Thought Leadership

BLSA CEO’s weekly – 28 April

28/04/2020 | By Busiswe Mavuso

The phased easing of the lockdown is a welcome step for government to take in managing the crisis. It is very important that as much of the economy as possible function if it can be done safely. I fear, however, that it will prove challenging to try and open parts of the pre-crisis economy in isolation. Everything is connected. Our objective should rather be to allow as much economic activity as possible, provided it meets health and safety requirements.

Economies are complex, adaptive systems. An intervention at one point has unexpected consequences elsewhere. The five alert levels will operate at both national and local levels from the end of this week. Certain industries and businesses will be able to operate at different levels subject to meeting health protocols and in areas that meet specific health requirements. This will result in a patchwork of parts of the economy that open while others remain shut.

There are going to be difficulties. Supply chains stretch far and wide and few are truly independent from others. In a sense, everything is connected. The approach of letting certain parts of the economy operate – either geographically or segmentally – is almost inevitably going to run up against supply chain blockages.

But economies adapt. Those blockages can be met with ingenuity and innovation. Already we have seen companies shifting production to meet the healthcare challenges we face – brewers switching to hand sanitisers, vehicle manufacturers to producing face masks. Others have launched new apps to help users deal with the crisis, providing information or connecting people. These are examples that show that economies are not static – they adapt to the opportunities and work around blockages.

In the economic response, however, I’ve not seen much discussion about stimulating this adaptive function. The question policy makers should ask is, “what would enable the economy to adapt to the crisis faster?” rather than “what parts of the pre-crisis economy can we resume?”. We may never go back to a pre-crisis economy.

Working from home is important and is likely to remain so for a long time, so we should find ways to make it easier for people. Can they access the equipment – computers, broadband and so on – to be effective? Are we serious about what people need, rather than what we think they need? We should not try and predict this – we should enable access to anything that can be safely delivered. And when people have done what they can from home, can they access logistics to send their output to customers?

These questions show that it is the distribution side of the economy that really matters in enabling economic activity. The production side can adapt – we can develop new ways of working that ensure social distancing is done for production to happen safely. For example, retailers who sold out of bricks and mortar can switch to selling online if the logistics are available for it. One can imagine the phone-based commerce to allow spaza shops to deliver in the townships. Many township businesses are services based; I can imagine appliance repair and rentals functioning through a safe logistics system. If we are able to provide economic infrastructure such as data and courier services to enable the movement of goods, the economy will adapt faster and more activity would take place than otherwise.

We will see how the phased lockdown works in practice. Clear communication is going to be important as the intersecting levels will be complex for businesses and consumers to understand. Understanding must extend to those tasked with enforcing the lockdowns, and the scenes of law enforcement abusing their power is a warning that even simple rules are difficult to enforce.

Ultimately, I hope that we work toward enabling the economy to work within a set of clear guidelines driven by health needs, and then allowing innovation to respond, rather than trying to pick and choose which parts of it should be open or shut.

We needed decisive intervention from government in the face of an economy that is set to reel from the effects of covid-19. It was delivered.

The R500bn stimulus injection into the economy to deal with the healthcare fallout and to look after the most disadvantaged in society is more than 10 times what the country spent in preparing to host the soccer World Cup 10 years ago. The success of the stimulus hinges primarily on the country’s ability to deal with the structural reforms that we’ve pushed for over the past two years, since the change in political leadership. At the top of the list of priorities is the future of our state-owned enterprises.

I wrote in Business Report that there is much riding on the measures announced this week, and while there are rightfully concerns about the deterioration in our debt metrics, the state quite simply had to react to the unfolding economic meltdown.

BLSA organised an online conference for business leaders with trade and industry minister Ebrahim Patel on last Tuesday – before the announcement that we’re moving into a phase 4 lockdown – where he explained some of the thinking and strategy behind government’s decisions.

“These are extraordinary times,” he said, and emphasised that there was no precedent on how to deal with the pandemic. “We’ve had to develop policy responses on the hoof, learning from others and our own actions.” Science was leading SA’s response to flatten the curve and protect the economy.

He said government’s main aim is to ensure it takes “responsible steps” in reopening the economy in stages.  “Some decisions are complex in ways that are not always publicly communicated. Any decision to allow activity has complex vertical implications. Every new store that is opened increases the number of workers coming to work, consumers coming to the store, suppliers restarting their businesses, trucks delivering products. So a decision on one end has an effect right through these integrated supply chains.” Read the full article on our BLSA Hub.

The interests of the health of our people and that of the overall economy have never been so finely pitted against each other as they are in the discussion about just when and at what pace we start opening up the economy, I wrote in Business Day on Tuesday, before the announcement easing the lockdown restrictions.

There’s a lot riding on the solutions to recast the economy for much-needed growth in a post Covid-19 world. It’s a chance afforded to all 90% of the world’s nations affected by this crisis. Over the next few weeks, the economics cluster has to emerge to breathe confidence into the country as much as the ministries tied to the health crisis have done. This must be done bearing in mind that lives still matter more than commerce.