FEDHASA appeals for municipal rate cut for hospitality sector to stop further job losses

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2 min read

FEDHASA has called on National Government and municipalities to intervene urgently in the continued shedding of jobs in the hospitality sector, by reducing the municipal rates. Many accommodation businesses are still seeing a turnover less than 50% of what it was pre-Covid-19, which this makes the current ratio of turnover to their municipal rates account simply unaffordable and unsustainable.

Pre-Covid-19, the rates account of an average large hotel would be 3% of their total revenue. During Covid-19, this figure increased to 86%, with only a few municipalities allowing businesses to defer payments.

With hospitality turnovers currently still languishing, rates can be as high as 10% of a large hotel’s total revenue. This is simply unsustainable and needs urgent addressing to prevent further job losses, says Rosemary Anderson, National Chair FEDHASA.

“Government needs to compensate for the damage that was caused to hospitality by the harsh regulations imposed on the industry. It can do this by facilitating that the rates are fair and commensurate with the industry’s reduced turnover.

“Municipal rates are now an unaffordable expense for hospitality businesses, which are still battling the fall-out of Covid-19 regulations and travel bans. If Government is serious about trying to stop job losses, one way that further job-shedding could be prevented and the hospitality sector helped to get back on our feet, would be the reduction of rates in the short- to medium-term,” says Anderson. 

The hospitality sector was among the hardest hit by Covid-19 regulations, some of which continue to limit normal operations, such as the restriction of 50% capacity still in place. 

“The ever-changing regulations over the past two years left our hospitality sector fundamentally damaged and extremely vulnerable. Many businesses were forced to close, and jobs were shed; those which remained open continue to grapple with restriction legacy regulations that remain in place, even though they were proven months ago to have no effect on limiting Covid-19 infections,” adds Anderson. 

“When one considers the catalytic potential of the tourism and hospitality sector to create jobs in areas where this is most needed, we should be doing everything we can to help it get back on its feet swiftly so that it can get back to creating employment,” says Anderson.

Some 1.5 million total (direct and indirect) jobs were said to have been supported by tourism as the pandemic hit and the sector is a significant employer of women (70%) and youth (60%). By nature of its geographic distribution and low barriers to entry, tourism also generates economic activity, SME opportunities and employment for low- and semi-skilled workers in rural and remote areas with the greatest need. 

“If mass unemployment is the biggest problem facing South Africa and the Government’s stated objective is to create jobs, a quick win would be for municipalities to cut their rates effective immediately for hospitality businesses – it is completely within their power to do so and it’s time to walk the talk,” Anderson says.