Thought Leadership

BLSA CEO’s weekly letter – 20 July

20/07/2020 | By Busiswe Mavuso

President Cyril Ramaphosa should learn to trust the citizens of the country he leads.

Being secretive – denying the public access both to the discussions on how major decisions are made and to the expert advice and modelling on which the National Command Council claims to base its decisions – instinctively triggers feelings of mistrust in return. I say “claims” because the government’s secrecy forces me to; I cannot know for sure that decisions are based on evidence and expert advice. And when a decision is likely to destroy the livelihoods of possibly millions of citizens, as the alcohol ban does, the need for transparency increases dramatically because its absence fuels damaging speculation among the public about how and why decisions are taken.

Not only should the president trust the public more, he should consult more with stakeholders, both before making a decision that affects their livelihoods and afterwards, to explain the rationale behind the decision, to present the evidence and advice received in favour of the decision. That is how a democracy should work.

Liquor and tourism industry representatives say one-million people depend on the liquor industry including about 350,000-township-based businesses. For any small or micro enterprise, even a small loss of revenue has devastating effects. Those small enterprises that managed to survive the initial ban during the hard lockdown will now suddenly have to close their doors again, probably permanently. When considering how many dependents each of those South Africans has, the consequences become terrifying. What makes the situation even more depressing is that many taverns are owned by SA’s most vulnerable group: black women. Furthermore, their businesses are inextricably linked to tourism, the one industry that, pre-Covid, promised immense growth potential, which in turn would offer sustainable livelihoods for millions of South Africa’s most vulnerable citizens.

And the tourism industry has every right to feel aggrieved by the ban. It collaborated to develop strict health and safety protocols which were approved by the department of tourism and endorsed by the World Travel and Tourism Council. A research report by a Business for SA workstream states that the industry had de-risked to the extent that it would be among the safest to operate in the country. It proposed a safe and phased reopening of the tourism sector in a way that would save existing businesses and preserve jobs, while ensuring the safety and wellbeing of guests and staff.

The National Liquor Traders Council, which represents more than 50,000 tavern and shebeen owners, is turning to the courts, demanding a once-off payment of R20,000 per business as compensation for loss of income due to the two separate bans on the sale of alcohol. It says 10,000 taverns have already closed permanently and another 12,500 are barely getting by.

Tragically, neither the president nor any relevant government ministers consulted with the liquor or tourism industries, before or after the decision was made. Industry representatives say they were given no warning, despite month-long negotiations with government. It’s difficult to fathom how government can be in talks with industry representatives yet still give no warning of the ban that will have such devastating consequences.

What’s concerning is that Charles Parry, a director at the medical Research council, says the council recommended only tighter restrictions on alcohol sales, not an outright ban. The ban has also been publicly criticised by some members of the Ministerial Advisory Committee.

Therein lies the tragedy. In an economy crippled by the pandemic, government’s responsibility is to do everything it can to keep every single business up and running but, because of their decision, many small businesses are likely to go bankrupt with devastating consequences on employees and their family members, while the fiscus generates less tax revenue and the state is burdened by an ever-increasing unemployment rate.

One can’t help suspect that the government decided to ban all alcohol sales because it was the “simplest” thing to do, rather than find alternative, less disastrous options such as allowing very limited trading hours nationally and enforcing a strict curfew. While the latter option would still result in alcohol-related hospital admissions, it would certainly reduce the number of them.

Did government even consider this? Did it commission any research into that option? We don’t know because there is no transparency. Did government balance the competing interests of society in making its decision? Did it do all it can to support the livelihoods of those affected by the decision? Unfortunately, there is no evidence that it did.

BLSA CEO's weekly - 20 July

I wrote in Business Day that in this economic war against the Covid-19 pandemic, we need the same determination the state has shown with its health response or else the liquor industry’s woes will be just a drop in the ocean. There is about R167.5-trillion of capital available from international markets and we can compete for it by securing investor confidence. For that, tough and sometimes politically unpalatable decisions on reform that the state has shied away from for the past decade have to be made.

Balance sheet

SA has approached the IMF for $4.2bn in assistance in the face of the Covid-19 crisis. It’s important to note that this loan will not come with the normal harsh conditions. However, unless SA itself implements reforms that are already on the table and have been agreed to by government, it is likely that we’ll have to apply for another IMF loan through its stand-by arrangement where we will have to adhere to stringent conditions – including implementing those very same reforms. In essence, our sovereignty will be lost, affecting all spheres of society. I wrote in the Sunday Times yesterday that it needn’t be this way if we, ourselves, take the reform decisions already on the table.

IMF

Quite simply, the restructuring of SAA into a commercially sustainable airline is too expensive for the state to fund. I’ve been clear before that not all debt is bad, as long as the borrowings are used in growth initiatives. Yet, with the state having invested about R30bn in SAA over the past decade, I think it’s rather clear that any debt raised to further fund this vanity project is bad debt, I wrote in my Business Report column.

SAA

B4SA’s economic recovery plan recommends bold, practical steps that would provide an immediate boost to our economy, protect existing jobs and deliver new ones, while establishing other factors for securing long-term growth. It tackles unemployment and proposes measures to further support the business sector generally and particularly small, medium and microenterprises. Now implementation is key, but unfortunately implementation has been the missing ingredient in SA. In order to build trust and restore confidence, it’s time for business government, labour and other social partners to work together, complement each other and implement the recovery plans. Read the full BLSA statement here.

B4SA economic recovery plan

This is a weekly newsletter from BLSA CEO Busi Mavuso.

BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.

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