Old solutions stand no chance of solving new problems
Many enterprises are asking themselves how they can survive the Covid-19 pandemic, and how they can position themselves to thrive after it
The current global health crisis is a stark reminder that to navigate the challenges of a post-pandemic economy, a hybrid of the public, private, and social sectors needs to emerge.
The advent of Covid-19 has forced businesses to reassess how their employees work. While the current income recovery trend is encouraging, we are aware that consumers continue to face difficulties as Covid-19 is still part of our everyday reality.
For many enterprises, keeping their doors open after the virus has been contained is a big enough challenge. But others are looking ahead, not just to the end of this pandemic but beyond. They’re asking themselves how they can survive the pandemic, and how they can position themselves to thrive after it, and through future crises.
Creating that fourth sector means harnessing the best of the other three while also considering the social development goals that must be reached if businesses, and the broader economies in which they operate, are to succeed.
The rapid spread of the coronavirus combined with lockdown measures means almost 90% of companies are expecting revenue to fall substantially in 2020, with a third of businesses expecting a decline of at least 15%. Furthermore, 90% of businesses report lower turnover than expected, and 36% have laid off staff, either temporarily or permanently, in response to the contraction in revenue they’ve experienced or now anticipate.
Both China and the US — the world’s largest economies — remain affected by the virus, and it’s unclear when they’ll return to full operating capacity or reopen their borders to trade and visitors. At the same time, demand for commodities has fallen, sending prices for them tumbling alongside it, and the effect on global GDP may only be felt at the end of 2020. The shockwaves will be felt for years to come.
Covid-19 has forced different sectors to work together. The private sector has invested in research to try to find treatments and vaccines in partnership with academia and public healthcare services. Similarly, education drives from government have been combined with social outreach and the distribution of personal protective equipment by the medical industry.
The efforts to contain the virus have seen cities around the world shut down, further highlighting the interconnectedness of all sectors. The hospitality and travel industries have all but ground to a halt, affecting not only airlines and cruise ship operators, but the myriad adjacent businesses for which tourism is the lifeblood.
Layoffs, restrictions to movement and limitations on what consumers can buy, along with unprecedented economic uncertainty, have also seen consumers cutting unnecessary spending. That has had enormous knock-on effects, from mom-and-pop corner stores that can’t open and may be struggling to meet their overheads or pay staff, to investors who’ve seen portfolios shrink as customers become more risk-averse, draw down on their investments to cover their bills and take a generally more conservative outlook.
Beyond the comprehensive debt relief measures SA banks have implemented to assist affected customers, financial institutions have also reduced the fees they charge grant beneficiaries, made it easier for those who rely on them to collect them, and collectively sought to prop up small and medium-sized enterprises.
Those customers who have to date been model customers have been encouraged to apply for relief measures through the banks’ communication channels, including call centres and smartphone applications. This is because the banking sector realises that the effect on small businesses isn’t only detrimental to the owners of those businesses but to the communities in which those businesses operate, the people they employ, and those people’s dependents in turn.
A crisis tends to expose a society’s cracks, and worsen the plight of those who were already slipping through those cracks before it. In SA Covid-19 is being most adversely felt by those who were already on the losing end of the high-levels of inequality from which the country suffers. But even those who were gainfully employed before the crisis may find they’re forced to take multiple jobs after it, and that their once-regular income from a single source is replaced by irregular income from multiple ones.
That’s going to change how financial institutions work too. While the crisis may actually encourage saving and financial caution from consumers, it’s also going to require enhancements to the models needed to meaningfully and accurately assess risk. Realistically, it’s a reminder of how little resilience even many middle-class South Africans have when it comes to unexpected economic turmoil.
Shared value may include fostering entrepreneurial activities, solving inequality challenges, providing access to education, or addressing environmental challenges. And it is likely to involve collaboration across multiple sectors that have often been considered adjacent, but separate.
For the post-pandemic economy to thrive social entrepreneurship needs to be fiercely promoted. Not just philanthropic endeavours, but those business creators whose initiatives can lead to the realisation of the world’s sustainable development goals (SDGs), which according to a report from the Business & Sustainable Development Commission collectively represent $12-trillion in opportunities and encompass a huge range of goals, including climate solutions like renewable energy, extinctions, obesity-induced noncommunicable diseases, and basic human needs like access to clean water.
Meeting and solving SDGs has the dual benefit of being potentially massively profitable while also helping the public sector realise its aims. For instance, a key SDG is job creation, and with the right initiatives socially-minded entrepreneurs stand to create 380-million potential jobs by 2030, of which an estimated 85-million would be created in Africa.
What do these fourth sector enterprises encompass? They include blended value organisations, like so-called “for-benefit enterprises” that are able to harness the best parts of non-profits and those of conventional, for-profit bodies. They may include cross-sectoral partnerships and co-operatives, such as community interest companies, sustainable enterprises, civic enterprises, or hybrid organisations.
As for the technology they embrace to achieve not just profitability but social betterment, some of those are still being created, but some are already well-established, like blockchain technology, artificial intelligence (AI), 3D printing, big data, drone technology, virtual and augmented reality, and renewable energy solutions.
Each of these technology-driven activities has the possibility to be both socially beneficial and profitable. What’s required is the vision to see what they enable and to recognise that the global economy is currently being upended and reorganised with a ferocity and speed that’s never previously been witnessed.
Thinking the old solutions will work in what is destined to be a very different world isn’t only foolishly optimistic, it means risking missing the opportunity to reshape it to better meet humanity’s needs. We can’t go back to the world we knew, but together we can create one that’s better than what’s been left behind. Thus, the fourth sector and its unique ability to solve unprecedented problems is more relevant than ever.
• Nasila is chief analytics officer in the FNB chief risk office.
Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.
Please read our Comment Policy before commenting.