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Optimism, despite slow growth

Local businesses are feeling the pinch as the latest economic downturn is now being felt across sectors. Clinton Lerm of the Whale Coast Business and Community Forum (WCBCF) says one need only look at the scores of unemployed in greater Hermanus and the many shops that are empty or changing hands to show the current state of the local economy.

“It’s a stark reality that businesses are suffering and some just barely surviving,” he says. “Our property market has more stock than ever before for a town and region considered one of South Africa’s top coastal regions. Businesses need to adapt and do anything possible to remain open. Unfortunately, one of the key expenses for any business must be its staff component, and so we are seeing a rise in unemployment and retrenchments.”

Johan van Zyl, owner of Hermanus Toyota, says the town faced many challenges in 2018 and 2019. “The 2018 protest marches and damages caused to business premises as well as the illegal occupation of private land have created a perception among local and overseas tourists that Hermanus is no longer a safe holiday destination. Over the last 18 months this has caused a drastic reduction in the inflow of money spent by visitors to Hermanus. The impact of this has wreaked havoc on the income of several small businesses.

He also observed that several business owners are laying off staff due to a drastic decrease in revenue experienced since the December 2018 holiday season.

Van Zyl says the buying pattern for cars has changed and clients prefer smaller, less expensive cars and light commercial vehicles, or they defer the purchase of a new vehicle. “Furthermore, potential buyers rather keep their vehicles longer and delay their vehicle’s services,” he says. “This negative trend has a tremendous impact on not only profitability but also cash flow of motor dealerships.

“Naamsa’s (The National Association of Automobile Manufacturers of South Africa) September statistics for new vehicles registered in CEM (Overstrand) shows a year-to-date decline of 11,4% over the same period in 2018.

Economy of HermanusGideon Serfontein of the Hermanus Business Chamber (HBC) says most of its members are feeling the general slow growth in Hermanus. “We are to a large extent a tourist-driven local economy, and South African consumers are under pressure, which implies less spending on discretionary items such as leisure activities, which does impact on the number of visitors to our town. Therefore, the preservation of current business activities rather than expanding the business is true for most of our members.”

Serfontein says most businesses in South Africa are in the same situation. “I would not say Hermanus is in an economic slump, but we do not experience significant growth, and neither does the rest of South Africa.”

Lerm describes the economy of Hermanus, where the tourism industry plays a big role, as a proverbial roller-coaster. He says: “We have for too long relied on European markets, while some of the emerging markets have made some inroads in our tourism sector. We also need to pay closer attention to the local market and Cape Town visitors and contributors to our tourism economy should be targeted. We also need to find a solution to break the winter blues and extend our season.”

According to Lerm, Hermanus was a very resilient town and region in the past. “The unrest of 2018 and the economic downturn has made this region feel the impact more so than the last recession cycle, when Hermanus was almost unaffected.”

An optimistic outlookLerm, however, remains optimistic. “We remain positive that the town and region still have the potential to turn it around. Hermanus, and indeed the whole region, has an amazing amount of depth in all sectors of life and it’s only a matter of time before the storm has settled.”

Serfontein also believes the upcoming summer season is looking better than last year with longer school holidays. He says: “We are therefore hopeful that our town will have the much-needed influx of visitors for the Summer holiday. All our people will benefit either through maintaining current employment or, where appropriate, obtain temporary employment for the peak season. The local economy is, however, as vulnerable as the South African economy and we all need to find constructive ways to protect and preserve it. The HBC is convinced the only way to do this is to keep dialogue constructive and open with all stakeholders.”

Van Zyl also does not believe everything is doom and gloom in 2020. “Next year we should see a renewed increase in the number of day visitors. This may start during the 2019 December festive season. Families from up north and KZN will relocate to Hermanus for family security reasons. This will increase the revenue stream of the local economy. The property market and house rental market should benefit and recover from a low base. South African motor manufacturers forecast a 7% drop in 2020 retail sales of new vehicles. But Hermanus Toyota is confident its new vehicle sales will grow positively in 2020. New model introduction in the entry-level segment will contribute to this as will some exciting new models in the luxury segment.”

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