An aerial view of Cape Town at dawn. Picture: 123RF/MAURIZIO DE MATTEI
An aerial view of Cape Town at dawn. Picture: 123RF/MAURIZIO DE MATTEI

In the Business Beyond Covid series, CEOs and other business leaders and experts in their sectors look to the future after Covid-19. What effect has the pandemic and resulting lockdown had on their industries and the SA economy as a whole? Which parts will bounce back first and which will never be the same again? Most importantly, they try to answer the question: where to from here?

Economists are predicting that we will experience a severe recession from the Covid-19 pandemic, with potentially millions of people becoming unemployed. In addition, it will be years before our economy will recover and create sustainable jobs.

Over the last few months it has become apparent that the people and businesses that are most likely to survive and recover quickly from the Covid-19 pandemic are those with significant savings or those who have access to funding to cushion the economic contraction. SA’s already high levels of inequality may indeed increase as a result of the pandemic.

At African Bank we see this existing inequality in the behaviour of our customers. On the one hand, we have experienced strong growth in banking sector retail deposits (savings and investments). In fact, our retail deposits have doubled annually over the last two years and we experienced our best month of growth in retail deposits during lockdown. It is also interesting that 50% of the retail deposits that we have received during lockdown have been in our longest term product, which is our 60-month product. This suggests that there is a segment of our customer base who are holding back on discretionary spending and are preparing for the lean years ahead.

However, on the other hand many customers simply do not have savings to see them through this financial downturn. SA’s large banks have been informing the market that they are experiencing material increases in impairments, which have been raised in anticipation of an increase in default rates on loans. As unemployment increases and the economy contracts, there will be an increase in businesses and individuals who simply cannot service their loans. This highlights a number of different societal ills, but one of them is the vulnerability of many of our fellow citizens to economic shocks.

Covid-19 will not be the last disruption we will experience in our lifetimes, so it is important for business and the government to develop and implement solutions to help customers and communities to become resilient, so that they can be less vulnerable when the bad times arrive.

In recent years certain businesses have embraced the idea of “creating shared value”, which is pursuing financial success in a way that also yields societal benefits. The idea of creating shared value was born at a time when the legitimacy of business had been sharply called into question, with companies seen as prospering at the expense of the broader community. This idea has resonance in King IV, which states that to be good corporate citizens businesses must serve the interests of all their stakeholders, that is not just their shareholders.

The rise in the importance of environmental, social and governance (ESG) considerations, which are the criteria used by socially- investors and shareholders to screen investments and assess a company's impact on the world, is another touch point in entrenching the idea of shared value. Nowhere is this more apparent than in recent demands from shareholders for SA banks to adopt and publicly disclose policies on climate-related risks that shareholders are exposed to by investing in the bank.

In an article titled The Ecosystem of Shared Value in the Harvard Business Review, Mark Kramer and Marc Pfitzer use Anglo American as an example of a company that created shared value through rolling out the first large-scale programme to diagnose and treat HIV/Aids in SA, to protect its workforce and reduce absenteeism. Anglo American’s initiative is a great example of creating shared value. A healthier workforce is more engaged, more productive and able to generate sustainable profits.

As a sector we need to find ways of advancing lives through the provision of financial and related services. We need to create opportunities for customers, employees, suppliers and other stakeholders to improve their lives so they can build resilience to survive the next disruption.

Access to funding can be the catalyst to creating financial value. Whether it’s a car loan that eventually helps you to get the job you want, a mortgage that helps you to live closer to where you work or a personal loan to pay for education, access to funding is critically important.

It is possible that in a post Covid-19 world, many people will have multiple jobs, the so called gig economy, and have irregular income. Banks typically lend to people with a predictable income. In a world where a growing number of people do not have predictable incomes it will be important to innovate around using structured and unstructured data to inform lending decisions. This will help us to bring more people into the formal economy, thus enabling these people to benefit from the advantages of leverage and help them to build resilience.

As the Covid-19 dust settles and a vaccine is hopefully found, I expect that life will get back to normal. We will again attend weddings, meet friends in restaurants and dance the night away at crowded music festivals. I hope that the pandemic will have left us with a lasting sense of our interconnectedness and the need to create value not just for ourselves and those closest to us, but also for those who need it most.

Never before has the importance of doing well, while doing good, been more relevant.

• Maluleke is African Bank CEO.

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.