What life will be like after the lockdown
Businesses with highquality management to prioritise the right costs to cut, or make or grasp new opportunities presented by the change in behaviour that Covid-19 brings, will successfully survive the devastating financial impact of the pandemic.
In spite of the government’s
R500bn stimulus, many companies will collapse, leaving many unemployed, in debt and in despair.
The annual report of tax statistics, released before the Covid-19 outbreak, showed that out of the 814,151 companies assessed as at the end of August 2019 for tax year 2017/2018, 24.3% had positive taxable income, with 48.3% having had taxable income equal to zero and the remaining 27.4% reporting an assessed loss.
The South African Revenue Service said that companies submitting returns fell to 36.9%, or just over 2-million, for the 2018/2019 fiscal year, partly due to many being considered “inactive or dormant”, because of the poor pre-pandemic economy.
It is going to be crucial that the government’s financial support for struggling businesses gets to them on time, based on merit, and not politics, race or corruption. If the R500bn stimulus fails on execution and does not reach struggling companies on time, or the money is lost through corruption, the rate of company failures will balloon.
There are many ways for businesses to Covid-proof themselves. They will have to adapt quickly, change operation systems and processes, innovate and, crucially, decide on the right costs to trim and which to increase. Current operating models, risk matrices and performance targets are in many cases obsolete.
Effective, innovative and imaginative managements will carry companies through the crisis; poor management will accelerate failure. Covid-19 will change the way people work, behave and shop. People will become more conscious of their health, so spending on health, wellness and hygiene is likely to increase. People are also likely to spend less, focusing on the basics and seeking cheaper alternatives. Brand loyalty will be disrupted. This means businesses will have to improve safety measures and look at their pricing and customer care.
Good corporate behaviour will be crucial.
Companies will have to be honest with shareholders, customers, lenders, suppliers and employees. If businesses need to be rightsized, costs need to be cut or lending terms need to be renegotiated, honesty, transparency and fairness are important. That is the only way to retain trust in a world where people are going to be instinctively distrustful, fearful and cautious.
Covid-19 will accelerate the expansion of the digital economy. Productive costs would be investing in appropriate technology, marketing on digital platforms and new growth areas. Companies will have to invest in employee wellness, as the fear, anxiety and powerlessness associated with Covid-19 and cabin fever cause symptoms similar to post-traumatic stress that could undermine productivity.
Companies will have to shed noncore businesses, archaic working methods and ostentatious offices. Companies may have to introduce wage cuts. When this is done it should be implemented fairly, with not only ordinary staff taking cuts, but also boards and management.
Managements should lead by example by taking pay cuts. Paying excessive dividends is insensitive.
While consolidating, companies will have to prioritise growth and make changes to win new opportunities in future markets.
The new needs, ranging from working from home, to fewer face-to-face interactive manufacturing and services, to online education, bring opportunities for new businesses.
There will be a backlash against China, with many companies already diversifying supply chains away from it. This provides opportunities for SA and our companies to become the alternative supply chain for the world.
There will be a backlash against China. This provides opportunities for SA