COVID-19 Pandemic - A Labour Impact Analysis - An Important Step Towards Solving the Labour Challenge in the Midst of a Covid-19 Storm - IQbusiness
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COVID-19 Pandemic – A Labour Impact Analysis An Important Step Towards Solving the Labour Challenge in the Midst of a Covid-19 Storm
Foreword
The COVID-19 pandemic has wreaked havoc businesses. Employment outcomes depend
in global health systems, global economies both on economic growth as well as the
and now global financial systems. The impact absorptive capacity of the economy (Altman,
of the pandemic is being modelled daily and 2003) and economic growth alone can be
forecasts are being revised continuously as achieved through growth in productivity levels,
more data points become available. As the without it resulting in employment growth.
Minister of Finance, Tito Mboweni, said in According to IDC report South African Report: An
his address on COVID-19 and the economy, Overview of Key Trends Since 1994, the average
“The COVID-19 pandemic is one of the greatest annual growth rate of GDP between 1994 and
challenges that has ever faced our nation”. 2000 was 2.9%, while employment growth
The COVID-19 outbreak poses a great challenge over the same period was an average of 0.5%
as its devastating effects will not be limited per annum; between 2001 and 2007, a period
to the health of millions of people but also the that was a high growth period for South Africa,
health of the global economy and subsequently, the average GDP growth rate was recorded at
South Africa’s economic outlook. The South 4.3% while employment growth was a meagre
African Reserve Bank (SARB) revised its estimates 1%. In the period that followed between 2008
for 2020 economic growth from an initially and 2012, South Africa experienced jobless
revised 0.2% contraction in March, and states growth, where economic growth averaged 2,2%
that they expect the South African economy over the period while employment declined
to contract by 6.1% in 2020. Further downward 0.4% per annum over the same period - the
revisions are expected as more statistical phenomenon of jobless growth has remained
data is collected. a key feature of the South African economy
since.
In this report we explore the impact that this
will have on labour and employment outcomes In the same vein, you can have productivity
in the country, sectors, households and gains than do not result in a commensurate
2
growth in output; and to illustrate, Tsebe growth. This labour impact report details
and Biniza in their paper Analysing Total the pockets of labour vulnerabilities on the
Factor Productivity Growth for South Africa’s back of the COVID-19 pandemic and offers
Manufacturing Sector Using a DEA-Based ideas for a new labour market place that
Malmquist Productivity Index found that between could inform future skills development programs
1994 and 2013 total factor productivity in given a more detailed understanding of the
the entire manufacturing sector grew by labour complexities of the South African
0.5% per annum – while over the same economy.
period manufacturing contribution to GDP
shrunk from 20.9% in 1994 to 12.4% in 2012.
(Tsebe & Biniza, 2015 ). In fact, the capital-labour
ratio widened from 176 100 in 1994 to 195
501 in 2012, while output per labour increased
from 68 821 to 92 126 in the same period.
Wolassa Kumo, found that there were three
critical challenges that were holding back
Total Factor Productivity (TFP) growth and
efficiency gains, namely 1) skills shortages 2) Sifiso Skenjana
infrastructure deficits, and 3) weak domestic Chief Economist, IQbusiness
competition. Human capital being key to TFP
growth is also supported by Nobel winning
Paul Romer’s endogenous growth theory
which argues that investments in human
capital, knowledge creation and innovation
are key contributors to long term economic
3Introduction – The Labour Complex:
A Tale of Many Stories
The labour question is one of the most complex issues that the learner cohort solve for the businesses current and
has continued to escape policy makers, labour, and future skills needs – hence a sultry absorption rate of 68%.
business for a good portion of the last two decades. The The labour data from Stats SA shows that roughly 91% of
relationship between private sector, public sector and wage those who are unemployed either have a matric attainment
bargaining remains a hostile one as they struggle to find a or less. In addition, the primary and secondary combined
meeting of minds with respect to issues of perceived rigidity dropout rate is 50%, meaning that roughly half of the learners
of labour laws, issues pertaining to wage inequality and who start the learning curriculum (grade 1) don’t make it to
resource prioritisation – the theory of the firm. grade 12. Not only does this create a social risk to the economy,
but also a looming fiscal problem.
