You’ve been stopped in your tracks

When our freedom of movement is restored, we will not be able to continue our different races from where we were stopped in our tracks, but will find ourselves in the position where we will be required to go right back to the starting line.

COVID-19 is the worst of all the recent crashes.  In stock market terms, the US Dow fell approximately 23% between January and April whilst the JSE shed approximately 22%.

It is furthermore expected that the harsh conditions will continue for at least a couple of years.

Many people underestimate the devastating effect of the current crisis.  It is anticipated that it could be on the same level as the Great Depression that started in 1929.

Although people yearn for business to be as usual, our viewpoint is that, as we go down this path, it will become clearer that this could never be.  Some analysts project a 5% contraction in our economy this year, although this may be closer to 10%.

The simple truth is that we do not know what the economic impact will really be in the long run.  While other countries in the world are also bleeding, some of them obviously have the capacity to counter the devastation.  The United States, for instance, could sink cash equal to 10% of its GDP into softening the blow, while the UK and Germany are considering about 15%.

Last night, on 21 April 2020, President Ramaphosa, in line with the above-required countermeasures, also announced various interactions amounting to approximately 10% of our GDP.

At present, the unemployment rate is approximately 38% and, after this crisis, it is expected to be a lot worse.  It is anticipated that the job losses will be great seeing that the economic contraction will be so severe.

What the crisis has done is force to the forefront the issue of the restructuring of the economy and various options that exist in this regard.  Last night, President Ramaphosa specifically touched on this issue.  What will be required in running South Africa is prioritising where we spend our money in order to achieve our objectives.  Our objectives will have to include the creation of jobs, ensuring the viability of small businesses and stopping providing finance to money-gulping state-owned enterprises, like SAA and Eskom.

Obviously, President Ramaphosa will need to cut public sector spending and trade unions will be required to become partners in the survival game or risk becoming totally irrelevant.  It is apparent from President Ramaphosa’s address last night that he is envisaging a social pact between all role players in this regard.

Never before have we as a society become so acutely aware of the gap between the rich and the poor – between those who have options and those who don’t.  The viewpoint is therefore that what is currently happening to us has the potential to spur social unrest and this issue needs to be addressed as a matter of urgency.

The viewpoint is held that, if business purely continues as in the past, it will find that it doesn’t work for the obvious reason that our consumers are battling.  A re-evaluation of the strategic objectives of each business could lead to very different operating models in the future.

There are still huge opportunities in some sectors, such as Cloud computing, internet security and the internet of things, but, even in these areas, poor investments will be punished.  As already indicated, it is anticipated that business models will also change.  Companies with structures where command and control is the preferred business module will struggle.  On the other hand, the agility and declutter of flatter management modules will be sought after.  We can expect far more people working remotely and a greater push for acquiring employees who are entrepreneurially driven.  The crisis has also provided businesses with the rare opportunity to rethink the various reasons for their existence, as well as investigate new or alternative products and/or services.

The economic repercussions will continue long after the pandemic itself has ceased.  Manufacturing and mining could pick up immediately after the lockdown but various industries, like tourism, hospitality and gambling, won’t come back quickly.  It is obvious that serious damage has been done to the demand side of the economy as both enterprise and household balance sheets have been dealt a severe blow.  It can’t but take some time to fix.

After having analysed the new environment within which it currently operates, as well as a consideration of its strengths and weaknesses, SALLR identified its strategic objectives during and after this crisis.  Its main strategic objective during this crisis is to provide its services and/or products to the SALLR community free of charge.  How many other organisations can say this?

Further strategic objectives include a reassessment of its current products and/or services, a consideration of alternative products and/or services and routes to market.  Many of these changes have already been implemented and we are sure that you receive the benefits via our emails, Facebook (facebook.com/labourlawreports/) and the SALLR website (www.sallr.co.za).

Another major push from the SALLR team is to develop a unique electronic platform that could be utilised if either the lockdown conditions prohibit the actual conducting of the seminars at the various physical venues during August this year or, alternatively, the risk associated with conducting such seminars is simply too high.  The SALLR team cannot wait to shortly introduce you to a virtual tour of this new environment.