The Good, the Bad and the Ugly – Possible Southern Africa Sector Outcomes Post The Covid-19 Pandemic

Mark Taylor, Barry Hawke &, Gordon Bell

The second article in our series on African alternative investment during Covid-19 comprises a list of how different sectors in the Southern African marketplace might emerge post the Covid-19 Pandemic.  It has arisen from our discussions with investors, corporate finance advisors and companies during April and May 2020.  We did this exercise to help triage the significant increase in incoming funding requests we were experiencing. After numerous discussions with our network about it, we have been asked to publish it pursuant to our first article on the changing investor landscape which lays out the pressures faced by capital providers in the current climate.

We found it most helpful to categorise these business sectors into three categories, namely broken business models (the Ugly), those that are likely to survive (the Bad) and those that will thrive (the Good).  Some sector trends appear self-evident (threats to the airlines), and some are an acceleration of existing trends (increasing adoption of e-commerce) but the interesting conversations often related to those sectors where there were differences of opinions because of nuances, unanticipated supply chain issues, or other uncertainties within sectors.  We have not covered all sectors and we expect our list will evolve with the changing landscape, so this should be regarded as a discussion document.

The Ugly – or Broken: Sectors that are most likely broken and will require a substantial rework of their business models in order to just survive.  Business rescue and liquidations may prevail, capital needs to be carefully allocated to avoid throwing good money after bad.

The Bad – or Survive: Sectors that are likely to survive but will need to adapt their businesses to the new post pandemic era.  There is hope, management will need a plan for both the short-term and long-term, this may involve pivoting into related opportunities or preserving/mothballing businesses until demand returns.

The Good – or Thrive: Sectors likely to thrive post the pandemic and may even be enjoying an acceleration of their business growth.  These businesses must not be starved of the resources required to fuel their growth and will play an increasing role in economic recovery, employment and expansion.

Each category represents a different demand for both funding and management action.  For businesses that need to change in order to survive frameworks like the Hersov-Craker JUMPStart (Jettison, Uplift, Mothball, Pivot and Start) or the McKinsey five-horizon framework of Resolve, Resilience, Return, Reimagination and Reform may be helpful.  Investors are understandably cautious and will be watching for those entrepreneurial managers that are quick, creative and nimble in adapting their business models to the current and new world within which we now operate.