Rope World Owner Johann Brits shares supply-side perspective on the current lockdown
1) You’re back in business. How did that come about? Some suppliers / distributors have been allowed back in, presumably to assist with essential services?
Yes we are back in business. When the amended regulations were published at the end of the 1st lockdown period we applied to be open as a specialised hardware supplier. Rope World has diversified through the years to service a large sector of the local economy and not just the marine sector. That includes fishing, marine, yachting and the services sector that includes work at height safety, plumbers, electricians, general maintenance and the building sector. We also supply manufactured product to other hardware groups such as Brights, Buco and Build-it as well as other general hardware stores in the Cape Town vicinity.
2) You probably saw this coming, having followed the news abroad. As a businessman how do you prepare for something like this?
I have been following the COV19 pandemic right from the start when it hit China and was initially concerned about the supply of product from China, as they provide a large portion of the components that we use in our manufacturing side – Tuffstraps, as well as many other components that we sell. So we stocked up as much as we could as I believed that the supply chain would be severely affected. What I did not anticipate was a lockdown in South Africa as severe as China leading to the cessation of business. Whilst this initial lockdown response was understood, the hardship and economic devastation that further severe levels of lockdown is going to cause, is just not feasible.
3) Presumably it will be a while before it is business as usual. How do you see things panning out over the next year or two, or is that difficult to predict?
Due to the disruption of the 5 weeks of lockdown, a further month or so under level 4 the economy is going to enter into a severe recession, possibly a depression, with millions of people losing their jobs. To avoid this scenario we should move to level 2 as soon as possible ie within the next 2 months or less otherwise we will not recovery from the economic devastation for years to come.
The medicine must not be worse than sickness.
4) Suppliers are dealing with a double-whammy of a global pandemic and volatile currency rate. Is it a scary place to be right now? How does the currency issue affect you?
The currency will affect our industry in different ways. Components imported will become more expensive and will also be difficult to come by for boat builders but on the other hand it will make the finished product cheaper in dollar terms that will benefit the export industry. The global market will bounce back by next year before us which will help. There is going to lots of printed money around as the first world countries print money to stimulate their respective economies.
5) Under these circumstances is it survival mode? Presumably there will be casualties. Established businesses /brands like yours presumably have more wiggle room and established business relationships.
Under a severe recession it is going to be survival mode. South Africa was not badly affected during the previous financial recession in 2008 as it was mostly a financial recession and our solid banking sector and the lead up to the World Cup with massive infrastructural projects and the continuous demand for commodities kept up our growth rate. This time around we will not escape the recession
There will definitely be some casualties and consolidation. Only established businesses that are cash strong with low overheads are going to survive
6) Liz Plotz from Lowrance SA recently spoke of SA’s resilience in the sense that South Africans are die-hard outdoor enthusiasts. She also warned that her company was unlikely to hold as much stock due to the economic circumstances / currency situation – with a knock-on effect for product availability. How do you see it?
I agree South Africans are pretty die hard and we will bounce back after this year. I do see a growth of at least 5% next year albeit from a low point with the caveat that we do not destroy what is left by keeping us locked down. I believe it is important to have good stock levels and we were fortunate to afford building up stock levels before the lockdown that will benefit us in some of the market areas we service
7) Do you see businesses in your space diversifying as a result of the current difficulties? (I recall a Knysna company moving into camping /caravanning accessories to offset the drop in boating revenue)
Diversification has been the key to our survival in these economic times even more-so over the next 12 months or so. However it is not always easy to diversify into the leisure market that is going to be affected on all fronts, not just boating. I know some companies that are making masks and PPE now, but that only has a limited time line.
8) Have you made sense of government’s economic support programme related to Corona? Are you going to try and access this?
The only economic program that we have had access to has been the UIF payments Covid19 TERS scheme but after 2 weeks since application have not heard a word other than a computer generated response that they received the application. This program is only for the initial 5 weeks lockdown. No clarity at the moment on what happens under further lockdowns as a large number of employees will not be working.
All other programs are for loans that a business has to pay back. Tax concessions are only a deferment so all these packages are debt packages that will come back and bite the small businesses. In the UK, USA, Germany to mention a few, the government pays the employees a % of their salaries/wages lost during closure. Here in SA the money is going directly to the poor in the form of increases of monthly grants etc.
So the employees that have lost their jobs will not be able to afford bond payments, school fees, rent and car payments. The only way to avoid this is to open up to level 2 as soon as possible.
9) Some people believe that, in as much as corona is a disaster for the world economy, in SA it might be the seismic shock we need to get our economy going and put some business fundamentals in place. Do you share this cautious optimism?
The only business fundamental that is important at the moment is an economy that is open and functioning. We certainly do not have to have wholesale destruction to change things.
10) What in your opinion is the single most important thing government needs to do to help expand the blue economy / maritime sector?
The single most important thing that government can do is to open the economy within a month which will benefit all sectors including the maritime sector
The point of the lockdown was to give government time to flatten the virus curve so that hospitals can get ready and that mass screening and testing could take place. This has by and large been achieved except for testing but that is a logistics problem that only the government can deal with. People are going to get the virus over time but as the medium age of our population is 27, most of us will only get mild symptoms. Aggressive testing and tracing of contacts, protection of the vulnerable and the aged combined with opening up the economy must be done urgently. We simply cannot afford further severe lockdown.