Demand and Supply Skills Mismatch
Urbanisation and Brain Drain
The South African economy continues to be characterised
as an economy that … “creates jobs for the labour force it The large metro’s have growing net positive migration rates
wishes it had and not for the labour force it currently has” … while the smaller towns. According to the mid-year population
and while it is important to future proof the economy in a statistics from Stats SA, Gauteng, Western Cape and the
continuously changing global market place, a preceding North West Province are expected to have net migrants of
step ought to fixate on policy imperatives that will inform 1 048 440, 311 004 and 107 733 respectively. This also
higher current labour absorption. The finance and business means that the other provinces who will be experiencing
services – a sector that generally attracts and requires a net immigration will also be losing some of the intellectual
higher skills profile - contributes approximately one fifth of skills that could be important contributors to the social and
the GDP, with roughly 16% of the labour force, while other economic development of those towns and cities.
labour intensive sectors like agriculture, tourism, mining,
construction contribute significantly less than what they Professionalisation of Municipalities: The Northern Cape is
ought to. home to three of the largest wind energy projects in the
country namely Longyuan Mulilo Green Energy, Loeriesfontein
Learning from the German Model: In 2016 almost half of Wind Farm 2, and Khobab Wind - each with generation
the German labour force had gone through a vocational capacity of 138.96MW, 138.23MW and 137.74MW respectively.
training qualification, which blended on the job skills An approach to professionalise these municipalities would
training and an academic component, with an approximate be to ensure that the national comparative advantage the
1.3 million apprenticeships per annum according to the municipality enjoys is wind generation and its ability attract
Federal Statistical Office (Destatis). The average absorption professionals who can ensure that the province remains a
rate of graduate was reported at 68%. What is particularly lead province for wind energy generation. Housing these
interesting about this model is 1) the learning programmes skills in the municipality ensures that the public sector is
are administered under the economic affairs department professionalised with highly technical skills and attracts
(labour and human capital development is an economic such labour from other provinces, ultimately limiting the
planning issue) and 2) that the curricula were co-authored, extent of brain drain. This model is how Gauteng became
assessed and examined by both private sector and the what it is on the back of marketing itself as a mining skills
department of education. What this means is that business opportunity province, before later establishing itself as the
can design learning outcomes directionally, to ensure that broader economic centre of the country.
4Wage Inequality These findings were echoed by the 2018/2019 Global Wage
Report, which found that South Africa had the highest wage
Mind the Gap: The Inequality Trends Report 2019 from disparities in the world based on gender and race. It becomes
Stats SA in partnership with SALDRU and Agence Francaise a complex conversation therefore with the unions when
de Dévelopement (AFD) found that wage inequality was the they demand above inflation increases to close the wage
largest driver of income inequality in South Africa. Specifically, gap, while also refusing to contextualise the firms’ economic
they argued that: environment and its ability to sustainably raise wages above
inflation over time.
“Throughout the years, income from the labour
Labour Laws
market has been the leading source of household
income in South Africa, accounting for over 70% of
South Africa’s labour laws are broadly touted to be rigid by
total income. The report found that labour market international standards. Some of these rigidities have been
income is the main driver of income inequality in directed towards the arbitration process and firm
South Africa, contributing 74% towards overall income constraints with respect to hiring and firing, restricting their
inequality in the country in 2015. Nevertheless, social ability to freely optimise their skills compliment according
grants and remittances have played a crucial role in to their needs. Some of the world’s largest development
institutions have dynamic views on the labour law issue in
reducing the income inequality gap between the
South Africa. In 2008, the World Bank lamented in the
bottom and top deciles”
Doing Business Report that restrictive labours in South
Africa would harm workers and not protect them. And 8
They further argued that:
years later in their 2016 Doing business report found that
“under-regulation in the areas of working time and minimum
“The distribution of earnings depicts the heavily racialised
wage protection can have harmful effects on the productivity
inequality present in the South African labour market and would exacerbate the effects of macroeconomic shocks”.
