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Digital economy companies take a punch as COVID-19 spreads

Simnikiwe Mzekandaba
By Simnikiwe Mzekandaba, IT in government editor
Johannesburg, 19 Mar 2020

The global spread of the deadly coronavirus (COVID-19) has required companies, including digital economy firms, to urgently come up with measures to deal with the disease, even though these are likely to contribute to the business slowdown.

At the weekend, digital home rental business Airbnb announced plans to give full refunds to guests that booked accommodation during a certain period, adding that hosts can cancel without charge or impact to their “superhost” status. This is in line with its extenuating circumstances policy in response to COVID-19.

In an e-mail to customers, local online retailer Takealot notes it is implementing precautionary measures to mitigate the risk of virus transmission. These include enhanced hygiene practices, contactless delivery and collection, no signature required, social distancing, and product pricing and availability.

Takealot’s online fashion and beauty business, Superbalist, has also informed customers of the measures it has taken to limit the spread and effects of the virus.

SweepSouth and Bolt have also provided updates on the steps taken to ensure safety.

Despite this, all companies have to reconcile with the economic bloodbath the spread of coronavirus will have on their bottom line.

Disaster ahead

Arthur Goldstuck, head of World Wide Worx, says there is likely going to be a collapse, in the short-term, of all services that require movement of large numbers of people.

“As public entertainment grinds to a halt and remote working becomes the norm for now, the demand for these services will plummet, if not vanish,” Goldstuck states. “From guest houses to restaurants to small business outlets that rely on walk-in clientele, we are literally facing disaster for micro, small and medium business.

“The hospitality sector will all but shut down and retailers will have to move rapidly to digital platforms. However, many consumers do not have access to the Internet, and will still need to go to stores to get essentials. Social distancing means people will want to avoid hospitality services and will want to be close to family. Airbnb will be particularly hard-hit.”

Mergence Investment Managers investment analyst Lulama Qongqo agrees, saying owners of Airbnbs and Uber vehicles are going to have a difficult time due to a significant decline in tourism and increased social distancing.

However, within that group, there is a more vulnerable group, adds Qongqo: “Those that have mortgages or car loans that still have to be paid despite their assets no longer attracting an income.

“I think we will have to wait and see whether the banks are going to look to compromise with asset owners because the probability of default has increased for those that use their properties for income-generation. I think Uber drivers are likely to try and switch to delivery services to try and make up for the lost passenger revenue, although deliveries may not fully offset the losses.”

Lulama Qongqo, investment analyst at Mergence Investment Managers.
Lulama Qongqo, investment analyst at Mergence Investment Managers.

Major disruption

The spread of COVID-19 will force traditional companies to change their way of business in the long-term, according to Jonathan Smit, MD of PayFast.

Smit notes implementing e-commerce technology is essential during this pandemic, as many people are going online for their shopping.

“Over the past few years, South Africans have come to rely on the convenience of online shopping; and now with the onset of the COVID-19 outbreak, it’s to be expected that the reliance on online shopping will be intensified,” he says. “Self-isolation and consumer worry about public places means local businesses are being forced to find quick and innovative ways to adapt to the current crisis.”

Qongqo highlights that if China is anything to go by, restaurant online activity will not perform as well as general retail online activity, noting this is what happened when the Chinese had movement restrictions. “In terms of risk – sealed packaged food is likely to be more trusted than ready to eat restaurant food. The former is also way more affordable.”

For services like Uber and Bolt, Goldstuck says they will have to ensure drivers are supplied with hand-sanitisers and cleaning material.

Seats will need to be cleaned after every ride, he says. “The services themselves need to engage in a highly-active educational campaign to ensure both drivers and passengers adopt new protocols for ride-sharing. I have yet to see any such measures, beyond Uber Eats indicating new pick-up and delivery protocols.

“Woolworths has set the example with non-contact delivery protocols highlighted as one opens their app. Uber has made no such efforts, beyond offering free delivery. We can expect a rapid wake-up from them, however, as their traffic disintegrates.”

Goldstuck says a particularly startling example of this lack of urgency can be seen in the Gautrain app. “For an organisation that has an executive tested positive for the virus, one would expect aggressive educational steps taken via its app. Instead, not even a notification − coronavirus crickets.”

Response 101

Arthur Goldstuck, head of World Wide Worx.
Arthur Goldstuck, head of World Wide Worx.

Goldstuck believes Airbnb provides an excellent example of how businesses need to respond in the short-term in order to ensure recovery when the crisis subsides. “The app opens with a response to the crisis, among offering guests full refunds and hosts no charge cancellations.

“South African apps are also demonstrating tremendous thought leadership in advising consumers how to respond. From Eskom Se Push to Checkers to Discovery, an effort is made to educate customers. Uber's main rival here, Bolt, offers a good example. The app opens with a recommendation to users to switch to cashless payments to decrease risk.

“Although Uber doesn't have that particular issue, it should be demonstrating greater awareness. Most dedicated hotel apps carry updates or links to pages providing COVID-19 information and responses, but the aggregation services like and seem oblivious to the crisis, at first sight.

“Awareness, education and intervention is critical, with differing responses needed depending on the nature of the business. Government and World Health Organisation guidelines should always be followed. The bottom line for any business owner or member of the public is: don't be an idiot.”

An Uber spokesperson told ITWeb: “We are always working to help keep everyone who uses Uber safe. We have a dedicated global team, guided by the advice of a consulting public health expert, working to respond in every market where we operate around the world. We remain in close contact with local public health authorities and will continue to follow their guidance to help prevent the spread of the coronavirus.”

Uber adds CEO Dara Khosrowshahi has twice in the past month sent information and guidance to riders and drivers, as well as Uber Eats customers and delivery people.

Qongqo advises companies to raise awareness of the measures they have taken to ensure the environments and goods their customers are exposed to are sanitised.

“With more people working from home in the services industry, we can expect that securing company data will be more challenging; therefore I think it makes sense for companies to focus on tightening cyber security measures. The beneficiaries of the shift to working from home will be remote working services like Zoom,” she concludes.