Business in South Hurting as Workers, Shoppers Stay Home

Factories cut back production, malls are empty and tourists cancel hotel reservations.

Ofer Vaknin

The businesses in Israel's south are feeling the pinch as the tensions escalate and both shoppers and workers stay close to home.

The Mul-T-Lock (Rav Bariach) plant in Ashdod’s southern industrial zone halted production four times in a single day this week because of missile sirens. Production at the locks and doors manufacturer is down 40%, after about 6% of its 300 employees were absent on Tuesday. Eight had been called up for reserve army duty Tuesday afternoon, and 15 others were expecting to get orders by the end of the day.

But even as scores of rockets rained down on southern and central Israel, as of Tuesday the Home Front Command was telling factories like Rav Bariach to operate as usual. That means they won’t be entitled to any government compensation for any lost production.

Four technicians from Finland had arrived this week to help install a new production line, expected to churn out 250,000 doors a year, mainly for export. “I thought they had returned to their hotel at night, but it turned out they continued to Ben-Gurion International Airport and left Israel, said Samuel Donnerstein, one of Rav Bariach’s principals. “I can understand them.”

Donnerstein said the fighting – formally dubbed Operation Protective Edge on Tuesday – put business people like himself in an untenable situation.

“It can’t be that war breaks out and no one declares an emergency because they don’t want to pay compensation from the budget,” Donnerstein told TheMarker, adding, “We need to enable the mothers of young children to continue getting their salaries without coming to work.”

Donnerstein said there had to be a formal mechanism for declaring official emergencies.

Many factories in the south, especially small and medium-sized ones, with 20 or fewer employees, reported worker absenteeism of 10% to 30%, said Meir Shimko, director of the southern branch of the Manufacturers Association of Israel.

“When there’s a shortage of workers, some of the head office people work on the factory floor,” Shimko said. He said that around 500 factories were within the range of Hamas rockets, mainly in Be’er Sheva, Sderot, Ashkelon, Ashdod and Kiryat Malakhi.

Plenty of parking at the mall

It wasn’t only workers who stayed home on Tuesday, in the south. Downtown areas and shopping malls were pretty much empty.

At the Globus Center mall in the Negev town of Netivot, the only occupied parking places were those of store employees who chose to report to work.

“Since the morning we’ve had maybe four customers in the store, compared with dozens on a normal day by this time. In the evening, no one came at all,” said the manager of the mall’s branch of the Steimatzky bookstore chain, who asked not to be identified. “It’s not good, but we’re managing.”

One barrista at the Café Café nearby kept his sense of humor. “I can give you your own personal waiter,” he said.

In the bigger cities of Ashdod and Ashkelon, sales and shopper traffic plummeted, too. In Be’er Sheva, somewhat more distant from the fighting, the drop in retail sales was slightly more modest, but merchants still talked about declines in the tens of percent.

“Fewer people are window-shopping, fewer coming into the store and even fewer buying,” said Pini Partok, one of the principals of the apparel chain Zebra. He estimated sales were down 67% in one store on Tuesday and down 53% at a second one.

“You have to understand that we’ll never make up the lost sales because most of the buying is spontaneous, by people who happen to be in the area,” Partok said.

Hotels and bed-and-breakfasts began receiving cancellations as much as two weeks ago, although as recently as this weekend, hotels in Ashkelon and Be’er Sheva had high occupancy rates and managers were optimistic that the tensions would not spin into another war.

That changed by Monday. “Occupancy has dropped sharply. There are few reservations for the coming weekend and more than a few of those will probably be cancelled. Many guests who are here are shortening their stay,” said Roni Aloni, VP Marketing at Fattal Hotels, which operates Leonardo hotels in Ashkelon and Be’er Sheva, among other Israeli cities.

The Israel Incoming Tourism Operators Association was encouraged by the relatively small number of cancellations so far, according to the head of the organization, Ami Etgar. He noted, however, that July and August are slow months for the organized tours in which the association specializes.

“There haven’t been many cancellations, but that doesn’t mean anything,” Etgar said, adding, “If there is a big ground operation [in the Gaza Strip], it will spell big trouble for the last third of the year. If things calm down soon, the damage will be minimal.”

Kafrit Industries, a manufacturer of compounds for the plastics industry that is based in Kibbutz Kfar Aza, went to a reduced schedule on Tuesday, when only 50 of the factory’s 160 workers clocked in.

“I’ve been dealing with situations like this, of increasing rocket-fire and declarations of emergencies, for 14 years, so I’m used to it,” said CEO Nadav Goldstein, who noted that the plant received a direct hit during Operation Pillar of Defense, in November 2012. No one was hurt but the factory was closed for several days.

The factory usually works three eight-hour shifts a day, but starting Monday it moved to two 12-hour shifts, Goldstein said, adding, “Kafrit is designated as a critical industry, so we’re permitted to operate in emergencies.”

Goldstein said the factory was meeting its production quotas and that raw materials were arriving on schedule, for now. “Fortunately the roads aren’t blocked,” he said.

The company’s office workers, in contrast to those on the factory floor, have permission to work at home. “No actual or potential customer has stopped doing business with us. They just how we’re getting along,” Goldstein said.

“Next week we’re supposed to meet with two businessmen from Holland. We agreed to meet in Tel Aviv rather than here. We decided not to take the chance.”

The Israel Tax Authority said on Tuesday it had received about 100 applications so far for compensation for damage caused directly by the attacks in the area. It said about 35 were for vehicles that had been hit, 52 for buildings and 12 related to agriculture. The authority estimated the damage came to about 10 million shekels ($2.9 million).

In addition there was damage to public infrastructure, the agency said.

Tax inspectors were making spot checks on damage, sometimes in a matter of minutes after a report, to assess the damage and help victims file claims.

Economy Minister Naftali Bennett, meanwhile, asked Finance Minister Yair Lapid and Bank of Israel Governor Karnit Flug to urge banks to show understanding to the owners of small- and medium-sized businesses in the south, and to avoid restricting their accounts over bounced checks.

His ministry also asked the tax authority to allow businesses in affected areas to get an extension for paying value-added and other taxes due on July 15.

With reporting by Adi Dovrat-Meseritz and Rina Rozenberg.