between 2011 and 2015. In addition to having worse Based on their most recent position, loose labour legislation
employment outcomes, black Africans also earn the in a COVID-19 environment would have disproportionately
lowest wages when they are employed. Whites, in worse labour outcomes.
contrast, earned substantially higher wages than all
Rigid or Protective: The jury is certainly still out on whether
other population groups. Their monthly average real
labour laws in South Africa are sufficiently protective of the
earnings were more than three times higher than
labour force or they are unnecessarily and unsustainably
those of black Africans. Females were less likely to be rigid and may result in worse off labour and economic
employed and earned approximately 30% less on growth outcomes.
averageas compared to males.”
5Labour Categories – A Commuter
Analogy
A Way Forward mass layoffs. The typical train rider would be mine workers,
craft workers, plant operator, permanent farm workers and
However complex the labour question is for South Africa, construction workers etc. The generalised education attainment
this report aims to charter a path into understanding, in attributable to this group is 1) secondary schooling not
more granularity the vulnerabilities of the labour force both completed and 2) secondary school completed and on this
from a COVID-19 perspective as well as a broader structural measure account for approximately 39.16% of the labour
perspective; whose understanding would better enable the force. From a generalised occupation perspective, this
response interventions for effective labour reforms. group accounts for 19.98% of the labour force.
In order to understand South Africa’s labour force and its
vulnerability to the COVID-19 outbreak, we use a commuter The bus riders
analogy to describe the categories that constitute our
labour market. In using this analogy, the transport ascribed We define bus riders as semi-skilled employees with
to each grouping is based on the skills level and degree of relatively more balanced security and limited mobility.
mobility of its members. Two perspectives have been Analogously they move from bus stop to bus stop, and
adopted using the level of education and occupations of there is little variation and differentiation in route and
South Africa’s employed labour force obtained from the routine. These are the workers that would typically be sales
October-December 2019 Quarterly Labour Force Survey. and services staff, clerks, technicians, retail till operators,
This allows for an analysis of their employment opportunities call centre staff etc. From a generalised occupation
and risk propensity to any major disruption in the economy. perspective they account for approximately 35.76% of the
labour force. The educational attainment perspective
The hitch hikers approximates this group to 27.90% generalized as 1)
secondary completed and 2) some qualification / certification
We define the hitch hikers as the labour group that is largely post-secondary schooling
unskilled with an analogous hitch-hike model, where they
take their chances for opportunistic demand gaps in the The Uber riders
labour force. These are the workers you would generally see
when driving past hardware store, temporary farm workers, We define Uber riders as skilled employees with a high
piece job takers and domestic workers. The generalised degree of mobility. Analogously, they have discretion on
education attainment attributable to this group is 1) no when to move and the mode of transport. Typically, these
schooling, 2) less than primary completed and 3) completed are labour market participants who are professionals or
primary. By education attainment this group makes up managers occupationally and account for a generalised
approximately 11.07%. From a generalised occupation 14.48% of the labour force from an occupation point of
perspective, this group is either 1) elementary workers or 2) view. Broadly these workers would have a tertiary education
domestic workers, accounting for 29.08% of the labour attainment level and account for a generalised 21.88% of
force by occupation. the labour force through this dimension.
The train riders The labour attribution in each of the commuter clusters
allows us to have a skills-based (occupation and education)
We define the train riders as the unskilled and semi-skilled view of the labour force and to model for the labour market
labour in high employment density sectors with high risk of risk propensity of each of the clusters.
