This week the restaurant industry took to the streets. I noticed some comments on social media talking about how the industry is white-owned & hires foreigners.

Here is why every single South African should stand with the restaurant trade.

Restaurants (like retailers) are distribution for consumption businesses. They are not manufacturers of the products they sell.

Everything you buy-to-eat from a restaurant is made of ingredients manufactured elsewhere & transported into the restaurant.

There are 3 different kinds of restaurants, broadly speaking:

1. the chain;
2. the franchise;
3. the independent;

Most chain restaurants belong to a large company with a strong distribution infrastructure, head office for administrative support & fairly robust balance sheet.

They have longstanding purchase agreements with large manufacturers.

The manufacturers supply directly into the supply chain of the chain through a centralized distribution warehouse. The chain wants this to control the quality of the ingredients in the kitchen. This is why a McDonalds tastes the same whether you have it in Brookly or Benoni.

Then there are some of the items that the restaurants themselves in the store. For chains, the procurement & supply departments try to limit these to near zero so that the can manage the margins in the business & reduce the risk deviation from the standard.

Point: the chain needs a head-office (which employs people) & a distribution centre (which employs people). They also have need trucks & truckers for the logistics of making sure they have stock (JIT) ... Just In Time.

Oh, Logistics companies also employ people.

But the goods that the trucks deliver at the distribution warehouse are often delivered prepacked. So this means there is a packaging facility that buys the ingredients from the producer and then packs into the utility packs for the restaurant trade.

The packaging facility employs people too.

Most packaging - even packaging for wholesale - is branded. The packaging hired a design company that designed the brand & then makes the stickers. Plus a company that makes the bottle or the packets.

All those employ people too.

Then the packaging company buys the goods directly from the producer.

In fact, around the 2009-2014 PE boom driven by vertical integration of manufacturing facilities, many of the packaging companies bought or merged with the producers.

Control the value = maximise returns.

So the producer & the packaging companies became one. Either way, the producer also employs people.

Some of the producers have through the years built their own brands & distribution models.

Example VKB. Established in 1919, it now operates a fuels business, a milling business, a flour business, an oil business, a grain business, a chicken business ...

You get the point.

You are buying products every day at your local store or spaza shop that are either made by or have an input of firms like VKB - & you probably don't even know them.

While we are busy arguing over simple sensitivities on these "twitter streets" the economic battle is being won by vertically integrated firms like VKB far away from the glare of social media.

But hey #letspullanotherpersondown so we can feel like we have accomplished something

This is a just the single value chain of the massive chain restaurant. It is not the full chain. There parts that I have missed.

The franchise stores which piggyback into this same vertically integrated platform.

The independent stores which don't yet have the volumes afford the DC and the head office et al, they keep the local market, the local supermarket, and the artisanal spice maker alive by buying from their local store.

So EVERY SINGLE RESTAURANT that you take out of business reduces demand for the inputs & weakens the chain.

So now that the restaurants have retrenches some staff, soon to follow will the logistics companies, then the DCs, then the packaging companies & the producers.

Rural areas & small townships are often sustained by a single producer or manufacturer.

Take away Nestle in Estcourt & you will MASS UNEMPLOYMENT.
Take away VKB from Reitz & you will cause social havoc.

It's not just the restaurant you should be worried about. It's yourself.

Not to be alarmist, but expect MASS UNEMPLOYED in the short term.

As a popular video of politician making the rounds says, "Sisekakeni!"

The plea by the restaurant industry (and the minister's subsequent failure to meet with or accept the memorandum of the industry) is shocking if you consider everything above.

Its a dereliction of duty of the highest order.

Our government didn't cause COVID19.

But to say its response has been woeful is a kind understatement.
Lethargy in the relief package, delays in TERS, inconsistent lockdown rules, poorly considered exclusion policies have decimated SA economy (a patient that was already in ICU)

If you made it this far, tell me what you think?