BLSA CEO’s letter 18 January

POSTED ON: January 18, 2021 IN , , , , by BLSA

By Busi Mavuso
The first two bans cost the alcohol industry 165,000 jobs, with the expectation that the third ban might have a similar impact and add more unemployment woes.

The government is having to spend an increasing amount of time in court defending its regulations to control the spread of the pandemic. South African Breweries has gone to court to challenge the alcohol ban and now the restaurant industry is doing the same.

The alcohol industry lost 165,000 jobs as a result of the first two lockdown bans, with this third one expected to add to the tally. Last week, SAB announced it had axed R2.5bn of planned investment in 2021 as a result of the sales ban.

Similarly, the wine industry has run out of storage space for the wine it has produced but been unable to sell over the last several months. It is now harvest time when it must pick the next grape crop. Unless it can move stock from cellars and tanks, it will have nowhere to put this year’s produce.

It may be forced to leave the grapes to rot on the vines at a cost of billions. These devastating economic consequences are avoidable.
We don’t need to take a view on whether the alcohol ban was necessary to be able to agree that it was handled badly.

As regulations stand, alcohol producers have no idea how long they are going to be required to shut down. That uncertainty is the real problem. As a businessperson, it puts you in an impossible situation. You can ride out a period of closure if you know you can plan around it. For example, you can determine what cash resources are needed if you know how long you need cover.

You can borrow if you have a business plan that shows how you will be able to generate cashflows once you reopen. But when your shutdown is indefinite, with an unpredictable and opaque process to determine when you can resume, you are in an impossible situation. You must assume the worst, cut jobs you otherwise might have protected, and go into a cash conservation mode in the hope you can last however long you might have to.

Government has lent on business often during this pandemic, most recently to help access supplies of vaccine. Government has needed business in the ring with it to fight against this pandemic. But at the same time, it has regularly tied our hands behind our backs, leaving us unable to play the supportive role we would be able to play.

The decisions we make to confront the health crisis should not have unintended consequences for the economy. We should know and understand what the economic impact is. Then we can look for ways to mitigate those while still achieving the health outcomes we intend.

The alcohol industry’s challenges could have been lessened if a clear end date was put on the ban, or at least clear conditions under which it will be lifted. Government could have worked with the industry to make it easier to export stock that cannot now be consumed locally. Instead, the industry has been forced to turn to the courts.

Since the start of the crisis the policy response seems to have consisted only of short-term thinking. We have not thought through the 12 or even six-month scenarios we face and how to maximise outcomes. Capricious changes to rules are made without understanding the economic impact they have and the causal connection to government’s own longer-term objectives.

Government seems not to recognise that its plans to undo the jobs impact of the crisis are so much harder to deliver if it fails to protect as many jobs as possible now. The short-termism is why we hadn’t planned a vaccine procurement strategy until only two weeks ago and why it took so long to develop an economic recovery plan. We have been better on short-term interventions like social grants and the TERS scheme, but don’t follow up with the longer-term thinking that will enable us to withdraw those and spur the economy back onto a growth path.

The pandemic will be with us for a while yet. Vaccines will, eventually, end this crisis, but there is so much we could lose in the interim if we are not careful. Business has, since the start, been a keen partner to government to fight this pandemic. We need to work closely together to ensure we can finish the fight with the least possible damage on our economy. Business should not have to turn to the courts to try and save themselves.

President Cyril Ramaphosa gave the country a glimmer of hope when he laid out plans for the Covid-19 vaccination programme, assuring us that 20-million doses had been secured. I wrote in Business Report that business, with its resources, stands ready to assist. Only with successful implementation of the vaccination programme can South Africa’s economy truly begin to recover from the devastation caused by Covid-19.

Vaccination programme

Vaccination- the litmus test

Deeper engagement between government, business and labour is crucial in the country’s effort to combat the pandemic, I wrote in Business Day. I’ve repeatedly argued for more transparency in government decisions. Perhaps such an approach could have averted SAB cancelling its R2.5bn investment programme.

Public sector wages deal

Public sector wages deal

This is a weekly newsletter from BLSA CEO Busi Mavuso.

BLSA is a business organisation that believes in South Africa’s future and shares the values set out in the Constitution. In 2017, BLSA signed a contract with South Africa, committing business to playing its part in creating a South Africa of increasing prosperity for all by harnessing the resources and capabilities of business in partnership with government and civil society to deliver economic growth, transformation and inclusion.

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