6FIGURE 1 – MINIMUM AND MAXIMUM SIZE OF COMMUTER CLUSTER
REPRESENTATION IN LABOUR FORCE
29.08
11.07
Hitch Hikers
39.16
19.98
Train Riders
27.90 35.76
Bus Stoppers
21.88
14.48
Uber Riders
Education Attainment Occupation Attribution
Hitch Hikers: Range of hitch hikers is between 11.06% and 29.08% of the labour force by occupation and education attainment. Interpreting this range
means that a) at a minimum we have 11.06% of the labour force as hitch hikers. b) at a maximum this number is 29.08%.
Train Riders: Range of train riders is between 19.98% and 39.16% of the labour force by occupation and education attainment.
Bus Riders: Range of bus stoppers is between 27.90% and 35.76% of the labour force by occupation and education attainment
Uber Riders: Range of Uber riders is between 14.48% and 21.88% of the labour force by occupation and education attainment
7COVID-19 Risk Assessment of Labour
Measurement
Categories and Sector Implications
Industries that are key contributors to South Africa’s GDP economic effect than the direct effects from mortality and
such as trade and hospitality are greatly dependent on the morbidity because if social distancing works only a small
free movement of people and will therefore be heavily fraction of the population will be infected. As a result of
impacted by the sudden inability to operate as per normal. Covid-19 we are already seeing demand in the healthcare
The fourth quarter GDP numbers reported that finance and sector skyrocket, while on the other hand we are seeing a
business services, Government, trade and manufacturing plummet in demand for sectors such as air transportation
were the industries with the largest contributions to GDP, and tourism. Concurrently, many sectors are facing issues
accounting for 20%, 18%, 17% and 13% respectively (Stats on the supply-side as the lock-down has left workers of
SA, 2020). non-essential businesses confined to their households.
Fortunately, much of the work conducted by finance and Table 1 and Table 2 indicate the amount of labour
business services, for example, can continue as employees withdrawn due to social distancing we use and the extent to
work from home. However, not all industries are able to which workers in given occupations can perform their
leverage off of digital solutions and cannot allow their requisite tasks at home. All the occupations with a Remote
employees to continue their work remotely. The table Labour Index (RLI) of 1 indicate that all work activities
below leverages the research from del Rio-Chanona and associated with the occupation can be performed entirely
Others (2020), Supply and demand shocks in the COVID-19 in the household while a remote Labour Index of 0
pandemic: An industry and occupation perspective. indicates that none of the occupation’s activates could be
performed at home.
This report shows the labour force's risk to the COVID-19
outbreak in terms of an industry's ability to work remotely Occupations in education and financial specialists are
and whether they are defined as essential. It is argued that estimated to have almost 100% ability to perform their
a higher propensity to work remotely mitigates the negative work from home, while occupations in Construction, Farming
impacts of shocks to the economy and necessary measures and extraction work are estimated to have almost a 0%
such as a total lockdown because delivery can largely continue ability to perform any of their work from home. Therefore,
as per normal, regardless if an industry is considered all occupations with an RLI of 0, if deemed as a non-essential
essential or not. However, if an industry has a lower ability service,have no ability to function during the lockdown
to have its work conducted remotely, it has a higher risk of period, regardless of demand supply of labour will be
being adversely affected by an event such as the COVID-19 unattainable.
pandemic. This due to having to cease business activity.
Where an industry is unable to conduct its work remotely In order to gain an understanding of which non-essential
but is considered essential and therefore must still operate, industries will be able to remain productive (supply labour)
it has an extremely high degree of risk because workers risk during the lock-down period we use Table 1 to look at how
exposure to the Coronavirus. industries are ranked according to their RLI. Industries with
the highest average RLI values relate to information,
As the government mandates non-essential businesses to finance and insurance, while industries with the lowest
close and social distancing practices to slow down the average RLI relate to agriculture, forestry and hunting and
spread of Coronavirus, the South African supply market accommodation and food services (restaurants, takeaway
faces significant uncertainty about the effects social outlets and catering services).
distancing and lockdown will have on lives and livelihoods.
