City of Tshwane health officials during a testing drive for the Covid-19 at the Bloed Street Mall in the Pretoria CBD. Picture: by Phill Magakoe / AFP
City of Tshwane health officials during a testing drive for the Covid-19 at the Bloed Street Mall in the Pretoria CBD. Picture: by Phill Magakoe / AFP

History suggests that some of the changes we are experiencing are unlikely to be permanent: the longer-term consequences of both 9/11 in the US and the global financial crisis, for example, were relatively modest and concentrated in particular sectors such as airline travel and the financial services industry – even though many people predicted at the time that these events would radically change social behaviour. This supports the argument that once Covid-19 is mostly under control (perhaps some time in 2021), a large part of our daily lives will return to normal.

However, pandemics have had longer-lasting effects on society. This was certainly evident after the Spanish Flu in 1918/1919, which significantly affected the health-care system and partially contributed to the baby boom in the 1920s.

Much like the Spanish Flu, Covid-19 has affected almost every person in the world, and we need to anticipate some important residual changes that will transform the way societies operate and people behave. These potential changes can be grouped into three broad categories: behavioural, economic and social interaction.

Behavioural changes

Practising good hygiene

The rapid spread of Covid-19 has increased our general awareness of hygiene and the importance of developing good hygiene habits. Along with increased hand-washing practices, the use of face masks will become more common, especially during flu season. Covid-19 has shown us how easily germs can spread and just how vulnerable we are to getting sick if we don’t maintain good hygiene. In addition, households and government institutions have become more conscious of what is required to contain the spread of disease, and presumably health authorities will be better prepared should another pandemic emerge. A good example is the way South Korea has managed the spread of Covid-19, drawing from the lessons of the country’s mistakes in handling the spread of Middle East Respiratory Syndrome in 2015.

Increased focus on service delivery

The pandemic is also exposing the deficiencies in government service delivery systems, forcing governments around the world to learn how to deliver public goods more effectively. After the experience of Covid-19, governments should be better prepared to provide social backstops and benefits to more citizens. However, to ensure this, they must use this opportunity to create systems that serve citizens more effectively. In SA, for example, the government should come out of this crisis better able – in theory, at least – to expand its capabilities through improved food parcel delivery systems, better access to health care and increased water supply provisions.

Changes to economic systems and policies

(Un)importance of China

The Covid-19 outbreak has exposed a number of weaknesses in the global economic system. For one, it has highlighted the world’s reliance on China for the provision of many manufactured goods. This has resulted in major disruptions in the provision of many goods that are key to both the household sector and businesses for the maintenance and repair of equipment. This is likely to encourage companies to reduce their reliance on China by upscaling and improving their local production capabilities. This will allow them to localise supply chains or find alternative sources of supply that can be used to diversify the risk of becoming overreliant on one supplier.

In addition, the general displeasure expressed by many Western nations with China’s handling of the coronavirus outbreak is likely to lead to even greater nationalism and some reversal in globalisation. This implies increased protection for local industry, and therefore a post-Covid-19 world may be one that is only a global village online. Even global tourism will take a while to restart, as people remain cautious about international travel.

Saving for a ‘rainy day’

The lockdown measures introduced by most countries have also highlighted the lack of precautionary savings by households and, more importantly, by companies. Consumption habits have left them unprepared for the effects of a worldwide lockdown on incomes and revenue. The income uncertainty produced by the outbreak should result in businesses and individuals recognising the importance of “rainy day” savings. Research shows that in times of increased uncertainty, households tend to increase precautionary savings. Indeed, this is something that was observed in many countries during the global financial crisis.

We may also see more stockpiling as a form of increasing precautionary savings. This may translate into more “doomsday preppers”, as people make sure that they are well prepared to face future calamities. This may not, however, be as common in low-income and emerging economies like SA, where people mostly live from pay cheque to pay cheque. In addition, SA households generally have a poor savings culture, meaning that they may remain vulnerable to potential loss of income in the future.

Of equal concern is the fact that many SA businesses do not have adequate safety nets for situations where there is a sudden halt in economic activity and cash flow. This lack of precautionary savings places a great deal of pressure on the government to provide households and firms (especially small and medium-sized businesses) with safety nets to prevent wide-scale job losses. As such, it may be prudent for the government to introduce regulations that require businesses (of a certain size) to hold a prescribed amount of their earnings in the form of precautionary savings, much like the Basel requirements imposed on banks following the global financial crisis. Liquidity and capital requirements for companies may help avoid large-scale job losses and prevent these companies from depending on the government during times of distress.

