How is the crisis impacting the South African economy and how can business leaders be part of the solution to the coronavirus crisis? Rajesh Chandy, Academic Director of the Wheeler Institute for Business and Development was joined in conversation with Nick Binedell, Founding Director and Sasol Chair of Strategic Management of the Gordon Institute of Business Science, University of Pretoria, to discuss how corporate South Africa has stepped up to the mark to support the country’s economy.
- NGOs, civil society and business have worked closely to support the South African economy during the pandemic;
- Binedell thinks the pandemic could be a test of whether the country can become a nation, where business and government work together as part of a moral partnership, enabling business to become part of the fabric of the country and play a role reducing inequality;
- Coming out of the crisis, there is an opportunity to think about a new form of social contract that redesigns the fundamentals of the economy, reduces inequality and makes society fairer;
- Cyril Ramaphosa, President of South Africa, has shown himself to be a decisive leader who has framed the problem early, generating support for his policies; but much of the funding for relief efforts has come from the private sector as the government does not have the resources for large fiscal support schemes;
- CEOs, leaders and executives need to show they understand the difficulties on the front line, engage with employees and react emotionally to demonstrate they face similar challenges to those everyone is facing.
As the national government has been unable to provide support to the required scale, corporations have had to fill the void
South Africa’s economy was already in a difficult situation before the lockdown, with great inequalities and a very high unemployment rate. Despite this, President Ramaphosa chose an emphatic approach to put human life over economic life. However, the difficulty in South Africa has been execution; the army and police have not been trained for this type of situation, while South Africans have a history of defiance, which has limited the effectiveness of the lockdown.
Binedell states that the government because large corporations are the driver of the South African economy, rather than SMEs, it has been easier to keep economic activity going. Businesses and government have cooperated, with the creation of a solidarity fund with hundreds of millions of dollars being raised to keep businesses afloat. Binedell himself is involved with a group called the Public-Private Growth initiative, which has given guidance to government officials on the regulatory environment for essential services and how to open up the economy with a risk-adjusted approach. Businesses have had to be extremely generous to provide the social support required because the government has very little resources to extend fiscal support. While the government has been able to extend the social grant, this is a limited survival grant, businesses have contributed funds to assist.
The Coronavirus could be an opportunity to rewrite the social contract, restructure the economy to reduce inequality and make society fairer
According to Binedell, some companies have been generous in realising that such wide inequality across the country is immoral. While the immediate debate is centred around short-term survival measures, there has to be consideration given to how the economy can be restructured in the future to make it fairer, more inclusive and reduce inequality. Binedell thinks that “it is not just about restarting the old engine… can we redesign some of the fundamentals” after the pandemic. The debate, according to Binedell, is about the role of business and whether the existing financial capitalism, shareholder model, which has been the dominant logic in South Africa, shifts to a more developmental form of capitalism where business owns and embeds itself in the life of the nation.
The structure of the South African economy has emerged over decades, so Binedell does not think that fundamental restructuring can occur overnight. Similarly, any moves toward more progressive measures will lead to businesses cutting investment and feeling threatened, while the people want the government to take action and voters support more progressive measures. Therefore, the government has to create a common consensus, as well as be pragmatic and humanitarian.
Binedell highlights the central role scientists and medical officials have played shaping the response as an indication that the government is taking sensible steps forwards. President Cyril Ramaphosa has been decisive and framed the issue early on, rather than letting the crisis emerge and grow. His firmness and clarity have won him support across the political spectrum, especially in contrast to his predecessor Mbeki whose denialist approach to AIDs worsened the situation.
There is an issue feeding the migrant population in South Africa, who are not registered and therefore do not receive support from the state. So, Binedell has raised funds to support efforts that help feed these people, with the result they have produced a video of 5,000 people lining up in a disciplined way to receive 6,000 parcels within a 40,000 person informal settlement, like a favela, with total discipline. The government’s attitude is changing, as it is a humanitarian issue to ensure they are fed.
There are three elements that will enable leaders to cope with this crisis, according to Binedell. They need to connect emotionally with the issues and make them tangible and real. Secondly, leaders need to engage with people directly and get a sense of how they are responding, which helps motivate people. Thirdly, there is an intellectual challenge of defining the issues and being able to articulate the challenge across an organisation to keep everyone informed. Personalised communication can show people you understand their situation and that you have the same vulnerability.
Assumptions that we all hold about how life is, what work is and how our economies and companies should function have all been suspended
The business school has had to find the most accessible form of technology to provide learning for all of its students, not necessarily the best technology for the minority, while remote working is a big challenge for leaders as the face-to-face element is gone. There are a lot of people saying it going to get back to normal, as well as people saying it will never be the same again when actually everyone just has to live moment by moment.
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Nick Binedell’s conversation with Rajesh Chandy is part of the Wheeler Institute’s COVID-19 series – bringing together the expertise and experience of our extended community to understand, illuminate and offer solutions to the challenges created by COVID-19. Our differentiating factor is the role of business in addressing these challenges, with a focus on the implications and actions for those in developing countries.
If you’re interested in following the Wheeler Institute COVID-19 series, check out our previous episode ‘How the pandemic has accelerated changes to https://wheelerblog.london.edu/how-the-pandemic-has-accelerated-changes-to-consumption-patterns-and-employment-in-china/consumption patterns and employment in China‘, with Juliet Zhu.
Rajesh Chandy is the Academic Director of the Wheeler Institute for Business and Development. He is Professor of Marketing at London Business School, holding the Tony and Maureen Wheeler Chair in Entrepreneurship.
Nick Binedell is the Founding Director and Sasol Chair of Strategic Management of the Gordon Institute of Business Science, a Business School situated in Illovo, Johannesburg and established in January 2000, by the University of Pretoria.