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 Ugly – broken business models Comment
Property – Commercial Trend to smaller offices and working remotely
Property – Retail Need for lower crowd density; depressed consumer spending
Property – Hospitality / Leisure Shift away from activities with high infection transmission risk
Property – Inner City / High Density Shift to more remote living, more space and migration
Aviation International Shift to smaller planes; lower volumes and increased costs
Business Travel Switch to online meetings and less face-to-face contact
Business Hotels / Accommodation Less physical business travel
Cruise Ships High infection risk
Entertainment & Arts Specifically, venues with high density audiences
Cinemas, Attractions, Casinos Fear of exposure and being part of the virus transmission chain
Conferencing – Physical In line with reduced business travel
Printed Media Shift to online (sector was already in decline)
Automotive / Cars (especially luxury) Pressure on consumer spending; lower transport requirements
Clothing, textile Specifically, non-essential and fast fashion; people going out less
Public Transport Infection risk with specifically large scale public transport
Call Centres (high density) More spacing requirements to reduce infection risk
Online Bookings Need control of funds to facilitate refunds, T&Cs etc
Construction (large scale) Reduced project funding, depends on government priorities
Luxury Goods Specifically, mid-market driven by pressure on consumer spend
Tourism and Leisure High volume and international travel mainly at risk


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 Bad – businesses should survive Comment
Manufacturing Supply chain scrutiny, demand destruction, workplace hygiene
Education Traditional model must leverage more online education
Energy Pressure for more alternative, dependent on oil price/grid parity
Mining Hygiene and working practice; demand for products
Industrials Value chain, digitisation, supply chain dependencies
Packaging Health and hygiene emphasis; growing environmental concern
Agriculture (large scale) Shift to locally sourced goods; enhanced food security
Construction (mid-size) Projects likely to be smaller scale, need for more flexibility
Financial Services Large institutions slow to move, disruptions from FinTech
Insurance Policy lapses; new business growth; asset liability mismatch
Traditional Banking Switch to online and contactless, lower cost, de-risk
Entertainment Live sport at risk, empty stadiums will lack atmosphere
Advertising Above-the-line advertising loses out as live events decline
Apparel Retail Pressure on discretionary spend; more functional clothing
Rental Accommodation Shift away from property ownership; de risk to rental
Hospitals Diminished profitability of large high-volume facilities
Private Healthcare Volume model broken, pandemics halt elective surgery
Call Centres Need an effective distributed model for social distancing
Restaurants and Bars Trend away from crowds, distancing, transmission chain risk
Gym Facilities (Virgin etc) Hygiene and client concentration, transmission surfaces
Ride Sharing, Uber, Electric Cars Arises from reduced reliance on public transport; less travel
Luxury Goods Ultra-high end will survive, mid-market at risk

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.

The Good – businesses should thrive Comment
Hospital/Medical Facilities Bespoke specialist facilities, distributed and hygienic, flexible
Medical Supply & Services Adaptable to demand, supply chain integrity, logistics
Scientific Research Accelerate, collaborate, quicker to market
Specialised Medical Trend to smaller facilities, increased demand
Personal Healthcare / Pharmaceuticals Increased health trend, demand for beauty products
Nutraceuticals Trend to healthier foods and supplements
Information & Communications Tech Overall winner as digitisation accelerates
E-Commerce & Online Trade Switch away from contact retail
Data Connectivity Cheaper data, bandwidth optimisation, simplified solutions
Telecoms & Networking Connectivity; rise of the home office; distributed businesses
Streaming Technologies Rise of Netflix, Showmax, YouTube, Twitch, Amazon Prime etc
Online Gaming and Gambling Trend away from physical venues
eSports Substitution for live sport, FortNite uptake
Online Videoconferencing Rapid adoption of Zoom, Skype, Facebook video, Houseparty etc
FinTech Contactless payments etc
3D Printing Demand for distributed local mini-manufacturing facilities
Semiconductors Underpinned by technology adoption and digitisation
Tech Hardware Support the home office and distributed workforce
Retail – High Street Trend back towards convenience, small well-located outlets
Retail – Food Stay at home chef, increasingly entertaining at home
Food & Convenience Ready-made food & QSRs, drop in traditional restaurants
Food Processing Health foods, hygienic packaging, ingredient flexibility
Agriculture (local & niche) Local sourcing, fresher produce, stable pandemic immune sector
Home delivery Stay-at-home, avoiding being part of transmission chain
Logistics Smart, automated, and digital-ready distribution centres
Online Education Increased accessibility and quality supplements physical classes
Content Creation Demand for attention void created by demise of live sport
Sportswear Health and fitness trend; comfortable stay-at-home clothing
Online Exercise Trend away from gyms to virtual instructors, Pilates, yoga
DIY / Home Improvement Fitting out the home office, more time at home
Remote Living Trend away from the city, ‘home in the country’
Alternative Energy New smart home office; more reliable power
Low-Density Experiential Tourism Nature travel, game reserves, camping, country hotels

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.


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