Soft loans and payment holidays are available for restaurants still battling to survive the pandemic.

At the beginning of May, my favourite local coffee shop closed its doors after 20 years of trading. My neighbourhood shopping centre, which caters to many “mom and pop” businesses, had four new vacancies last month.

The extended lockdown and its impact on tourism, especially the restriction on foreign travel, which the Cape Town hospitality industry relies on, has taken its toll on local businesses.

A year into the pandemic and the signs of economic fallout are continuing. During 2020 many small business owners cashed in what reserves they had in the expectation that if they could just hold on long enough, things would get back to “normal” and they would be ok.

By the end of 2020 tourism had started to show signs of recovery as South Africans took advantage of specials to travel and discover their own country.

But the beach ban, curfews, and further alcohol bans caused many to cancel their holiday plans, destroying the hope many in the hospitality industry had been holding onto. The second lockdown in December and January was the final straw for many of these businesses.

Sukuma Fund steps up

It is with this in mind that The Sukuma Fund, administered by Business Partners Limited, has partnered with the Federated Hospitality Association of Southern Africa (FEDHASA) to try and assist the local restaurant industry in a meaningful way, and save much-needed jobs in the sector.

The assistance will be in the form of soft loans to help those in the restaurant industry meet expenses such as rental and working capital. The collaboration with FEDHASA will help identify eligible restaurants that require capital to survive these challenging economic times.

David Morobe, spokesperson for The Sukuma Fund and Executive General Manager of Impact Investing at Business Partners Limited says that the hospitality sector, which employs a high volume of labour, was one of the hardest hit by the pandemic, and is in dire need of some kind of relief.

It is estimated that nearly 30 percent of restaurants in South Africa were forced to close their doors during the height of the nationwide Covid-19 lockdown in 2020.

“As it stands, thousands of restaurants are still struggling to recover from the devastating economic effects of the lockdown and are on the brink of closure,” says Morobe.

The Sukuma Fund was formed in April 2020 to distribute the R1 billion donated by the Rupert family and Remgro Limited, in response to the economic crisis resulting from the pandemic.

To date, 1 303 SMEs and 2 614 formal sole proprietors have received survival grants and/or soft loans from the fund, saving over 32 000 jobs in the process.

The loans were all no-interest loans and didn’t require repayment in the first 12 months. Repayments will only start now for those who took the loans last year.

However, for some businesses who are still struggling due to the extended impacts of the pandemic, there may be the option to provide further payment relief based on an evaluation of their financial position.

Spirit of humanity

Morobe says for most business owners who applied for soft loans, their main concern was for their staff. “The common thread was that they were thinking about staff. Many could have simply closed to start again later. It shows the spirit of humanity.”

Morobe adds that Sukuma is primarily a rescue fund and that this requires a collective approach where everyone does their part to keep businesses alive and retain jobs.

In order for restaurants to receive a loan, landlords also have to come to the party by providing a 25% reduction in rent. The fund will then assist with the balance and other working capital requirements.

The upside for landlords is that they know they have a tenant who is more likely to survive with this support, which will reduce vacancies.

Currently The Sukuma Fund has allocated R100 million towards the rental relief fund, and hopes to assist as many independent restaurants as FEDHASA submits.

Morobe notes that the mission of The Sukuma Fund is not only to save as many SMES as possible, but also to create an innovative and sustainable model capable of supporting SMEs through challenging times.

“Our vision was always to do more than just help today. The intention is to allow Sukuma beneficiaries to pay it forward so as to create a self-perpetuating cycle of support for the SME sector,” says Morobe.

Which restaurants qualify

To qualify for Sukuma relief funding, independent restaurants must be formally registered, regulatory compliant and FEDHASA members. They are required to provide evidence of financial solvency and future viability, among other criteria.

The funding is also available to new FEDHASA members, so if a business that would otherwise qualify is not currently a FEDHASA member, it is encouraged to register as a member to become eligible to receive the financial support.

The finance is for independently owned restaurants and not franchises.

The unsecured interest-bearing loans of between R250 000 and R1 million are structured over 60 months, and will incur no interest or repayment obligations for the first 12 months. Thereafter, interest will be raised at the prime rate with repayments set to commence from month 13.

This article first appeared in City Press.