South Africa’s most notable business export, Elon Musk, recently told the New York Times that the economy must reopen. Musk said that the vulnerable must be protected, but those who don’t fall into that bracket should go to work. Martin Kingston, head of the Economic Work Group at Business for South Africa (B4SA), “absolutely agrees” with the Tesla and SpaceX founder. But, Kingston says, the people of South Africa need to play ball first. In this interview with BizNews founder Alec Hogg, Kingston explains the dire need for South Africans to be responsible. Stating that “guidelines are only as good as the people who observe and implement them,” and that both businesses and the public need to work hand-in-hand in taking the necessary precautions. His advice: when it comes to wearing masks and being responsible, we are actually looking after our neighbours and are not just looking after ourselves. Kingston also adds his insight into the need for a public-private partnership. It is this twofold message that is crucial in building the way forward after over 1.5 million jobs have been lost, largely due to the Covid-19 pandemic. – Nadim Nyker
Covid-19 models and the economy
Alec Hogg: Martin Kingston is the head of the Economic Work Group at Business for South Africa. Lovely talking with you again, Martin. You brought out a statement today on the way that you guys are seeing the Covid-19 crisis. There’s quite a lot of controversy around statistics. We have the guys from PANDA. And we have others who are advising the government at loggerheads with each other. Who does your statistical modelling at Business for South Africa?
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Martin Kingston: Well, we’ve used a lot of people, but the person who’s leading this is Barry Childs, who used to be the chairman of the Actuarial Society of South Africa.
And we integrate a number of models. And I have to say, sitting as I do in the war room, the Solidarity Fund, we see even more models. And you’re right, there are as many models as there are epidemiologists and statisticians as far as I’m concerned. But I feel the one that we have now seen and been shown today is conservative and responsible and gives us the sort of information that we require to be able to give advice to businesses and to input on our advice, indeed to other central stakeholders.
Is it dynamic? I think that’s the big issue that PANDA were saying, that there was one scenario that has not changed dramatically, but some of the models haven’t.
No, it absolutely is completely dynamic. It’s not just dynamic on a national basis, but on a provincial basis as well. And it integrates also with aspects of the latest input from the health care systems to the extent that that information is available.
Of course, what would be the best possible option would be if all information was openly shared between everybody so that we could form a view.
What is for sure is that we know that we’re now well into the surge. We anticipate the peak being in late August, the beginning of September. I think that’s consistent with government’s views.
We met with government and the minister of health at Nedlac, in fact, on Friday of last week, and those views are pretty consistent. There were four to six weeks away from the peak. The surge is going to endure probably into the fourth quarter before it starts to drop off over time. And that’s on the assumption there isn’t a further surge or surges as we’re seeing in other parts of the world.
Are your models anticipating that it accelerates from this level?
No, we think that probably we’re going to accelerate somewhat from where we are now. I mean, this level currently. Yes, it does. I don’t have the exact figures in terms of levels of infection and mortality. Of course, we know the mortality is running two to three weeks behind the levels of infection.
And those are only the levels of infection that we know about.
There are some people who are suggesting that in various countries, what we’re announcing could be only 10 percent of the actual infection rate in any given country, regardless of the level of testing that has taken place.
So what we’re announcing is only based upon testing that is in the public domain rather than the level of infection. Then, of course, you get a debate about symptomatic and asymptomatic. I think what is clear is that there’s going to be many thousands, probably tens of thousands of people who regrettably, who will die, the vast majority of those with comorbidities, as we know. And there’s going to be an equally significant number of people who are going to be impacted upon as a consequence of the economic hardship that is now being suffered.
Let’s move to that side of it, because this is where Business for South Africa has focused its attention. There was a wonderful interview over the weekend with Elon Musk, probably our best known export in the business community of South Africa, where The New York Times asked him what he thought of Covid-19. And he said, you must absolutely protect people who are vulnerable. People who are not, they should be allowed to go back to work and to get things going again, because the economy clearly in his in his instance needs to be rolling once more. How you are you viewing that?
Well, we absolutely agree with Elon. I have to say that I hadn’t heard that before.
There’s no doubt that employers have got a responsibility to those who are vulnerable to those over a certain age. Fortunately, that, I think excludes you and I. But us apart those over a certain age and those of comorbidities, we know that the highest proportion of those who are vulnerable are those with comorbidities, regardless indeed of age, and they need to be appropriately protected, work from home rather than in the office.
