Tough choice for state: economy or life itself
The pressure on President Cyril Ramaphosa and his key economic ministers must be unbearable. They face a decision of keeping people as safe as possible during a raging global pandemic that is spreading like wildfire and hitting economies, while trying to balance the future of SA. Whatever direction is taken, there are clear choices that must be made, particularly with mounting arguments that SA’s 21-day lockdown is insufficient and must be extended beyond April 16.
Extending the lockdown, and by extension the economic paralysis that it entails, will have severe repercussions for SA’s 57-million people and the country’s ability to bounce back if and when the pandemic is brought under control. Easing restrictions when there is more to be done risks swamping medical facilities and morgues, creating panic and social disintegration as people lose faith in the government and its structures.
Consider the thinking of the Minerals Council SA. It says that mines have to go back to work at the end of the 21-day lockdown, albeit on a limited basis, with all due precautions to protect employees in place, or the industry will face permanent damage. Some companies are already operating on a limited basis, but the industry wants more. The industry employs 450,000 people who support large family networks, many in impoverished rural areas.
How does this government balance pragmatism in allowing a return to work with its responsibilities to broader society in controlling the pandemic? It’s almost impossible. Whatever it decides, it will have fierce critics.
PAY SACRIFICE
The Coronavirus pandemic is an opportunity for some listed property executives to show humility and take pay cuts so staff can be paid and their jobs saved as the economic lockdown persists. The R470bn listed real estate sector is going through its biggest slump yet. Some CEOs remain well paid despite slumps in their share prices and dividend growth. For more than two years, remuneration votes at AGMs of various property companies have shown that executive pay needs to be scrutinised more deeply.
Property-fund manager Ian Anderson said in February there had always been issues with executive remuneration and incentivisation of management teams, but remuneration had become a bigger issue as governance shortcomings were exposed, particularly in listed property. These shortcomings included not correctly disclosing how executives were rewarded in related party transactions and deal-making fees.
Historically, management teams in the listed property sector were heavily incentivised, be it through salaries or loans to buy company shares. A big part of their net worth has been tied to share prices of companies they lead. With a sharp fall in prices since the end of 2017, much of that wealth was wiped out for many CEOs. Anderson said any “negative” wealth, where the value of the shares they own is lower than the outstanding loans, will ultimately be borne by shareholders.
Some property companies could take the lead from food and clothing retailer Woolworths, which said on Monday that its senior management would take a salary cut over the next three months to provide additional support for its employees.