How are small businesses in Israel's South faring during the war with Hamas?

It is no secret that the country’s economy has been hit hard during the past year following the brutal Oct. 7 Hamas attacks on the Gaza border communities.

The war in Gaza and the fighting with Hezbollah on the northern border have impacted Israel’s economic sectors, particularly small businesses.

Despite the costs of war, the OECD reported that Israel’s “strong private consumption will continue to be a strong engine of growth together with the government needs related to the war,” according to a Globes report in May.

How have small businesses been impacted by the Israel-Hamas war?

In Ramat Hanegev, bordering the Eshkol Regional Council, small business owners Michal Hess, 53, and Nurit Portugez, 51, had to rethink their business concept following Oct. 7. The two owned a clothing and accessory shop-on-wheels called Baot Lerega. They traveled across the Negev in a large white van carrying mostly Tel Aviv designer clothing and accessories.

The women would set up shop in peripheral cities like Yeruham, as well as kibbutzim and moshavim in the Arava, the Negev Highlands, and the northern and western Negev. Many of their clients were women from the Gaza border communities.

“For many people who come to live in the Negev, they make a certain sacrifice. There are comforts of city life – cafés, restaurants, boutique clothing stores, and designer shops – that you just can’t access in the desert,” said Hess, who moved to Midreshet Ben-Gurion 14 years ago from Jerusalem, where she taught literature in high school.

The women traveled every three to four months to as many as 80 communities – religious and secular – with long Excel sheets filled with the names and sizes of products that their clients wanted to purchase. They also opened a store in their community of Midreshet Ben-Gurion, which they would open once or twice weekly.

“Our business model was similar to that of a food truck, but instead of traveling and delivering food, we delivered clothes,” said Hess with a smile.

“We realized there was a demand for quality products, like clothing and jewelry, especially among women in the Negev. We established connections with designers and shops in Tel Aviv that our customers would rarely have the time to visit themselves,” she told the Magazine.

“Some of our best customers came from communities like Kibbutz Be’eri, where we regularly set up our shop,” Hess noted.

That was, until Oct. 7.

“Overnight, our clients from the western Negev literally disappeared. Some were murdered by Hamas terrorists or lost loved ones; others were kidnapped. Most were displaced,” said Portugez.

“We traveled to the hotels in the Dead Sea to give free clothing to women from Kibbutz Be’eri, Nir Oz, and other communities that had been relocated there,” said Portugez, an academic originally from Ness Ziona, who has been living in Midreshet Ben-Gurion for 20 years. “Our contacts in the Tel Aviv designer community contributed expensive boutique clothing and accessories for free during this period.”

Noted Hess: “For many women, the new clothing was a breath of fresh air. They had come to the hotels with nothing except the clothes on their backs. Some had homes and belongings that were completely burnt down by Hamas. They had escaped a pogrom.”

Their clients were very glad to see them, both in the hotels and in their shop in Midreshet Ben-Gurion, a community in the Negev Highlands that has hosted hundreds of internally displaced persons from the Gaza border communities following the Hamas attacks.

“When our clients met us, they would open up,” said Portugez. “We were people they previously knew whom they could trust and confide in. One woman told us how her husband had been murdered by the terrorists.”

For other women, the new piece of designer clothing symbolized a new start. “They felt like they could be the women they were before Oct. 7,” observed Hess. “Second-hand clothing had only reinforced their sense of displacement.”

BUT PORTUGEZ and Hess, who are not only business colleagues but also best friends, whose husbands and children served in the army during the war, realized that they could no longer continue their traveling boutique in its current form.

“We managed to get through the pandemic, but this was a lot worse,” Hess said. “We saw what our friends in the kibbutzim had gone through, and it was beyond traumatic.”

The two women decided that instead of closing down their business completely, they would change direction to make their enterprise financially viable. They converted their clothing shop in Midreshet Ben-Gurion into a unique gift store complete with local ceramics and artistic souvenirs, along with board games, children’s toys, home decor items, and much more. While there are still some Tel Aviv designer clothing (available in all sizes) and jewelry on display, the store, renamed Nona, targets a wider audience.