We expect to see social distancing measures having a greater
8TABLE 1 - RISK BASED ON INDUSTRY'S ABILITY TO WORK REMOTELY VS ESSENTIALITY
Industry Remote Essential Risk by Health Risk/ Loss of Labour Force
Labour Score Remote Risk of Income Category by
Index Median Labour Exposure Risk Commuter
Median Analogy
Agriculture, Forestry, Fishing Extremely Extremely Hitch Hikers,
0.144 0.500 Low Risk
and Hunting High Risk High Risk Train Riders
Extremely
Mining 0.278 0.000 High Risk Low Risk Train Riders
High Risk
Hitch Hikers,
Construction 0.308 0.659 High Risk Low Risk High Risk
Train Riders
Administrative Support, and Moderate
0.322 0.600 High Risk Low Risk Train Riders
Waste Management Remediation Risk
Extremely Train Riders,
Transportation and Warehousing 0.337 1.000 High Risk Low Risk
High Risk Bus Riders
Extremely Train Riders,
Manufacturing 0.346 0.250 High Risk Low Risk
High Risk Bus Riders
Accommodation and Food Extremely
0.356 0.000 High Risk Low Risk Train Riders
Services High Risk
Extremely Bus Riders,
Healthcare and Social Assistance 0.390 1.000 High Risk Low Risk
High Risk Uber Riders
Moderate Extremely Train Riders,
Utilities 0.419 1.000 Low Risk
Risk High Risk Bus Riders
Arts, Entertainment and Moderate Moderate Train Riders,
0.427 0.000 Low Risk
Recreation Risk Risk Bus Riders
Moderate Extremely
Public Administration 0.437 1.000 Low Risk Bus Riders
Risk High Risk
Moderate Moderate
Real Estate Rental and Leasing 0.466 0.000 Low Risk Uber Riders
Risk Risk
Moderate Moderate
Retail Trade 0.472 0.301 Low Risk Bus Riders
Risk Risk
Moderate
Wholesale Trade 0.504 0.457 Low Risk Low Risk Bus Riders
Risk
Bus Riders,
Education Services 0.597 1.000 Low Risk Low Risk Low Risk
Uber Riders
Professional, Scientific and Bus Riders,
0.630 1.000 Low Risk Low Risk Low Risk
Technical Services Uber Riders
Management of Companies and
0.659 1.000 Low Risk Low Risk Low Risk Uber Riders
Enterprises
Bus Riders,
Information 0.666 1.000 Low Risk Low Risk Low Risk
Uber Riders
Bus Riders,
Finance and Insurance 0.726 1.000 Low Risk Low Risk Low Risk
Uber Riders
0-0.2 = Extremely High Risk | 0.21-0.4 = High Risk | 0.41-0.5 = Moderate Risk | 0.51-0.8 = Low Risk | 0.8+ = Minimal Risk
Source: del Rio-Chanona & Others (2020) and IQbusiness Analysis
9TABLE 2 - RISK BASED ON OCCUPATION'S ABILITY TO WORK REMOTELY VS ESSENTIALITY
Industry Remote Essential Risk by Health Risk/ Loss of Labour Force
Labour Score Remote Risk of Income Category by
Index Median Labour Exposure Risk Commuter
Median Analogy
Extremely Extremely
Extraction Workers 0.071428571 0.288858322 Low Risk Train Riders
High Risk High Risk
Hitch Hikers,
Extremely Extremely
Farming, Fishing and Forestry 0.1 0.916246529 Low Risk Train Riders,
High Risk High Risk
(Bus Riders)
Extremely Extremely Hitch Hikers,
Construction 0.1125 0.375572144 Low Risk
High Risk High Risk Train Riders
Production / Manufacturing Extremely Extremely Train Riders,
0.133333333 0.362090307 Low Risk
Occupations High Risk High Risk Bus Riders
Installation, Maintenance and Extremely Extremely
0.155870446 0.624344384 Low Risk Train Riders
Repair Workers High Risk High Risk
Building and Grounds Cleaning Extremely Extremely Hitch Hikers,
0.176923077 0.657159621 Low Risk
and Maintenance High Risk High Risk Train Riders