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The rest need to, to the extent that they have to go to work to serve, but observe the necessary behavioural protocols that we haven’t seen adequately, in my opinion, in South Africa, not only in the workplace. And we have published as Business for South Africa, comprehensive guidelines in terms of workplace protocols, but also in the transportation system from home to work, and most importantly, of course, in the communities within which we live.
And I think that is now a common cause that communities spread is where the virus transmission takes place most effectively. Unfortunately, it is most difficult to control and issues such as social distancing and sanitation and of course, wearing face masks should be observed everywhere from home to indeed the workplace.
Are there any particular guidelines that you’re offering the business community about this getting back to work?
Yes, absolutely. We have published comprehensive guidelines there are on the Business for South Africa website. Easily accessible. We need to recognise that we can’t just have them standardised that they need to be tailored for particular sectors, for particular locations, for particular types of industries, depending upon size. But absolutely.
We’ve spent some three months publishing those guidelines, ensuring that they’re fit for purpose and working with behavioural scientists to ensure that they’re appropriate for the circumstances concerned. But as you and I know, Alec, guidelines are only as good as the people who observe and implement them.
Unfortunately, and often as not, they are not recognised and then not implemented. I’m not talking about in the workplace, but in our day to day existence that we only need to turn on the television to see how few people are actually observing the necessary requirements of social distancing and wearing face masks.
Covid-19 wake-up calls
Why?
I actually think that they believe that the virus isn’t going to infect them, in fact, the virus is going to infect most of us. Hopefully most of us are going to be asymptomatic and those who are not going to be only mildly infected.
It’s only when it comes knocking at our door and there are people that we know and careful and love who are severely affected and indeed may even die, that people get a wakeup call.
I think that’s most unfortunate. We need to anticipate that. We think that we can significantly reduce the strain on the hospital system, on the health care system more broadly if people do observe the need for behaviour change. And it is, in fact, taking the pressure off the frontline of defence, the health care system that’s going to ensure that as many people as possible recover from the virus to the extent that they’re badly infected.
I’ve been talking a lot with Discovery over the past few months, and what’s been really interesting is to see how the infections have moved away from the workplace to community. So in other words, it almost looks like workplaces or businesses are now taking more responsibility and you’re less likely to get infected by Covid-19 if you go yo work than if you go to your local supermarket or engage in your community, are you getting similar feedback from your members?
Yeah, I think that’s true, although for the most part our members and serve for example, they would include retailers, shopping centres, grocers. I was speaking to Professor Salim Abdool Karim the other day and he’s very concerned about shopping malls and retailers. But the problem is that they can only effect so much behavioural change on the part of their customers.
The customers themselves also need to observe them. If people are not going to distance…it’s difficult to enforce that behaviour. By the way, the same thing applies to public places where people congregate, places of worship.
Being one such example, funerals being another. We know that there is a particularly significant level of transmission that’s taking place in both of those cases where people have not afforded others and are not affording themselves, afforded others the necessary protection, which is, of course, what this is about. We are actually looking after our neighbours, we are not just looking after ourselves.
Business for SA: Economy will take two years to recover
As far as the economy is concerned. There are some dire costs about employment or unemployment rather. I see you’ve done some ratios on how much economic contraction impacts employment.
Yes.
So we actually are now of the view that the contraction that we were forecasting originally of about 10 percent this year is probably correct and that we anticipate up to a million and a half jobs being lost.
That’s really in the formal sector. We think that a million jobs potentially in the formal sector and potentially as many, again, in the informal sector have already been forfeited. We’ve got certain segments or sectors of the economy that are particularly at risk now. So SMMEs, obviously hospitality, alcohol-related industry, all very much at risk.
We don’t know that they can withstand the next three months if we’re going to be gone over the next three months. And that could be a very significant number of incremental jobs that are a risk. And then, of course, you’ve got to weigh against that the ability for the state to be able to support a very large number of additional people by way of grants and social support. I know that there’s much discussion about the basic income grant.
We’ve got to work out whether or got we’ve got the systems let alone the financial wherewithal, be able to underwrite those types of commitments as a country.
1.5m jobs to disappear now
Reading through what the president had to say about improving employment in construction. He was talking about 300, 000 jobs being created. If we’re losing one and a half million, that’s kind of not enough.
You’re absolutely right. Well, of course, in the presidential working committee on jobs, which came out of the job summit, we committed to 300 000 jobs a year that could be created. But that, of course, was pre-Covid, without taking into consideration the fact that we were going into a recession and we were gonna be downgraded to junk status.
