The SA Cultural Observatory - Measuring and Valuing SA’s Cultural and Creative Industries - December 2021

HIGHLIGHT ON OUR PUBLISHED REPORTS

The Observatory was established to undertake economic research for and about the cultural and creative industries in SA. Additionally we have done research on other related sectors that impact the cultural industries.  We publish the reports on our website and in various media platforms, including this newsletter, with a view to inform and empower industry stakeholders with information that we hope they will find useful, informative and can be relied upon when making decisions that affect the sector.

In this publication we put a spotlight on two reports that speak to the impact of covid-19 on the CCIs and the sports sector. The two reports are: 1. Measuring the impact of the COVID-19 Crisis on the Cultural and Creative Industries in South Africa: One year on, and 2. Covid-19 Impacts on the Sports Sector.  The complete reports can be downloaded from our website  (www.southafricanculturalobservatory.org.za) or through the links.

# Report 1: Measuring the impact of the COVID-19 Crisis on the Cultural and Creative Industries in South Africa: One year on

In all countries, the cultural and creative industries (CCIs) have been negatively affected by the COVID-19 pandemic. Using results from and online survey (326 responses), key stakeholder interviews, and macroeconomic modelling, this report investigated the medium-term impact of the lockdown on South Africa’s CCI’s. The survey included responses from freelancers (49%), employers (51%), formal (64%) and informal (36%) businesses.

Only 19% of respondents said they could continue with 60% or more of their normal business activities in 2020, which improved to 36% in 2021. While business continuity improved for all domains (defined using the UNESCO Framework, 2009), recovery was slower for domains with high levels of informality, freelancers, and those who operated in a mostly face-to-face mode. As found in the 2020 study, the most vulnerable domains were Performance and Celebration, Audio-Visual and Interactive Media, and Visual Arts and Crafts. Technical and support workers were one of the most negatively impacted.

Key stakeholders noted that impacts were more severe for emerging (early-career) creatives who do not yet have a track-record, strong industry networks, or an established following. Sectors relying on tourism, such as crafts and commercial museums, were also very negatively affected.

A much greater proportion of respondents to the 2021 survey (64%) than the 2020 survey (35%) reported moving their business activities online. However, key stakeholders commented that few had managed to monetise online content very effectively, and that online demand was constrained by poorer households not having access to data and devices needed to access content. Still, 66% of respondents said they would continue to develop their online activities when the pandemic had passed.

Other common adaptation strategies included using the time to upskill (47%) and working from home (44%). More than a third of respondents had to rely on using up their reserves or savings (37%) or on support from family and friends (33%). Strategies used by employers included ending short-term employment contracts (39%), closing their offices (41%) and cancelling contracts with suppliers (47%).

45% of respondents had applied for public funds, and 15% had applied for private sector support. Of those who applied for public funding 37% reported being successful, with a further 25% awaiting the outcome at the time of the survey. Knowledge about government support was lower for early-career creatives and those operating informally.

A third of respondents expected their turnover to have recovered by the end of 2021 or sooner at the time of the survey (June 2021). By December 2022, 74% expected their turnover to have recovered to pre-COVID levels.

Macroeconomic modelling estimated that the CCI’s direct contribution to South African gross domestic product (GDP) fell from R84.3 billion in 2019, to R42.2 billion in 2020 i.e., a drop of 50%. While there has been some slow recovery in 2021, which is expected to continue, the contribution of the CCIs to South Africa’s GDP in 2021 is forecast to be R46.9 billion – still 44% less than in 2019.

The key findings of this study can be summed up as follows:

• 36% of respondents could continue with 60% or more of their normal business activities in 2021 (compared to 19% in 2020)
• 39% of employers reported ending short-term employment contracts, and 41% closed their offices
• 45% of respondents applied for public funds
• 61% said that they would find information about effective online business practice ‘essential’ or ‘very useful’
• 49% said they would continue to work from home after COVID
• 33% of respondents expected their turnover to have recovered by the end of 2021, and 74% by the end of 2022
• The direct and indirect contribution of the CCIs to SA’s GDP fell to an estimated R42.2b in 2020 and a forecast of R46.9b in 2021 (i.e., a drop of R42.1b and R37b in 2020 and 2021 respectively).                                                                   

# Report 2: COVID-19 Impacts on the Sports Sector

At the time of conducting the study, the sports sector was one of the most impacted by the COVID-19 pandemic, with widespread cancellations and/ or suspension of sporting activities. In this context, the study assessed the COVID-19 pandemic impacts on the sports sector in South Africa. Results emanating from an online sport-related business/ organisation survey (817 completed surveys) are presented. A consumer (public/ fan survey) online survey examining sport participation and perceived sport business impacts was also conducted and 1 072 persons responded to this survey.