Transportation and Material Extremely Extremely
0.2 0.895438484 Low Risk Train Riders
Moving Occupations High Risk High Risk
Extremely
Healthcare Support Occupations 0.266666667 0.985501949 High Risk Low Risk Bus Riders
High Risk
Extremely
Protective Service Occupations 0.266666667 0.998663325 High Risk Low Risk Bus Riders
High Risk
Personal Care and Service
0.304347826 0.390156919 High Risk Low Risk High Risk Hitch Hikers
Occupations
Food Preparation and Serving Hitch Hikers,
0.348484849 0.14082331 High Risk Low Risk High Risk
Occupations Train Riders
Healthcare Practioners and Extremely
0.363636364 0.995056683 High Risk Low Risk Uber Riders
Technical Occupations High Risk
Moderate
Legal Occupations 0.535714286 0.986529587 Low Risk Low Risk Uber Riders
Risk
Moderate
Office and Administrative Support 0.541958042 0.753799992 Low Risk Low Risk Bus Riders
Risk
Life, Physical and Social Science Moderate
0.555555556 0.979899497 Low Risk Low Risk Uber Riders
Occupations Risk
Arts, Design, Entertainment, Moderate Train Riders,
0.571428571 0.565350927 Low Risk Low Risk
Sports and Media Risk Bus Riders
Community and Social Services Moderate
0.576923077 0.994583649 Low Risk Low Risk Bus Riders
Occupations Risk
Architecture and Engineering Moderate
0.612244898 0.777434357 Low Risk Low Risk Uber Riders
Occupations Risk
Moderate
Management Occupation 0.693979933 0.796055082 Low Risk Low Risk Uber Riders
Risk
Sales Occupations 0.696153846 0.485205997 Low Risk Low Risk Low Risk Bus Riders
Business Operations Specialists 0.7 0.813993346 Low Risk Low Risk Low Risk Uber Riders
Computer and Mathematical
0.764705882 0.803128077 Low Risk Low Risk Low Risk Uber Riders
Occupations
Financial Specialists 0.791666667 0.859092012 Low Risk Low Risk Low Risk Uber Riders
Education, Training and Library
0.804761905 1 Minimal Risk Low Risk Low Risk Uber Riders
Occupations
0-0.2 = Extremely High Risk | 0.21-0.4 = High Risk | 0.41-0.5 = Moderate Risk | 0.51-0.8 = Low Risk | 0.8+ = Minimal Risk
Source: del Rio-Chanona & Others (2020) and IQbusiness Analysis
10Health Risk/Risk of Exposure: Occupations that are consid- has been allowed to continue (remotely or not remotely).
ered essential (>0.5) but have a low ability to work remotely, Loss of income risk is extremely high where the ability to
are considered to have an extremely high risk to COVID-19 work remotely is extremely low and the occupation is not
exposure. Occupations that are essential but have a high essential.
ability to work remotely, are likely to only have a moderate
health risk if they conduct most of their work remotely but From the tables 1 and table 2 we are able ascertain which
may have the possibility of coming across clients or job profiles and industries are at particular risk to loss of
colleagues. Occupations that are neither essential nor have income and negative health exposure. The view of which
a higher propensity to work remotely are considered to commuter cluster is associated with the occupation and
have a low health risk at present as they would be subject industry at risk is particularly valuable to ensure that any
to lockdown regulations. interventions to support job retention and minimised negative
health exposure is targeted and is with the right context.
