Despite the country moving to Lockdown Level 1 on 21 September and the warmer weather bringing hopes of a COVID-19 respite, there remains concerns that South Africa could be hit by a second wave of the pandemic. Take what has happened in Europe recently. The winter season there has ushered in renewed lockdown conditions further impacting on the lives and livelihoods of people. So, what can local businesses do to mitigate the risk if this should happen here?
One of the burning questions that must be answered is comparing the company today to where it was in February. With many economic activities resuming from Level 3 on 1 June, there was opportunity for decision-makers to be in a stronger position than even before the hard lockdown. Companies should have spent the first lockdown to become leaner and bring their cost base down. With the uptick now happening, this is the ideal time to make profit.
However, this does not mean companies should chase growth in the same way they did prior to the pandemic. Instead, they must remain focused and forget about chasing pre-COVID budgets. Organisations need to keep their low cost base in place and should refrain from going on an expansive recruitment drive just because there are preliminary signs of a recovery. Now, the central function must be about scrutinising any strategic changes and making more considered business decisions than before.
Attention must shift to more considered growth and identifying the products and services required for a market that will take a long time to return to normal. The past several months highlighted the importance of cash flow especially for smaller businesses. Entrepreneurs and owners must ensure they have funds available. To this end, there must be strong relationships with their funders, whether they are traditional such as the banks or non-traditional such as ourselves.
Planning, planning, planning
Adding to this is the importance of conducting more diverse scenario planning. If they have not done so before, decision-makers must embrace planning for the worst and hoping for the best. Good budgeting is a vital component in this regard as it will highlight the extent at which cash flow must be protected.
Throughout this, the business must become agile enough to pivot in any direction. If the country should go into more stringent lockdown conditions, it must be prepared to rapidly adapt based on the learnings of April, May, and June. But if a vaccine is released, then it must be able to shift in a different direction and have the cash resources in place to capitalise on a more optimistic environment.
Ultimately, a business must ensure that not only does it have the cash on hand to adapt, but also the right stakeholders. Preference Capital is proud of the work we have done with our customers in 2020 and how we have helped them through the difficult months. For us, it is about putting people first and positioning an organisation for future growth.