Taxes may go up

From a policy perspective, once this pandemic is over, countries will face very significant fiscal pressures, necessitating changes in tax systems. In SA the long-term fiscal consequences of Covid-19 will be enormous. The government may have little choice but to look at adjusting the corporate and income tax regimes to help address the large fiscal deficits.

Unconventional monetary policy goes mainstream

Furthermore, many unconventional monetary, fiscal and financial policies may become mainstream. The unprecedented monetary and fiscal response to the crisis will raise questions about whether such policies should become more permanent in nature. This may increase government and central bank policy toolkits by introducing things like modern monetary theory, debt forgiveness and a universal basic income. Many of these radical economic and financial policies have associated risks that need to be thought through carefully before they are fully implemented.

Changes to the way we work, live and play

Remote working becomes a more practical option

The pandemic is likely to accelerate corporate acceptance of remote working by employees and may change the way we disseminate information. With many companies being forced to allow employees to work from home, software and applications once thought to be nice to have – like Zoom, Microsoft Teams and Skype – have become critical to their functioning. Not only have people become more familiar with the use of workplace digital tools, in many cases it has proved to be more effective. For instance, the use of platforms like Zoom for seminars, conferences and meetings has meant that information is delivered to more people at a fraction of the cost.

Working remotely will become common for many companies, and the need for people to be physically present for conferences and meetings will decrease. This will help companies and employees save on things such as travel expenses and accommodation, and become a more cost-effective way of working. While this will result in losses in some parts of the economy, like accommodation and commercial property development, it will lead to higher demand for internet access and an increase in investment in research & development (R&D) for software that will make working remotely easier.

Climate change slows down

The spread of Covid-19 and the subsequent lockdowns have brought about unprecedented drops in carbon emissions thanks to decreased demand for electricity, a fall in road and air traffic, and the closure of many businesses. Hopefully this will help slow the course of climate change. This, however, will depend on the long-term political decisions made about carbon emissions.

Consumers go digital… and stay digital

Another area of change that will come from the virus is our increased acceptance of e-commerce and internet-based activity. The fear of infection, closure of many entertainment facilities, and strict social distancing measures have resulted in increased use of online shopping and entertainment platforms. While the use of online shopping has been on the rise over the years, lockdowns have heightened awareness of and comfort with online payment and delivery processes. Online shopping and contactless delivery have been widely allowed and encouraged by governments, especially in China, the UK, Australia, the US and Europe. Covid-19 has accelerated the popularity of online shopping and increased its importance to retail activity.

Subscriptions to online entertainment and gaming platforms like Netflix, Showmax, PlayStation Now and Google Stadia may replace some traditional forms of entertainment. While the use of these streaming services may decline as the lockdown is lifted, the convenience of such services means that a residual customer base will remain subscribed. Much like working from home, this will increase R&D funding for this market, increase the demand for higher-quality internet access, and lead to growth in artificial intelligence and virtual reality.

Slow food beats fast food

Finally, on a lighter note, the lockdown may reduce SA households’ heavy reliance on fast-food takeaways and restaurants in general. Over the years, South Africans have increased the frequency of their fast-food purchases, driven by a wider offering to consumers from new entrants and the convenience introduced by mobile delivery applications. The ban on the sale of hot cooked food during the lockdown has forced many South Africans to cook and bake as a form of entertainment, with the help of the internet. Some have even tried to re-create their favourite fast-food meals like fried chicken, with varying success. Many people may choose to continue this after the lockdown, not only because it is healthier but also because of the uncertainty around hygiene practices in commercial kitchens. Furthermore, voluntary social distancing may continue, decreasing demand for meals at restaurants, fast-food or otherwise.

While some of these changes will be more immediate, a lot of the change that will come from the pandemic will be slower, taking years to be implemented. Despite this, however, the Covid-19 pandemic has exposed a lot of what is wrong with our “normal” way of living, serving as a catalyst for some much-needed changes to some key aspects of our lives.

  • Kevin Lings is chief economist at Stanlib


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