Crucial co-operation against a COMMON ENEMY

The impact of Covid-19 on the economy will be severe, writes Nigel Ward, President of the Durban Chamber of Commerce And Industry, and reopening the economy will take some doing

Firstly, the Durban Chamber of Commerce and Industry applauds President Cyril Ramaphosa, his cabinet and the government for the manner in which they have dealt with this unprecedented crisis and the bold steps taken to combat the Covid-19 pandemic. All leaders, in both the private and public sector, have acknowledged that dealing with the Covid-19 outbreak has been an unenviable task, and we have to recognise the leadership and difficult decisions that have been taken in order to secure the country’s socio-economic future.

The proactive action taken has gone a long way in preventing the crippling impact that large scale loss of life would have had on our society and economy, and the socio-economic strain it would have put on critical infrastructure in the healthcare sector.

*IMPACT OF COVID-19

The effects of the pandemic on the national economy will be unavoidably severe. Insights from the Organisation for Economic Co-operation and Development (OECD) outlined that as the disease spreads across the world, global gross domestic product (GDP) growth could plummet this year to as low as 1,5%, almost half the 2,9% forecasted prior to the outbreak. South Africa is highly dependent on the global market in terms of trade of goods and services; hence, we believe these losses will indeed find their way into South Africa’s bottom line. In fact, Minister of Finance, Tito Mboweni, has indicated that he expects the South African economy to contract as much as 6,4% with the budget deficit swelling to more than 10% of GDP.

The Durban Chamber is particularly concerned about the socio-economic impacts of the Covid-19 pandemic and the lockdown which has led to significant losses for KZN’s provincial economy. Several critical sectors have been impacted as a result of the Covid-19 pandemic.

Tourism: The pandemic has brought many businesses in the tourism sector to a complete halt, translating into huge losses in terms of revenue, coinciding, as it does, with a traditionally busy Easter season. This threatens job security on a large scale. Travel bans and the cancellation of events have contributed to further losses for allied businesses.

An extended lockdown will impact both our manufacturing and transport/ logistics sectors adversely, as these sectors are interdependent

Manufacturing, Transport And Logistics: Given the inherent complexity of regional and global supply and value chains, an extended lockdown will impact both our manufacturing and transport/logistics sectors adversely, as these sectors are interdependent. These losses will weaken our local economy further. Manufacturing and the transport sector contribute significantly to Durban’s GDP. A recent article published by the World Economic Forum outlined that the emergence of Covid-19 is accelerating the change of global value delivery models with unprecedented consequences for both manufacturers and supply chains.

Small Business: SMMEs, spaza shops and informal businesses will be the worst affected given that many are reliant on monthly income to sustain operations, with no access to additional capital to ride out the current outbreak. Notwithstanding the economic stimulus package put together by the government, this tough social reality will bring more pressure to bear on the national purse.

Currently, the Durban Chamber is not aware of any businesses shutting down as a direct result of Covid-19 yet, but the possibilities remain high. A number of our members in the eventing and hospitality sectors have already begun restructuring processes and jobs have already been shed, and we expect many more to be lost in 2020. According to The Durban EDGE, high skilled labour will be better able to adapt to and absorb the shortto medium-term shocks. However, the impact will be worse for employees who cannot work from home and most likely to be low skilled.

While Covid-19 has already impacted businesses across most sectors, the Durban Chamber believes the full economic impact of Covid-19 will only become clear post-Covid-19.

*REOPENING THE ECONOMY

The Durban Chamber supports the government’s “risk-adjusted approach” to reopening the economy. While our businesses are suffering tremendous economic losses as a result of the lockdown, we acknowledge the science and respect the statistics that indicate that a resurgence of infections in an unplanned return to business as usual could cost the country even more. The value of human life must be prioritised above all else. In fact, this is in line with eThekwini’s goal to be the most caring and liveable city by 2030. Reopening the economy during this phase of the pandemic is a complex process with different sectors having different requirements and facing different pressures. There is a delicate balancing act between preserving lives and preserving livelihoods.

Managing this process will be critical as we have to monitor our daily rate of infection and balance that against the different requirements and needs of each industry sector. The Durban Chamber, on behalf of the business community, is engaging with the details of this plan that has been provided in order to determine how organised business can work with the government to ensure the successful implementation of a smooth transition back into economic activity and productivity that will help secure social stability. The one positive that has come out of this crisis is that it has proven that the public and private sectors can work together quickly and with a singular vision in the best interests of our country. We hope this trend continues well after this crisis has ended.

