The Sandton CBD in Johannesburg, empty and unproductive during the Covid-19 lockdown. Picture: SEBABATSO MOSAMO
The Sandton CBD in Johannesburg, empty and unproductive during the Covid-19 lockdown. Picture: SEBABATSO MOSAMO

A relatively early lockdown may have curbed the spread of the coronavirus, but has already started affecting the overall economy, employment and consumer spending. How can SA focus on “flattening the curve” while limiting the economic impact? And are there industry changes that multinationals should consider adopting beyond Covid-19?

Africa lags other continents in terms of the pandemic curve, as infections only appeared in Egypt on February 14, three weeks after the first case was reported in the US. SA’s first case was reported on March 3. With an incidence of 37 cases per million at the end of last week, SA is at a very low incidence level, suggesting the country is still at an early stage of Covid-19 development.

In addition, a growth rate of about 5% implies that SA has the virus under control. Monitoring growth rates over a seven-day period is of significant importance in any decision to loosen societal restrictions.

One thing SA does not have, however, is time, for in the background of Covid-19 lies an economy that struggled before the crisis and an inefficient state paralysed by state capture.

With the inclusion of Covid-19, an economic lockdown of 35 days, low commodity prices — capital outflows from emerging markets and a major slowdown in key trading partners have significantly disrupted economic activity.

What SA urgently needs to do is ease the lockdown restrictions, which are among the most severe globally. Some actions that can be taken immediately that will not significantly affect the growth trajectory of the pandemic are:

  • Open up take-away restaurants with a focus on delivery or pick-up with strict requirements on social-distancing and hygiene standards.

  • Gradually ease up on the ban on selling alcohol and tobacco, with sales limited to retailers and liquor stores during daytime hours.

  • Extend online retail sales to include a wider range of clothing, electronics and other goods required to improve the well-being of consumers during the lockdown extension.

Gradually reviving the retail and hospitality sectors through limited channels while enforcing social-distancing will help restart the economy, while improving consumer access to desired products and services.

To continue flattening the curve as a priority and reducing the economic impact, a thoroughly thought through strategy needs to be considered, as the only way the pandemic can be mitigated is through finding a vaccine, which is at least 18 months away.

Reports of unrest due to hunger ... could become more widespread in the current lockdown and more likely if the lockdown is extended again

A potential migration to selective intervention should be considered after April 30 as SA cannot afford an extension of the hard lockdown. The impact on the overall economy, employment, disposable income and access to food in the longer term will have greater consequences than the actual impact of the pandemic.

Reports of unrest due to hunger, as recently occurred in parts of Cape Town, could become more widespread in the current lockdown and more likely if the lockdown is extended again and people, especially in the township economies, are unable to earn an income.

Supply chains, complex in nature, are hard to restart if closed for too long and will further affect SA’s ability to restart the economy. Easing could include geographic interventions (with a short lag, reduce restrictions in those provinces or municipalities that have stabilised infections) and demographic/location interventions, such as:

  • Social isolation for vulnerable people (elderly/immuno-deficient people) to continue until a vaccine is available, then re-evaluate.

  • Open all other aspects of society within guidelines of moderate social-distancing. End work-from-home recommendation, including retail trade, restaurants, and bars, but with density restrictions.

  • Open travel to and within provinces except those that are selectively closed.

After easing is implemented, data should be monitored and stricter measures put in place in areas where the growth rates increase above 5% for a seven-day period. This may include locking down selected cities, provinces, or a country-wide lockdown if the growth rate accelerates.

A gradual and phased approach to opening up the economy, therefore, looks as follows:

  • During the current lockdown, a gradual easing of retail and hospitality with a focus on delivery and pick-up. Dine-in restaurants, sit-down occasions and social gatherings to remain prohibited.

  • After the lockdown, opening manufacturing, mining and other activities where work from home is not possible. Safety and hygiene measures to be implemented and adhered to at the cost of companies wanting to operate. This will only be possible if public screenings are effective, testing is increased, and track-and-trace methods remains effective.

The small- to medium-enterprise (SME) sector, most vulnerable to the slowdown, remains a challenge after the lockdown as most companies will not have the resources to implement measures  to restrict the spread of the virus.

Government support in providing health and safety equipment will be required to open up this sector, which, in less-infected areas should be initiated and, as the growth remains under control, should be extended to other provinces. If a spike in cases is identified, the company or district should be closed off. The key is to have a flexible approach towards -containment while supporting economic activities.

The new normal for business

Even before Covid-19 it was clear that changes in ways of working, delivery channels for goods and services, and a need for faster-paced change to remain competitive led by technological developments would define the winners and losers in the next decade. This has been accelerated by the pandemic and will be the catalyst for the new normal.

Companies will need to be financially prudent through this virus in the short to medium term. Our research has shown that while the instinctive reaction when facing a recession is for companies to focus on controlling costs — by slimming down operations, squeezing suppliers and re-engineering the core business — this is generally not enough to thrive during and after a recession.

Companies that take steps to be more financially disciplined before recessions enter them with more flexibility to take advantage of soft labour and asset markets. Our study also found that companies that used this flexibility to invest in growth-orientated strategies and introduce product innovations are the ones that succeed in the epilogue of recessions.

What does this mean as SA faces a prolonged contraction? Exercising fiscal discipline by prudently managing cash flow and evaluating new market innovations will be critical for companies.

Although lockdowns and restrictions will be eased over time, customers will remain vigilant. This will affect their willingness to go to restaurants, shopping malls, travel internationally and socialise in large gatherings.

A concerted effort will be required to build consumer confidence while recognising and adapting to the acceleration in digital channels, including an increase in home deliveries, take-aways and in-home entertainment.

Leading companies of the future will be those that drive a strategy of resilience in their financial statements supported by fiscal discipline; resilience in their supply chains that adopt to technological advances; and build learning organisations that adapt quickly to change.

• Abba is vice-president, Middle East & Africa at Canback Consulting.