Stocktake: Debt is Covid’s ‘smoking gun’
Last week was all about the economy reopening and the debt Covid will leave us all with, as the supplementary budget tabled by the Finance Minister outlined.Monday, 29 Jun 2020
Last week was all about the economy reopening and the regulations for restaurants which are allowed to trade from today; the debt Covid will leave us all, as the supplementary budget tabled by the Finance Minister outlined in gory detail; as well as the various court cases around the sale of cigarettes.
A tighter belt for us all
Government’s significant debt challenges and a lack of concrete detail is what critics of the Supplementary Budget said last week. Brands are going to certainly have to work harder for sales and retailers for customers, as basically COVID-19 has derailed all budgets, whether Government, business or individual. Unfortunately, it did not offer much detail about how it expects to actively raise revenue and reduce expenditure to address the significant debt and revenue shortfall challenges the fiscus faces, said Mike Teuchert, national head of taxation at Mazars. “There was mention of raising about US$7 billion that Treasury would borrow from international funders, but the Minister did not provide details about what we would be doing differently to repay that debt. In fact, there were no real announcements about tax increases, notable expenditure decreases, or commentary about the handling of state-owned entities (SOEs), which was surprising.” Teuchert says that one of the most jarring graphics in the Minister’s presentation was a graph showing how significantly VAT and pay-as-you-earn (PAYE) revenues have decreased this year. “We see an almost immediate drop-off in both those tax categories at the start of lockdown. I suppose that this would be expected, but it really shows how hard tax collections were hit within just a few weeks of economic inactivity.”
He added that SARS had been much more aggressive in its collection of revenue from certain taxpayer classes, and that this is likely to continue as the need to boost revenue intensifies. “There has been a lot more focus on high-net-worth taxpayers. They are also considering technical issues related to categories such as VAT, so I believe that SARS may make headway into increasing revenue collections again.”
Graham Molyneux, tax partner at Mazars, says that there was at least some positive news contained in the Minister’s presentation as well. “While there are no details on how it is going to be achieved, there is a mention in the Minister’s presentation that Treasury will aim to decrease the cost of doing business and that Government would take steps to improve competitiveness in the market by reducing the dominance of SOEs in network industries. It does give us an indication that Government will be making an effort to reduce red tape for businesses and help the economy grow, which is a positive step.”
Frontline workers receive free Ubers
Uber has launched its largest region-wide initiative to date, in partnership with Mastercard, which has committed to providing 120,000 free trips and meals to those frontline workers supporting communities across the Middle East and Africa, including South Africa, which will be facilitated through Uber. Once qualifying workers have successfully signed up through Uber’s website, they can arrange transportation to and from their homes and to where they are needed, such as healthcare facilities or to feed the vulnerable.
Uber recently also partnered with the Bill and Melinda Gates Foundation to deliver chronic medication to vulnerable patients who cannot travel. Uber has also been able to assist Doctors Without Borders to collect thermometers and transport them to clinics across South Africa. Amnah Ajmal, executive vice president market development, Mastercard, MEA explained: “Uber’s mission to improve lives is matched with Mastercard’s mission of doing well by doing good, together we are focused on helping frontline workers across the region feel confident and safe with access to free transportation.” Anthony le Roux, regional general manager, Uber, Middle East and Africa, added, “This is the largest partnership for us across MEA; this is just a start and this commitment comes as part of Uber’s global pledge to help communities in need to ‘Move What Matters’.”
Crossfin rebrands to Adumo
Crossfin Transactional Solutions (CTS) has rebranded to Adumo; and intends to drive African financial inclusion and business growth with new, cashless alternatives for merchants and traders. Following the 2019 acquisition of Sureswipe by Crossfin Technology Holdings, a fintech investment company, and Apis Growth Fund, a private equity fund managed by London-based Apis Partners LLP, Crossfin Transactional Solutions (CTS); South Africa’s largest independent payments and merchant acquiring solutions platform was formed. 2020 will now see an authentic, local positioning of CTS to ‘Adumo’ to see the global fintech giant into its next phase of growth and support of African business.
Adumo is now the largest independent payments and fastest-growing merchant acquiring solutions platform in South Africa. The brand services more than 30 000 active clients and 50 000 active card machines – processing over $4 billion in transaction value – and with a presence in seven African countries. It also brings together three of South Africa’s most well-known payment service providers under one entity – Sureswipe, Innervation Pan African Payments, and iKhokha. Sureswipe has now also partnered with Grobank to give independent retailers the edge, with merchant solutions to service SMME’s throughout Southern Africa. In teaming up with Sureswipe, Grobank is now able to bring actual point of sale (POS) to clients as part of its merchant services; which enables the full transactional service to be coordinated by Grobank.
This week in numbers:
Even after the Covid crisis has passed, 70% of shoppers indicated that they would continue to go online to shop the categories they were forced to buy online due to lockdown. Delivering a positive experience for these shoppers was key to retain them, said Norman Reynecker, Kantar Retail, Sales and Shopper Director, Consulting Division, who was speaking at the IAB SA weekly Insights in Action series this week, along with Retailing Africa. The shift to ecommerce is likely to be long-lasting; so, retailers must ensure that they deliver exemplary experiences that align with shopper expectations and priorities – both online and offline. This is what will drive customer loyalty.
QUOTE of the week:
“The world is changing. We cannot go back to how it was before COVID-19. The fallout has already been too great, the implications too far reaching. There will be no ‘normal’ going forward – we cannot just try to pick up the pieces and put it all back together like before. We need to assemble the pieces differently. ‘New normal?’ No, ‘new way’.” – Claudia Ferguson, Business Director at Orange Ink, and a columnist for Retailing Africa.
*Stocktake is a weekly roundup of current FMCG retailing and brand news, curated and edited by Retailing Africa Publisher & Editor, Louise Burgers. Keep the industry updated and send your announcements and news to: firstname.lastname@example.org.
Louise Burgers (previously Marsland) is the Publisher and Editor and Co-Founder of RetailingAfrica.com. She has spent over 20 years writing about the FMCG retailing, marketing, media and advertising industry in South Africa and on the African continent. She has specialised in local and Africa consumer trends and is a passionate Afro-optimist who believes it is Africa’s time to rise again and that the Africa Continental Free Trade Agreement (AfCFTA) will be a global gamechanger in the next decade.
– Receive the Retailing Africa newsletter every Monday and Thursday • Subscribe here
– Take advantage of Retailing Africa’s ‘Pay-what-you-can’ business support package • Read more