Although Hess and Portugez miss traveling across southern Israel, they are glad they were able to continue their business in a different format. They also pointed out that their shop is able to attract customers thanks in part to the Knaaniya Café, a well-known eatery established in 2011, located right next to Nona, which draws in a large number of tourists, as well as locals.

“We are a business in the middle of the desert. But because of our location next to the Knaaniya Café and a loyal and expanding customer base, we are able to make ends meet,” Hess explained.

“Where else in the world can people travel to vacation in Eilat, eat a great sandwich in Knaaniya, and buy a beautiful souvenir, all while the country is at war? We have every reason to be optimistic and believe that things can change for the better.”

OTHER SMALL businesses, like NegevJeep – a desert excursion tour company run by Haim Berger, a licensed tour guide and zoologist – faced seemingly insurmountable challenges as well. NegevJeep, which has been operating for 20 years, depends almost exclusively on tourists. Before the pandemic, for example, almost 70% of Berger’s clients had been from abroad.

“I had a 100% decrease in business for the first two months after Oct. 7,” Berger told the Magazine. “The weeks around the Sukkot holiday have always been the high season for my tourism company,” said the ecologist, whose doctoral thesis examined the wild predators of Israel’s desert, including wolves.

After Oct. 7, business for NegevJeep halted abruptly.

Instead of waiting around, Berger, 60, volunteered in the army reserves, and for two months used his jeep for reserve duties.

“There was this feeling of insecurity and uncertainty. I felt it was important to do my part. We were out in the open; anything could happen,” said Berger, who lives in Midreshet Ben-Gurion with his family; his son is also serving in the army.

During reserve duty, Berger taught his fellow soldiers about the local wildlife and the desert, providing them with valuable information about their surroundings. He is set to do another round of reserve duty in September.

“Around Hanukkah, tourists started coming down to the South but not for the regular tourist activities, rather for war tourism,” Berger recalled. “Groups would contact me to visit and pay respects at the site of the Supernova music festival and at the different kibbutzim,” he said. He would guide these groups to the Gaza border communities voluntarily, having gotten to know the area well during his reserve duty.

He pointed out two factors that helped keep his business afloat during the past year: His wife had made a career switch, and two of his employees were recruited for reserve duty, “so I didn’t have to worry about a payroll.”

But the most important factor that helped his business survive is the partnership he has with the luxury Kedma Hotel, part of the Isrotel Hotel chain, located on nearby Kibbutz Sde Boker. Berger promotes his unique jeep tours, night safaris, and star-gazing activities through the hotel’s website and information booth in the lobby. He also refers the hotel’s clients to 25 other small businesses across the Negev that cater to tourists in niche areas.

But it wasn’t until this past April that NegevJeep really came back to life. By that time, most of the Gaza border community evacuees staying in the Kedma Hotel had returned to their homes, replaced by local tourists who filled the hotel rooms once again.

“Kedma Hotel brings in a large number of clientele who otherwise wouldn’t visit the Negev,” Berger said. “This helps generate income for many other small businesses that cater to tourists in our region.”

While he says it is wonderful to be able to conduct tours for Israeli tourists again, he is hoping that his overseas clients will be able to visit soon.

“I get emails from previous clients saying how much they want to visit Israel again. People from the US, Canada, France, and Germany – Jewish and non-Jewish – have been sending me heartwarming messages throughout the year.”

According to the Central Bureau of Statistics, this year around 500,000 tourists arrived in Israel between January and June. This is a 76% drop compared to last year, when two million tourists visited Israel.

“We are waiting for the tourists from abroad to return,” he said. “There is always so much to see and discover in the Negev desert.” 

The writer made aliyah from Calais, Maine, in 2004. She works as an English teacher in Midreshet Ben-Gurion, where she lives with her family.