*ECONOMIC STIMULUS PACKAGE

The Covid-19 pandemic and the resultant lockdown have placed South Africa’s economy under tremendous pressure. Our economy and businesses will not be immune to the adverse exogenous and endogenous effects of Covid-19. As a result, the Durban Chamber welcomes the government’s R500-billion socio-economic relief package to fight the Covid-19 pandemic. We are optimistic that this relief will aid our ailing economy. We applaud the R50-billion allocated to social grants, which will be a significant help to the most vulnerable in our local communities, and we urge organised business to supplement this through their own or jointly co-ordinated corporate social responsibility programmes.

The Durban Chamber acknowledges that this funding is not new money and has been reallocated and redistributed from the existing national budget. The Durban Chamber has the following concerns:

• Reprioritised funding from other areas will alleviate the immediate stress but will mean that critical infrastructure and other development activities will be placed on hold.

• Overall, established businesses will benefit. We remain concerned about how funding will reach the informal sector.

• The R200-billion in loan guarantees will not go directly into the businesses but will be administered by the banks. Sadly, the lending practices of most banks and financial institutions have not transformed over the years or been adjusted to match the social reality of South Africa which has a staggering number of informal businesses operating outside the formal sector, very profitably in many cases. We are anxious to hear how the banks will cater to small businesses and microbusinesses that desperately need access to this relief offered by the government. We will appreciate some detail on how the credit committees of the banks will unlock the R200-billion, broaden their horizons and restructure their lending mechanisms as well as culture and approach to financing micro-businesses.

• Existing defaults and arrears that happened for many businesses in the economic crisis that preceded Covid-19 mean that certain businesses will be excluded from accessing the funding.

• Those who will benefit from the R70-billion allocated to tax relief are those who are currently tax compliant. Those who need help are most likely those who are in trouble and presently non-compliant. There is an opportunity here to look at the big picture and structure relief in a way that will grow and encourage future compliance.

*UNETHICAL BUSINESS PRACTICES AND PRICE GOUGING DURING THE COVID-19 PANDEMIC

The Durban Chamber is aware that, during the Covid-19 pandemic and national lockdown, there have been increased reports and allegations about price gouging and other unethical business practices. The Durban Chamber urges all businesses to pledge to maintain food and commodity prices at fixed and affordable levels as the national lockdown continues to have a significant impact on our local, provincial and national economies as well as the global economy. We encourage the local business community to work with the government to maintain a stable pricing regime. Both direct and indirect suppliers of goods and services are bound by the Consumer Protection Act, and it is essential that businesses supply reliable, safe and quality goods and services to avoid adverse consequences. Price gouging is exploitative and unethical.

The Covid-19 outbreak is an unprecedented national emergency and the business community – as a critical stakeholder and role player in South African society – needs to play its part in working with the government to support society at large. The government has taken measures to ensure the health and safety of the populace, and it is up to business to support government structures to help us all make it through this pandemic.

The one positive that has come out of this crisis is that it has proven that the public and private sectors can work together quickly and with a singular vision in the best interests of our country

The Durban Chamber applauds the work done so far by the KwaZuluNatal Premier’s Office, the KwaZulu-Natal Department of Economic Development, Tourism and Environmental Affairs, Health, Labour, to name a few, to root out price gouging, unethical business practices and non-compliance with the lockdown regulations and Disaster Management Act.

We warn offending businesses to consider not only the financial repercussions of legal action being brought to bear on them, but the fact that there will also definitely be extended reputational damage sustained by noncomplying companies, their owners and senior employees. The Durban Chamber also recommends to all businesses that this is the ideal time to review all the applicable laws and current emergency regulations, re-evaluate current pricing strategies and practices, and develop risk management plans and procedures for dealing with enforcement agencies and the media.

The Durban Chamber remains committed to promoting ethical business practice and integrity within its membership and the business community at large. We encourage all members to abide by the Durban Chamber Members’ Code of Conduct and Members’ Code of Ethics. Together we can survive the national lockdown and the Covid-19 pandemic if we all remain committed to ethical behaviour, compliance with the rule of law and compassion for fellow citizens.

*CONCLUSION

The Durban Chamber calls on our members, the business community, chamber movement and labour movement to intensify messaging to employees and members regarding the need to adhere to lockdown regulations in order for us to collectively make progress in flattening the curve. The more we observe the regulations at community level, while we are in lockdown, the fewer infections and deaths we will see and therefore the sooner we can all return to full productivity in the business arena. Our country is depending on us all to do the right things that will save jobs and reinvigorate the economy.