Virus paves way to beat economic crisis
It is becoming increasingly clear how good “doing good” is for business. In his state of the nation address, President Cyril Ramaphosa called for a social compact to form durable and mutually beneficial partnerships between government, business, labour, civil society and communities. and they have come together to face the economic threat posed by Covid-19.
SA has many low-skilled workers in an open economy, which makes them particularly vulnerable to retrenchment in times of low domestic economic growth and high global technology advancement.
As technology advances and the pace of the skills supply cannot keep up we can expect to see a bigger wage premium for higher skills, which will worsen the existing challenge of skills and wage inequality. SA has barely scratched the surface in truly investing in its human capital, its largest contingent asset for long-term sustainable growth.
The human development index (HDI) covers three dimensions for analysis: long and healthy life, knowledge and standards of living. According to the UN Development Programme HDI report 2019, SA ranked 113th out of 189 countries, relatively unchanged over the past decade.
One economy that famously leapfrogged into growth is Singapore. Then prime minister Goh Chok Tong said in 2013 that “those of us who have benefited disproportionately from society’s investment in us owe the most to society, particularly to those who may not have had access to the same opportunities. We owe a debt to make lives better for all, and not just for ourselves”. He referred to this as a model of compassionate meritocracy.
In later research, Harvard professor Raj Chetty found that in Singapore about 14.3% of children born to parents in the bottom 20% income group were able to reach the top 20% of income earners — Singapore reports higher social mobility for low income children than Denmark and almost double that of the US.
Some of the social compact ideas that could propel SA into growth post the coronavirus include:
Small business funding and
●
re-entry support:
It is well understood that the prospects of entrepreneurial reentry are primarily influenced by prior entrepreneurial experience and the attractiveness of paid employment. In SA, most small businesses have tended to have negative prior experiences, while paid employment looks like a pipe-dream given the long-term unemployment trend. A level of support would therefore be critical in building a culture of enterprise in SA.
Employment retention and skills development support:
A skills development strategy that is proactively designed by the government,
●
labour and business to ensure that the economy’s skills needs, current and future, is more urgent now than ever before.
The finalisation of this strategy would inform a development plan that ensures retention of active labour participants as well as encouraging higher labour absorption rates for those who have become economically inactive and are not in training or education.
Resilient health
●
infrastructure to improve human development
indicators:
Health outcomes are directly related to the economic outcomes of any economy, and vice versa. Like the global financial crisis of 2008, where minimum capital standards were established for commercial banks to reduce systemic risk in the financial system, we ought to establish globally agreed minimum health standards to ensure the removal of systemic health risks that pandemics such as the coronavirus can bring.
The establishment of a solidarity fund, the proposed public health management programme, pledges by the Rupert and Oppenheimer families, the banks’ debt-relief programme and others have resulted in the formation of a new social compact that amounts to a united effort to fight the negative effects of the coronavirus.
Such social compacts will be the new sustainable way of doing business in future.