I think Covid makes it extremely difficult to see how we can generate hundreds of thousands of jobs in the short-term. The construction industry is probably an exception because there is no doubt that there is significant pipeline of sustainable, viable infrastructure projects, not large scale and actually smaller scale infrastructure projects across the network industries, whether it’s road or whether it’s housing, water projects and the like, that can be implemented in relatively short order, which can be funded by the private sector.
We, of course, have a construction industry that has been decimated over the last couple of years where the majority of the large companies have gone to the war, where this provides very ready opportunities not only for them, but for their workforces.
But it takes time to remobilise, as you and I know, and it’s critically important that we actually select a smaller number of projects that can be successfully implemented than a large number of projects, which actually are trophy projects, which are not going to stand the test of time where we’re going to see significant cost overruns which are not going to be implemented on time or indeed to specification, as has been the case, for example, with Medupi and proceeding as a country, we actually cannot afford that.
Now, what I found in their work was being done by the Investment in Infrastructure Office within the presidency, overseen by Dr Ramokgopa is a much more prudent, responsible approach where the private sector has been heavily involved through a programme called Tam Dev, particularly driven by the NBI and by CISSA, where we’ve been seconding senior experienced retired professionals who can lend their expertise and insights to help indeed with the design, development and implementation of infrastructure projects. And I think that there’s no doubt that it’s a significant foundation for economic growth on an exclusive basis. It is a major employer, as you say, of resources. But we need to be conservative and cautious about how we go about it.
How close is that relationship now between government and the private sector, the so-called public-private partnerships?
My own assessment is that there is a much closer level of cooperation, collaboration, careful listening that has taken place over the last few months than had preceded it for many, many years. I think that trust is being built. It depends on the sector, depends on the discipline.
Certainly in the context of infrastructure projects, it is, I think, broadly acknowledged that public-private partnerships is the only way we can proceed, the only way that we can raise the requisite capital that is required, given the huge strains on the fiscus that are going to emerge over the next three years, and not only by virtue of the fact that our tax revenues are going to have declined substantially as a consequence of Covid-19 and indeed broader macro-economic factors, but also that as a country, we’ve been incapable of tightening our belt in terms of keeping costs under control.
So when we need to access capital for infrastructure projects, for example, it is natural that providers of their capital will place greater reliance upon the private sector if it has a proven track record than it will upon the public sector.
But we’ve got to work hand in glove because the regulatory environment within which we are operating is overseen by the state. And by the way, we welcome and support that. We’re not suggesting there shouldn’t be regulation. We think that regulation needs to be fit for purpose. And increasingly, again, I think there’s a willingness to explore that between the public and the private sector.
So I am heartened by that. And I believe that the president’s letter even yesterday acknowledges that the only way we’re going to be able to find our way out of this extremely challenging set of circumstances is if we mobilise the resources of all social partners: government, business, labour and indeed civil society and do it in a smart and agile and impactful way. Otherwise, I am fearful for the fact that the level of decline that we’re seeing in economic activity will continue and will actually undermine social stability, which is something that we all know we cannot possibly even contemplate, let alone afford.
Masks, social distancing
So what’s the thrust of your message right now?
So the thrust of our messages, I think twofold. One is when we’re in the surge and indeed for the months and indeed perhaps years ahead, until there’s a vaccine, we need to behave with extreme levels of responsibility in terms of behaviour change, as I said, social distancing sanitisation and wearing face masks and encouraging everybody else to do the same in the workplace and outside the workplace.
And secondly, that we need to reactivate our economy in a manner where we work collaboratively with our social partners and we focus and ruthlessly focus on limited priorities. We decide what is essential and we put our collective shoulder to the wheel. That would be the two key messages as far as I’m concerned, Alec.
Insurers pose risk to economic recovery
And just to close off with the debate that’s going on with the insurance industry, it is an important sector of the economy that seems to have been some kind of progress on that side. But if all the business interruption claims are to be honoured, are you able to participate in finding some common ground there?
I think that the insurance industry does have a particular challenge. By the way, it’s no different to the banking industry. I think that to the extent that commitments have been made and this is appropriately characterised as business interruption risk, we have seen, by the way, the provision that Liberty announced only yesterday, we need to assume that the insurance industry is going to take strain for the immediate short term and indeed perhaps for the medium term.
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But if it doesn’t, then I think that people are going to look askance at the ability to place the sort of risk that we’re talking about, which couldn’t have been anticipated that people thought they had insured against. And I have no doubt that we’ll be arguing in negotiating that on a case by case basis. But we have to assume and we place enormous relies on the efficacy and the robustness of our financial services sector by which I include, of course, the insurance sector as well. They’re going to act in accordance with both the spirit and the letter of the law.
