Traditionally matters of national well-being have been viewed as government’s problem which they must address.
Bryden Morton and Chris Blair / 13 April 2020 13:35
The severity of the Covid-19 pandemic has caused shockwaves around the world from a number of perspectives. Socially, the challenges and fears have been mainly focussed on health and safety as well as how to reduce the spread of the virus. Initially these concerns were undisputedly at the core of the fear and uncertainty caused by the pandemic.
As the pandemic continued to spread the rate at which new cases are increasing has forced many governments (such as South Africa) to implement a country wide lockdown as a strategy for slowing the rate at which new cases are appearing. This lockdown has stoked the fires of economic concerns as the reality of what a national lockdown entails dawned upon South Africa’s citizens. The threats include fear of failure for many small businesses, fears around whether employees will be paid and fears around wage cuts and/or partial payments to name a few. It could be argued that the economic fears are on par if not exceeding the social fears at the moment as individuals not only worry about their long term future but also their ability to feed themselves in the immediate future. This has led to numerous articles being written on the subject from a variety of viewpoints. Some articles highlight the opportunity that the lockdown has created in terms of technology maximisation and remote working arrangements.
These opportunities exist and should be investigated where possible; however, the nature of the South African economy raises more challenges than opportunities. Not all jobs are able to be performed from home/remotely eg: a machine operator on a factory floor. The challenges to the South African labour force include:
The labour-intensive nature of the South African workforce
South Africa’s already high unemployment rate
A highly skewed distribution of income
Scrutinising the above illustrates the importance of ‘bread winners’ within households as a result of the high unemployment rate and skewed distribution of income. The labour-intensive nature of the South African economy further reduces the economy’s ability to continue as normal during a time of lockdown. This has led to employees’ fearing for their livelihoods and employers’ fearing for the sustainability of their businesses. In a perfect world, we would all receive our full salaries and businesses would be able to absorb these costs until Covid-19 has passed. Unfortunately, the reality confronts businesses with the following options when deciding on how to deal with the issue of employee remuneration in the pursuit of sustainability during this time.
Employees can take annual leave
Employees can remain on full salary
Employers can apply to the Temporary Employee Relief Scheme (via the UIF)
Employers can apply for the National Disaster Benefit from the UIF
Employees can apply for UIF Special Leave if they are required to be quarantined
Employers can offer reduced salaries
This list of options of how to deal with employee remuneration during this period paints a grim picture for employees as they are impacted with an undesirable outcome in most of the options listed above. A survey performed by 21st Century revealed that at this stage the most popular method currently used is keeping employees on full pay, followed closely by asking employees to take annual leave. This result is an indication of businesses’ attempts to reduce the economic impact on employees. This is an admirable sentiment but as the time period of lockdown and/or economic slowdown increases, it becomes increasingly difficult for businesses to maintain this stance.
Traditionally matters of national well-being have been viewed as government’s problem which they must address. This has not been the case with Covid-19 as businesses and individuals have identified the seriousness of the pandemic and what it means for the global economy. Many pundits are anticipating a global recession as China and the USA, the world’s two largest economies, are at the epicentre of the pandemic. This has placed pressure on emerging markets that take the brunt of economic losses during uncertain global economic times. An example of this is that the United Nations have warned that this pandemic has the potential to eradicate nearly half of all jobs on the African continent unless Africa is assisted by the international community. This would be a truly devastating blow to the African continent and its development if this was to come to fruition.
Before the Covid-19 pandemic, South Africa’s economy and workforce were characterised by high levels of unemployment and income inequality. This will be exacerbated by the pandemic. Consumers will need to be more frugal than ever in their purchasing decisions and should save where possible in case the lockdown persists for longer than the current 3-week period. Unfortunately, South Africans have been poor at saving in the past which further emphasises the need to be thrifty with their money during this period. The future for South Africa and the global economy is at a level of uncertainty which has not been seen in many years. Consumers should brace for difficult times ahead and budget effectively if they are to weather this social and economic storm.
Bryden Morton is executive director and Chris Blair is CEO at 21st Century.
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