PATRICK BUTHELEZI: Out of chaos comes opportunity
SA economy is expected to recover from the worst of the pandemic
In 2020, the economy fell into a sharp recession, leading to huge loss of income for both households and businesses.
Unfortunately, many lives were lost, nearly 90,000 cumulatively since the pandemic started. A year on, the mood is improving, albeit not in a straight line, as demonstrated by diverging confidence levels.
In the recent Cape Town Central City Improvement District’s State of Cape Town Central City Report 2020 — a Year in Review, we pointed out that it would take collaboration and creativity to equip business owners with the support, skills and will to weather the remaining storm.
Importantly, though, the SA economy is expected to exit the recession, supported by high terms of trade (though this may have peaked), accommodative monetary policy, a buoyant global economy and low base effect.
However, the economy is expected to return to the pre-pandemic level in 2022. Even so, the recovery is good news for the business sector and households. Recently, the daily rates of infections plunged, officially marking the end of the third wave, and this paved the way for the Covid-19 command team to relax restrictions to alert level 1.
Covid-19 has had devastating effects on society and businesses, and the impact will be long lasting. In its April 2020 Business Impact Survey, Stats SA found that 85.4% of participating businesses had lower turnovers, with 46.4% indicating temporary closure or suspending trading activity temporarily.
Reasons for this ranged from supply-chain disruptions, loss of skilled personnel to Covid-19 to reduced retail hours (due to curfew) and a different operating environment. Admittedly, lockdown restrictions have been less strict compared to the first hard lockdown in March 2020. Further, the relationship between lockdown restrictions and economic activity has weakened.
Still, it is not business as usual as contact-intensive industries are still suffering more. Moreover, a need for regularly sanitising is raising the cost of running businesses as supplies have to be procured. And, in most instances, a dedicated person is employed to administer the sanitiser and check temperatures.
At the same time, high input costs, reinforced by elevated commodity prices and supply-chain bottlenecks, cannot be fully passed through to the consumer due to economic slack. Hence, core inflation remained subdued. Improving economic recovery suggests businesses may be able to recoup costs.
Covid-19 forced many businesses to work from home to prevent the spread of the virus. This has worked for companies and employees, but for others it has proven more difficult. For instance, many employees have experienced a feeling of disconnection and mental issues due to isolation. Corporates are having to increase efforts to reinforce their company culture to maintain and improve the new way of doing things. Hence, exceptional leadership is important to keep teams connected, productive and focused on their core purpose.
Some businesses have had to reduce their staff complements, and in turn, this has worsened the state of joblessness. In addition, challenges such as theft, crime and cybercrime have increased, adding to the costs of doing business.
Remote working should form part of company culture as long as productivity is not compromised. Businesses that choose to work remotely, whether partially or fully, will need to strengthen team bonding activities and encourage all staff to engage. Most importantly, building trust will be a critical anchor for this new way of work to succeed.
While the vaccination programme was heralded as a silver bullet to restore normality, it is proving slow, and evidence suggests it does not prevent infections but protects the most vulnerable from becoming critically ill. At least the global daily infections have declined from a peak of over 80 per million in August 2021 to 51.2 per million on October 13 2021, allowing restrictions to be relaxed on aggregate worldwide.
This is good news for businesses because demand can be expected to continue to recover. After all, SA is a small, open economy. These developments will present opportunities for domestic economic activity.
Flexible businesses have the chance to not only survive but thrive in the post-pandemic world. The use of technology should form an integral part of the businesses to increase productivity and competitiveness. However, safeguards against threats from technology must be put in place.
Further, employees must be equipped with relevant skills to meet the changing needs while laying the foundation for the fourth industrial revolution and green future. Additionally, displaced workers need to be retrained for future work. Labour is an abundant resource in SA, and appropriate training can close the mismatch in the labour market.
The pandemic has demonstrated that it is possible to work from anywhere in the country and the world. This means people don’t have to leave the destination of their choice to work. Talent can be attracted and kept from anywhere in the country. Both businesses and labour stand to benefit.
Now is the moment to live with confidence and make courageous decisions. It’s critical that corporates step up, take stock, and give back to their communities. There is a chance to make a difference by using a position of influence to drive a positive narrative for the country in the current landscape.
Further, the unemployed have a role in rebuilding the country. And the government must create a conducive environment by implementing necessary structural reforms. Finally, all stakeholders in the country must find common ground and work together.
However, it is important to foster greater financial inclusion — be it through corporate socialinvestment and job creation, to name just a few — for everyone to participate in the economy. The African Continental Free Trade Agreement, if leveraged well, will provide opportunities for businesses and deepen integration. In this way, the economy will grow and eventually solve our pressing challenges.
(This is an edited essay which first appeared in the State of Cape Town Central City Report 2020 – A year in review recently published by the Cape Town Central City Improvement District.
• Buthelezi is an economist at Sanlam Investments
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