The results indicate that sports businesses/ organisations in South Africa are varied in terms of number of years in operation types, employment, size and activities involved in. Most have been severely impacted by the COVID-19 pandemic, with 61% experiencing total closure or only able to continue with a small part of normal business. Close to half of the businesses (48.5%) were based in Gauteng. Concentration of businesses in the more populated and urbanised provinces was evident. Various strategies are being adopted to deal with the pandemic with the main ones being closure, suspension and cancellations of activities/ events, moving to online/ virtual platforms, and using personal funds and seeking additional resources.

However, the contact nature of many businesses in this sector, with 88.1% stating that their operations were mostly related to face-to-face activities, does not permit working from home or going online as viable options in the dominance of face-to-face activities. Furthermore, 69.3% of the businesses could not change to non-contact operations. Most businesses (84.9%) also operate from a physical site. Additionally, options to deal with the disruptions are constrained mainly because of lack of access to resources (including funding and technology), space, equipment needs (including access to the internet) and limited information. Despite the challenges faced, many businesses were assisting to fight the pandemic.

Respondents expressed the need for support from a range of sources, with financial/ funding support being the most important and government departments and the private sector (including banks sponsors) viewed as the main sources to provide the support. The prominence of public support is consistent with trends globally that the pandemic-induced economic recession (which has devastated the private sector) will place a considerable burden on the government sector to aid the recovery of businesses. Many business have already closed and will be unlikely to recover should disruptions be prolonged.

The second part of the report used the information from the survey to develop realistic scenarios that were used to shock an econometric model (based on a Social Accounting Matrix) to determine the economic impact of the COVID-19 lockdown on the sports sector, and their resulting impact (including the direct and indirect effects) on the South African economy as a whole. The report provides the first scientifically rigorous impact evaluation of the reduction in sport and sport-related activity because of the COVID-19 shutdown on the South African economy.

The impact of the COVID-19 shutdown is not symmetric with sports and enterprises that rely on face-to face interactions experiencing harsher consequences and longer expected recovery times. The total impact (without the induced impact) on total output of the COVID-19 shutdown on the sports sector is R79.6 billion and their consequentially direct and indirect impact on the South Africa’s Gross Domestic Product (GDP) is expected to be R39.8 billion in 2020.

The public survey responses echoed business perceptions of the impacts and strategies used by the sports sector to deal with the pandemic. Respondents were interested in a variety of sports activities, which ranged from social/ recreational to professional/ business purposes. The main motivations for participation in sports activities were health-related and for social purposes. Most respondents (94.7%) spend money on sports-related activities and products, and some were willing to provide funding via donations/ crowd funding to assist the sports sector. However, like the businesses, most (86%) felt that government should be the main source to provide support.

Recommendations include engaging with sports federations and stakeholders to establish risk levels for different sports businesses and activities that will inform the resumption of some businesses. There is a need to develop a framework and approach to allocate resources (including funding) to support the sports sector. Monitoring of interventions and impacts are also important.

The key findings of this study can be summed up as follows:

• Diverse types of sports businesses operating
• Widespread disruptions among sport-related businesses and organisations, which vary considerably
• 61% of businesses experiencing total or substantial disruptions to operations
• Business closures, cancellation/ postponement of activities most prominent responses
• Dominance of face-to-face activities, although increase in online activities as a response
• Need for financial support/ funding
• The COVID-19 shutdown is expected to reduce South Africa’s GDP (direct and indirect impacts) by R39.8 billion in 2020
• Importance of government as the main source of support noted by businesses and the public
• Widespread participation in and consumption of sports activities and products among the public
• Public appreciation for the benefits associated with sports, including health, social and economic aspects
• Substantial public spend on sports services and products, and willingness to support the sports sector via donations to assist
• Need to engage with sports federations and stakeholders to develop responses that are sensitive to sporting codes and types of activities, with sport organisational networks being a key asset
• Need to develop a framework and approach to allocate resources, including monitoring of interventions