Though exclusion and inequality are entrenched and endemic, the coronavirus outbreak and lockdowns have laid bare social and economic issues world leaders cannot simply keep papering over. However, the transformation of our unequal societies is just one aspect of the required global reset. There are other tectonic forces at play — globalisation, interdependency and interconnectivity — that have to be reshaped and reimagined if we are to find new, functional and inclusive ways of doing business, interacting and connecting in a post-Covid world.
During some of our recent business engagements, some have declared this futuristic thinking as being “a bit over the top”. Most would rather put their money on the resilience of old and established systems and the tenacity of the human spirit as they wait for things to “get back to normal”. But it is our contention that we are not stepping “back to the old” or even into a “new normal”. Rather, the world we see is radically different and offers us the chance to examine how we do business, live, shop, entertain ourselves, raise our children and think about the world — and to change.
To do this, we must start by dismantling the aspects of our social architecture that are just not serving humanity as a whole.
This means being open and honest about the role of capitalism in widening inequalities and how we can put human welfare at the top of the agenda. South Africa’s response to the coronavirus outbreak, for example, offers some idea of what a version of universal income might look like — from the six-month temporary grant to a special Covid-19 distress grant, billions for the protection of jobs and income support for workers. This has been an extraordinary and bold policy step in a fragile environment, one that demonstrates that change is not only possible but can also meet widespread social agreement.
Of course, South Africa is hamstrung in its fiscal response to Covid-19, having stepped into the crisis battered by a decade of corruption and widespread wasting of resources. Coming into 2020, the headline numbers were far from rosy, with expectations of anaemic growth of just 0.8% for the South African economy — way below population growth, meaning per capita incomes were set to keep going backwards. The world economy, meanwhile, was looking at growth of 3% in 2020.
Now, thanks to the effects of Covid-19, the world economy is likely to shrink by at least 5% and South Africa can expect to fall 7%, based on the Reserve Bank’s estimates. Economists, polled for their views, put this number much higher: in the double digits. This is the sharpest decline the South African economy would have on record.
These projections have the potential to be much worse based on how the virus continues to behave throughout the remainder of the year. The second half of 2020 will lean heavily on stimulus measures injected into the world economy from the likes of Japan, at 21.1% of GDP, the US (13%), Germany (10.7%), the UK (5%) and China (3.8%).
South Africa’s R500bn stimulus package represents about 10% of our GDP. The stimulus measures we are seeing under Covid-19 absolutely tower over the quantitative easing that came into play after the 2008 global financial crisis. Furthermore, the interventions are fiscal in nature, offering social relief through benefits and employment support, business relief and infrastructure programmes, along with huge monetary policy relief starting with a world of low or no interest rates.
How these measures help lift economies out of the pandemic-induced recession will in large part determine how the future looks on a country-by-country basis. While many hope stimulus inflows will lead to a V-shaped recovery, a number of factors could see these hopes dashed in favour of a U-shaped recovery (a lingering recession), L-shaped (stagnant) or even W-shaped (phases of stop-start recession and recovery). All these scenarios point to a slow thawing of the global economy, and that will have impacts and implications — in places profound — on important sectors, different parts of society and the shape and nature of relationships and ties inside of and across borders.
One thing that is clear is that no matter how long we linger in recession, we cannot wish for a recovery “back to the same”, and that the implications for business, industry, governments and society are likely to be pronounced. We are at a collective turning point that has the substance and attributes of the Great Depression, the world wars, the falling of the iron curtain, or the opening of China to a new world order.
It is for this reason that we must take this opportunity to rethink how the future of travel might look, or the world of work, or investments into commercial property. While each sector has a high-road and a low-road scenario to consider, what seems inevitable is that some form of change is on the cards: not only out of necessity but because society needs to re-establish the ground rules.
As just a taste of that reimagined world, consider the form and nature of travel in future. We are already seeing slow recoveries in domestic travel around the world, but we can expect international travel to be a more uphill battle as additional issues such as quarantine periods and costs come into play. There is a reason a country such as Spain opening its borders, with no strings attached, to tourists from Britain — a country that is itself imposing a compulsory 14-day quarantine on arrivals — is newsworthy. Similarly, plans by the South Pacific nation of Fiji to join the New Zealand-Australia “travel bubble” is also important, as it points to the regionalisation of travel and the pressing need facing tourism-driven economies to restart this crucial industry. This has implications for jobs, supply chains, travel corridors and business footprints.
There are also deeper issues at play in the travel sector, which will change the face of this industry forever. Security is a prime issue that will potentially drive up ticket prices and, in the process, dent the enthusiasm and resources of some people to travel. Travel queues invariably will be longer, checks extensive and isolation periods part of our new-look overseas travel experience. Covid-19 concerns are, and will remain, an in-flight companion for some time to come, which could spark greater interest in domestic and regional travel. This, in turn, will open up immense opportunities for smaller players and less developed local markets.
Of course, travel is not the only industry facing substantial changes. The commercial property sector is likely to be heavily affected if the work-from-home trend continues after the pandemic, in the process shifting the focus from magnificent head offices to shared working and collaboration spaces where employees of the future dip in and dip out to attend meetings and conferences. The day-to-day work will continue at home. Will this see platforms such as Zoom and Microsoft Teams benefiting at the expense of listed real estate companies or property administrators? If this is the new work format, barriers to entry might suddenly be lower in some industries where green screen replaces square metreage, and this paves a way for a new population of small businesses built on agility rather than scale. The near-term pain for some could be the path to a healthier, more competitive and more inclusive economy.
In a recent trading update from South African shopping centre property firm Hyprop, we also get a sense of what the future might look like as our shopping mall culture takes a back seat to buying local and supporting smaller, neighbourhood shops. This has the potential for a twofold impact, firstly causing a glut of retail space to come onto the market, thereby driving down costs per square metre, as well as how we shop in future. That, of course, sparks a whole new debate about the future of e-commerce, delivery apps and digital payments.
When we start drawing all the strands together and imagine how the ripple effect of change is likely to reshape the world as we know it, we begin to formulate a clear idea about where we are going. We begin to see that there is nothing normal about this new. If we follow the signs, we are heading towards a more digitally enabled but less globalised world, a more regionalised tomorrow with opportunity for local manufacturing and supply chains. What we cannot lose sight of is how we reshape our societies around these mega shifts to ensure we create a more inclusive tomorrow.
This article by Cannon Asset Managers CE Dr Adrian Saville and The Strategists CEO Abdullah Verachia was first published on BusinessLive.