Loss of Income Risk: Loss of income risk is low where
occupations are defined as essential and so business activity
11Navigating a New Labour
Market Reality
Velocity of Money – A Sector View significantly lower than the global average of 1.4%, slightly
(Tactical Approaches) below the 1.5% that South Africa targets.
An opportunity the country missed in the pre-COVID-19 Technological growth has helped many economies experi-
economic context was an opportunity to take advantage of ence “catch-up” growth. Germany went through this
sectors with a velocity of money. Simply, for certain sectors, between 1880 and 1910, transitioning from being a largely
one unit of currency spent moves faster into the real economy rural economy to being in a technology led growth transition
and benefits are realized in the aggregate output numbers thanks to the establishment of Technical Training Institutes
in a shorter space of time. Take for example tourism, last and a proliferation of specialised R&D laboratories for
year an exhibition match between Roger Feder and Rafael manufacturing. Israel, a former drought-stricken country
Nadal was announced mid-year and by the time ticket sales with now some of the most advanced agricultural and
opened, roughly 51 954 tickets were sold out in minutes, water desalination technology in 2018 spent 4.9% of the
many selling in excess of R1000 per ticket. The ticket sales GDP towards GERD. The country is home to the largest
would be followed by flight and accommodation bookings, reverse-osmosis desalination facility in the world and now
followed by dining and drinks before and after the event. runs a water surplus. There are plenty more case studies
And before you knew it, the cumulative economy created available to motivate why South Africa should be targeting
by an event planned over six months could amount to a a GERD of above 5% for the next 20 years.
minimum of R60 million. Tourism is a sector that is broadly
labour absorptive, with a high velocity of money. This is an Digitally Intensified Workplaces
economic low hanging fruit that South Africa has to take
advantage of in a post-COVID-19 economic environment. COVID-19 has ironically become a vitamin B shot for digital
transformation and the future way of work. Microsoft has
A human capital and innovation centred seen a significant increase in user minutes as lockdowns
long-term aggregate output economy – A have been implemented among various countries around
Paul Romer reality the world, as a result of the Covid-19 global pandemic. On
the 31st of March Microsoft teams hit a daily record of 2.7
According to Romer’s endogenous growth theory, capital billion meeting minutes in one day, a 200 percent increase
only accounts for one third on the variation in income per from 900 million on 16 March 2020. With the advent of the
capita across countries – leaving the other two thirds to Fourth Industrial Revolution, we have already found
total factor productivity, the product of an investment in ourselves living in an increasingly digitalised world. Not
human capital, innovation and the knowledge economy. only are we collaborating through digital platforms
One of the critical things we will need coming of the internally with colleagues, but communication with custom-
COVID-19 pandemic is a labour investment strategy as well ers is occurring through digital channels and products are
as a complimentary R&D agenda that will inform the scale being offered to consumers digitally. Again, delivery can
of long-term economic growth that is required to catapult and should continue as per normal if the infrastructure to
labour absorption. enable these channels is accessible and functional. The
outbreak of COVID-19 and the subsequent enforcement of
The National Advisory Council on Innovation estimated that social distancing and lockdowns across the world has then
South Africa’s gross expenditure of research and development forced us to test just how digitalised we are. Companies
(GERD) spend as a proportion of GDP was 0.68% in 2018, that have committed to digitalising their products and the
12way they communicate with customers will see the benefits inequality of opportunity are likely to be exacerbated in a
of this during this time but companies that have also made time like this. Labour force participants in industries and
an effort to digitalise their entire operating model should occupations that cannot digitalise or work remotely during
be in a position where they can minimise adverse impacts a COVID-19-induced lockdown, are likely to be most affected
to business activity. and these happen to also be labour force participants in
lower income groups.
