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The government, private sector organisations and civil society will need to come together to drive genuine social transformation as this is vital for economic recovery.
The ongoing Covid-19 pandemic continues to cause human suffering and economic distress on a global scale, with nations in the developing world suffering an outsized impact. This will be felt especially by the many small- and medium-sized enterprises (SMEs) and the more marginalised in our society, and will have a knock-on effect across the economy.
Of course, thanks to their critical role in job creation and growth it is vital that these businesses are protected and supported during this period of economic turbulence. We need as many SMEs as possible to survive this crisis, as their survival and recovery will serve as a bellwether for the economy and employment as a whole.
However, far more than merely doing all we can to protect our SMEs in this period, we need to focus on driving social and economic transformation as this will truly be the catalyst the country needs to drive higher levels of inclusive growth. Without a truly inclusive economy it seems unlikely that we will be in a position to rebuild economic structures effectively, promote growth strongly or create large-scale employment opportunities.
We need to recognise the many challenges we face — worsening poverty exacerbated by Covid-19; an increasing trust deficit between the government and business; citizen angst over corruption, lack of service delivery and poor governance; uncertainty among investors; and a seemingly never-ending energy crisis, not to mention having the highest unemployment rate globally.
With so many challenges besetting SA it is clear the country’s success must ultimately be everyone’s priority. This means business, civic society and government need to collaborate closely, which is why financial institutions will have a significant role. This sector, after all, is key to building back the economy and leading the way in transformation.
Action is needed
If we hope to build back better and have a positive influence on transformation at the same time, there are at least three actions that we must take. We must view those within our supply chain as partners, especially SMEs, as somewhere between 50% and 60% of SA’s workforce is employed in this space (McKinsey, 2020), and SMEs contribute to a quarter of the private sector’s employment growth.
With this in mind, it becomes clear why supply chain development puts transformation into action. Both parties share the potential risks in a supply chain, meaning they succeed or fail together. It is critical for larger organisations to view their SME suppliers as partners because this will encourage them to support these smaller entities during demanding times through approaches such as providing them with development funding, the provision of skills training or assistance with capacity building.
To this end, the Nedbank Enterprise and Supplier Development (ESD) programme is designed to combine business mentorship with specialist guidance and financial support. The end goal is to assist SMEs across various industries to succeed, grow and create additional employment opportunities. There is also a focus on supplier base optimisation, prioritising locally transformed service providers, and sourcing locally manufactured goods.
The second action we can take is to use financial inclusion to help bridge the gender gap. While fully aware of the need to drive overall financial inclusion, we cannot ignore the knock-on effect the pandemic has had on women being successfully included in the formal economy. Many women were already in a position where they had less access to financial services, something Covid-19 has worsened.
Of course, more women than men have also been made unemployed during the pandemic, while remittance flows are expected to decrease by about $78bn in 2021 relative to 2019. In turn, this also has a profound effect on women’s economic independence — bearing in mind that these are funds usually spent on family, food, education and healthcare. Even something as basic as opening a bank account can be difficult for women in rural and remote areas.
Transformation and economic inclusion
While there is much financial institutions can do to have an effect here, real success is only possible if the private and public sectors collaborate closely to help redress structural and societal barriers to enable more just financial inclusion. Such collaboration can include extending financial services networks by further utilising spaza shops and retail outlets and partnering with fintechs to enable women to have greater access to mobile money, remittances, credit, and savings options. It is also crucial to focus on education and financial literacy campaigns to overcome the inherent mistrust many have in financial institutions.
The third necessary action is for business to be genuinely vocal and actively participate in driving the required change. Business can only prosper if the right fundamentals are in place, namely good governance and demonstrable leadership in addressing the country’s serious structural issues. Business cannot observe from the sidelines any more. The time has come to actively participate in constructive engagement with stakeholders, most notably the policymakers.
Ultimately, business should be working alongside the government to identify policy and regulatory bottlenecks and constraints to growth, investment promotion and job creation. For the private sector, this means leveraging industry platforms — National Economic Development & Labour Council, Banking Association SA and Business Unity SA — as a collective voice to formulate and share solutions with all stakeholders.
While there remains much else that needs to be done, these three critical actions outline a feasible course that can help lay the foundations for both social transformation and a truly inclusive and growing economy, precisely the response we will need if we are to thrive in a post-pandemic world.
• Govender is executive head of transformation & strategy at Nedbank.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.