaries and taxes sans customers.

It’s in stark contrast to 2019, when Ghana’s international PR campaign, The Year of Return 2019, brought in an additional 237,000 visitors representing an estimated $1.9 billion into the economy, according to Barbara Oteng Gyasi, Ghana’s Minister of Tourism. Most of the money was spent on the hospitality sector with the average spend per tourist estimated to be around $2,590.

And now, with the slow demise of the hospitality sector, a host of ancillary services are also feeling the pinch. Rashad McCrorey is the founder of Africa Cross Culture, a travel company that helps African-Americans reconnect to their roots by visiting countries on the African continent. He was one of those seduced by Ghana’s call to reconnect with the continent on the 400th anniversary of slaves landing in the United States, and so he arrived in Ghana with the goal of promoting his tourism business.

Ghana imposed a lockdown on movement in its two largest cities, Accra and Kumasi, from March 30, and effected a travel ban on people traveling from countries overseas with cases of Covid-19. In addition, the United States (US) State Department advised its citizens to return home immediately or face staying abroad for an indefinite period. “I was shocked. My initial thoughts were fear and panic. I was seeing all the development in the US, and New York has the highest amount of cases. The National Guard and US army had been deployed in the streets and my home was basically ground zero for the deadly virus,” says McCrorey.

After weighing his options, he made the decision to stay on in Ghana instead of returning home.

“At the time, ticket prices surged from $500 to about $6,000 and I was scared of exposing myself more to the virus. Also, going back meant that I risked spending the pre-paid money of my customers and that was also not ideal,” says McCrorey.

Gregory Lamptey, the founder of Black Cab, a logistics company providing transportation services to customers and businesses in Accra, is facing a similar conundrum. “Business has all but stopped since the lockdown in Ghana last week. I do not think we will be able to make it to the end of the year and I have had to start looking at other alternatives to make ends meet,” he rues.

In Ghana, there were 4,700 confirmed cases with 22 deaths as of May 12. Ghana has undertaken 160,501 tests since the outbreak as of this date, a figure the president lauded as the highest per million people than any other country in Africa.

But as elsewhere on the continent, it’s the workers in the informal sector that are most at risk.

“They face a very difficult choice: keep going to work and risk contracting or spreading the virus, or stay at home and risk their family starving,” observes Nana Kwame Bediako, the founder of Kwarleyz Group, an umbrella company which encompasses Wonda World Estates and Petronia City Development that has designed and developed over 500 residential and retail units in Ghana. The company is currently negotiating to pledge one of its premier properties, Number 1 Oxford Street, five-star luxury serviced apartments, as a quarantine location, isolation center, temporary hospital or safe place for nurses, doctors and other medical personnel should the need arise.

“This is the most challenging economic downturn globally,” says Franklin Cudjoe, President of Imani-Africa, a leading think-tank in Ghana. “This is going to affect businesses all over the world in a much more significant way than ever before.”

This was perhaps the rationale behind Ghana easing its lockdown restrictions in less than a month to allow people to return to work. There is, however, still a ban on public gatherings and a national requirement for face masks to be worn by everyone.

But Kwame Ofori, a financial analyst with the Ghana Stock Exchange, is currently on the fence on how the Ghanaian economy will recover.

“Everything depends on how long this period lasts, but if it goes on for a long time, it’s going to be a big financial and economic crisis for Ghana. Most businesses in Ghana cannot realistically afford a lockdown,” avers Ofori.

It is within this context that Ken Ofori-Atta, Ghana’s Minister of Finance, said in a Financial Times interview that Africa has reached a “break the glass moment”.

Through a partnership between the ministers of finance and economic planning on March 30, a series of strategies were outlined, which includes fiscal measures to mitigate the impact of the coronavirus pandemic including the Coronavirus Alleviation Programme. Consequently, the government estimates of the immediate impact of Covid-19 is a decline in GDP growth from a projected 6.8% to 2.6%.

Along the pristine coastline of the Labadi Beach, sits a five-storey apartment complex boasting beautiful ocean views, underground parking for tenants, a gymnasium, two restaurants and a supermarket. The developer, Kofi Appiah, is a British-Ghanaian architect who relocated to Ghana two years ago.

“I started building and selling a couple of years ago in Ghana and things were great. Right now, we cannot even get anyone to come and look at our developments. I have had to lay off the entire sales team and we are now depending on social media to attract buyers,” says Appiah.

“Buyers need to imagine themselves living in the apartments and this is very difficult to imagine with just videos and pictures on Instagram. I don’t imagine we are going to be selling any of these units at least for the next six months.”

About 40 minutes from Ghana, Nigeria, Africa’s most populous country, is also battening down the hatches. With plunging oil prices caused by the price war between Russia and Saudi Arabia, and the novel coronavirus outbreak, Nigeria is in a much more precarious economic position.

Nigerian stocks have gone through weeks of losses with the fall in oil prices from $57 to $30 per barrel subsequently leading to an increase in external debt and a depreciating currency. This year, Nigeria’s budget stood at $37 billion based on oil prices staying at $57 per barrel. With the sharp decline in these prices, Nigeria cannot currently fund its budget.

“Nigeria might very well be in trouble here. Even though Parliament recently granted President Muhammadu Buhari’s request for $22.7 billion in foreign borrowing, the significant fall in global oil prices will erode any boost from this stimulus. Many analysts are of the opinion that the Nigerian naira has deteriorated markedly and remains set for a sharp fall this year if current conditions persist,” says Ofori.

One of the major side-effects of this in the country is a US dollar shortage that is creeping up with the informal dollar dealers on the black market. Nigeria’s official exchange rate which is fixed by the central bank, has stayed at around N360 to the dollar since the country emerged out of recession in 2017. Today, the rate is N445.