It is important to acknowledge that not all businesses are in a
position to digitalise. Either due to scale or the very nature of Re-shoring Supply Chains
their work, many companies will struggle as a result of the
Coronavirus outbreak. The hospitality industry, for example, The import-demand ratio (IDR) explains the percentage of
will be particularly affected due to its reliance on people being imports required to satisfy domestic demand. According to
able to move freely and visit their establishments. Small the International Trade Administration Commission of South
businesses that were also heavily reliant on the routine foot Africa (ITAC) mining and manufacturing have been the most
traffic brought about by proximity to central business dominant contributors to what has been an increasing IDR
districts and public transport hubs will also suffer from the from 1996 to date with declines only experienced during
reduced movement of people on a daily basis. Although the the financial crisis of 2008. Figure 3 below shows that the
lockdown is a very unique response to a very unique global economy is particularly susceptible to rising import
challenge, we have not seen a global health pandemic of intensity in the medical products space given that a
this size for almost a hundred years, this does again draw minimum of 60% of export volume is attributable to three
attention to problems of inequality around the world but exporters.
especially countries like South Africa. Income inequality and
FIGURE 2: TOTAL EXPORTS TO WORLD AND SHARES IMPORTED FROM TOP 3 EXPORTERS
OF COVID-19 MEDICAL PRODUCTS
Nitrile and sterile gloves 80% 60%
Ventilators, oxygen masks and nebulizers 65% 35%
Patient monitors and pulse oxi meters 65% 35%
Medical Masks 77% 23%
Hand Sanitizer 65% 23%
Flow-spitter for (oxygen supply) 65% 35%
Catheters 65% 35%
Enzymes 68% 32%
Humidifiers 64% 36%
Venturi masks 65% 35%
World impact share from Top 3 Exporters % From rest of the world %
Source: Peterson Institute for International Economics
13COVID-19 has necessitated government and its agencies to and commitment. Tilapias constituted over 90 percent
explore ways to support the development of local medical of the total aquaculture harvest. The Government has
product manufacturing to ensure we are able to meet the
placed aquaculture as one of the top priorities in the
health needs of the population in a context of rapidly rising
country’s development agenda and substantial
infection rates. In the true spirit of “never letting a good
support is being given to fish farmers in various
crisis go to waste” the policy makers have been presented
with an opportunity to take a more permanent view to building aspects of the industry” FAO (2016)
domestic manufacturing capacity for critical sectors. Maybe
our reindustrialisation strategy should channel resource to The Ghana case study not only enables us to think about
building domestic manufacturing capacity towards priority the opportunities of expanding the potential output of our
sectors as well as the sectors where South Africa already fisheries sector as a labour absorptive, high value goods
enjoys a comparative advantage continentally and globally sector but also on the policy / legislative balancing act
including but not limited to citrus, macadamia, avocado required to embark successfully on a sustainable growth path.
farming, medicinal bio diversity, viticulture etc.
The Social Compact
Leveraging incentives
The uncharted territory global economies find themselves
It is an opportune time to revisit the DTI sector code incentives necessitate a move away from ideologues and towards a path
to ensure that we are able to sufficiently exploit incentives of collaboration toward sustainable long-term development
as a crowding in mechanism for inward investment into target outcomes. When asked about struggle songs and the value
sectors of the economy. When the economy is constrained thereof, former President Mandela said that “it was the
in its ability to drive fiscal stimulus, then ought to explore way time and space we couple be united in mission, irrespective
to use our current resources and infrastructure to drive of our individual backgrounds”. Maybe the COVID-19
investment. Ghana embarked on what would ordinarily be pandemic is the struggle song South Africa needed in order
deemed as a counterintuitive policy by allowing for tax to refresh, and rejourney towards a new normal informed
exemptions for fish farming inputs, which on balance mutually benefit social compacts between government,
would reduce the cost of farming the high value Talapia labour, business and civil society.
domestically. So the policy was pro import intensity for the
net benefit they expected in potential output.
“Fish farming has grown rapidly from 1 200 tonnes in
2005 to 38 500 tonnes in 2014, spurred by high prices
of tilapia, the quickly expanding cage farming in the
Volta Basin and the high level of government interest
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