“Everyone is currently hunting for dollars and we don’t have any more. Even the agents we get them from are not releasing the dollars because they believe the rates will go even higher so this is becoming a big problem,” says Audu, a black-market agent.

The coronavirus is simply adding insult to injury for Nigeria’s economic woes. As of May 12, there are over 5,000 confirmed cases of Covid-19 in Nigeria. The country issued a nationwide lockdown between March and April but similar to Ghana, has eased restrictions on movement to enable its 200 million population to return to work while practising social distancing.

Billionaire Jack Ma, founder of Alibaba, announced a donation of essential medical supplies to help fight the pandemic. Along with making global headlines, his actions have also galvanized other private businesses and Nigeria’s most successful entrepreneurs to utilize their assets and funds for social good amid the devastating outbreak.

Tony Elumelu, Chairman of Heirs Holding and United Bank for Africa (UBA), announced N5 billion ($12.8 million), through the UBA foundation, to kick-start a comprehensive pan-African response to the fight against the coronavirus. The donation is aimed at providing significant support to Nigeria and other African countries through the provision of critical care facilities and materials.

“I believe we all have a part to play in this global crisis and I hope that this is the time the private sector and government work together to help the most vulnerable people to battle the virus. We need to act fast and we commend the work the government is already doing to ensure we stem the spread of this global pandemic,” says Elumelu.

For African countries, this virus is expected to overwhelm an already insufficient healthcare system and reverse the economic growth that many countries have been experiencing in recent years. The United Nations Economic Commission for Africa (UNECA) has revised Africa’s growth, falling from 3.2% to 2%.

“We need to deal with the human crisis first before we can begin to address the economic impact of the virus on us. I am confident we will pull through this crisis just like we have in several other adverse situations that have come before,” says Oscar Onyema, CEO of the Nigerian Stock Exchange.

Nigeria’s richest woman, Folorunso Alakija, is also stepping in to help fight the pandemic. Through her Famfa Oil, one of the leading indigenous exploration and oil production companies in Nigeria, she has pledged N1 billion ($2.56 million) to support Nigeria’s fight against Covid-19.

“These are truly difficult times for us. As the world rallies to deal with the health security, economic and social implications of the coronavirus, it is clear we feel the effects more deeply than most of the developed world. Managing a crisis of this magnitude means that the strength of our response will determine our ability to weather the storm but I believe with God, nothing is impossible,” says Alakija.

“Millions of Nigerians are under 30 and live from hand-to-mouth and quite frankly, cannot afford a lockdown. They depend on going out each day to earn a living on the streets as well as buying food from crowded markets. If this lockdown continues, there could be a mass unrest which could further cripple Nigeria,” says Idrisu Bello, a Nigerian economist.

President Buhari in an address in March ordered financial intervention schemes to be rolled out for the most vulnerable.

“This represents about 10,695,360 individuals in 35 states across the country as the poorest and most vulnerable Nigerians,” says Bello.

The Aliko Dangote Foundation (ADF) has also pledged N200 million ($516,000) to support the current effort of the Nigerian government to fight the disease.

Zouera Youssoufou, Managing Director and CEO of ADF, says the donation is part of the foundation’s cardinal objective of partnering with governments to combat the disease.

“The Dangote Foundation has been at the forefront of helping Nigerians fight against diseases and providing economic development for Nigeria. At this very difficult time, we are committed to providing the much-needed support to help the government provide help to millions of vulnerable Nigerians,” says Youssoufou.

As corona cases continue to rise, Nigeria, along with other African countries, has also shut its airports and air travel.

The International Air Transport Association (IATA)  estimates that around 330,000 jobs and $1.2 billion are at stake in Ethiopia’s economy, around 190,000 jobs and $3.8 billion in South Africa’s economy, around 138,000 jobs and $1.1 billion to Kenya’s economy and 91,000 jobs in Nigeria with $650 million lost.

Then there is the worrying problem of medical care.

Lagos-based air ambulance and offshore medical solutions contractor Flying Doctors Nigeria, founded and run by entrepreneur Ola Brown, is calling this a true pandemic.

“Africa has to be cautious because of the challenges we have in our healthcare. There are significant deficits and a huge lack of medical and financial resources which means we face an unprecedented time ahead,” says Brown.

However, in spite of the insurmountable challenges, a number of local entrepreneurs are providing innovative solutions to help the government in its fight against the disease.

Accra-based company DTRT Apparel is gearing up to manufacture a range of personal protective equipment (PPEs) to supply Africa and the rest of the world. DTRT supplies products to major US and EU-based brands via a global network spanning three continents. The company employs over 2,000 people in West Africa, procures textiles from Asia and exports primarily to the EU and US markets.

“Now is the time for companies all over Africa to work together for the greater good of the continent. We want to do our part to ensure we are contributing to the fight against this pandemic by providing resources to the healthcare system,” says Salma Salifu, Managing Director of DTRT.

In Nigeria, Bamigbose Adams, a furniture-maker, has begun turning old metal drums into custom hand-washing basins to be sold in Lagos.

Around 157 million Nigerians lack access to proper hand-washing facilities, according to a 2018 report by WaterAid Nigeria and Adams saw this as an opportunity to innovate to survive.

“Business has been slow for a while so I was looking at different ways of making money to feed my family. I got the idea to use the drum from my local area where some people use them to store water. I created the first drum and it worked and then the publicity began to create a demand,” says Adams.

His main clients are local businesses that want a temporary solution to help combat the spread of the virus.

As governments rally to find solutions to help their economies, it is very clear that the way we live and do business will not be the same. Ever again.

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