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No easy answers for SA’s humanitarian crisis

Addressing the security situation and structural reforms are now key to whether businesses will have the confidence to rebuild.
Image: Moneyweb

Recovering from the destruction of property in KwaZulu-Natal and Gauteng will require a multi-pronged effort between the public and private sectors. Tens of thousands of small businesses have been destroyed and many large companies. From township spaza shops to high-tech factories, businesses have had their stock stolen or destroyed and their infrastructure burned to the ground.

For those who are insured, the state-owned insurer Sasria will be playing a critical role. It is the legislated monopoly insurer for risks related to riots and unrest. Many businesses and individuals are covered. Sasria works through the commercial insurers who act as its agents and claimants will need to work through their insurer to register their claims.

Read:
Can Sasria honour claims of up to R30bn?
Sasria may be strong, but size is what counts
Sasria gives mandate to insurers to settle smaller claims immediately

It was encouraging to hear President Cyril Ramaphosa in his address [on Sunday] night saying Sasria would accelerate payouts and would have the backing of National Treasury if needed. It is important that claims are settled fast – the sooner companies receive cash, the sooner they can start rebuilding.

The volumes of claims will be unprecedented for Sasria, so it will take a special effort to be able to process them efficiently. Banks and others may be able to play a bridging finance role to help get payments moving as fast as possible while claims are being finalised. Sasria has considerable financial resources and reinsurance policies, but the state must assure the public that it will stand behind Sasria and that all valid claims will be met. It is particularly important that firms which intend to rebuild are able to access insurance proceeds quickly so that reconstruction can begin.

The challenge is what to do about those who are uninsured. The president announced [on Sunday] night that a facility will be forthcoming and we need to watch this carefully. There is a vital humanitarian relief effort under way by both the public sector and NGOs, with business playing an important role through the Solidarity Fund – which will now be supported by an addition R400 million from government. Schools, clinics and many other public facilities have been damaged with serious social consequences for communities, while damage to supply chains and businesses mean food and medical supplies have been disrupted.

The humanitarian crisis is made worse by the damage to small businesses, both formal and informal.

Such businesses are essential for many to put food on the table for themselves and their families. How can we get them back on their feet, with infrastructure rebuilt and inventory replaced?

I don’t think there are easy answers. Some organisations have rallied together to provide grants to small businesses that have been severely affected. Ideally, we’d pull together resources to provide ‘reconstruction grants’ to all of them, but there simply aren’t the resources available and what we have must meet humanitarian needs first.

The president last night announced some important measures to address these issues. Business welcomes the extra R750-a-month boost to the Employment Tax Incentive for each eligible employee. Extending relief to those worst affected while also deferring taxes for three months for the alcohol sector and pledging to set up a fund for uninsured businesses that were affected are also positive moves.

Overall, the government’s package of support announced on Sunday can be funded from expected additional revenues due to high commodity prices this fiscal year, but we should be cautious.

This this situation won’t last forever and the underlying fiscal problems of government cannot be forgotten in the medium run.

There are other things government can do to help. Some resources have not been spent from the Covid response that can be redirected to support damaged businesses. There is also scope for innovative incentives to tilt the odds in favour of businesses rebuilding, such as accelerated capital write-offs and tax holidays. Joint funding mechanisms with the private sector that government can back with its balance sheet might be feasible. It makes sense for government to use some public financing to support the reopening of businesses that have long been an important source of tax revenue. If they instead close up, that is revenue lost forever and more people join the unemployed ranks.

There are, though, going to be businesses that will have to find their own resources to reopen. Our banks will help where there are opportunities to lend to viable businesses. Many clients have been affected and will need help from their banks if they are to avoid bankruptcy. The Covid crisis showed how banks can themselves quickly help clients when they need it.

But fundamentally the willingness of businesses to take on risk by financing rebuilding will depend on the confidence they have in the future.

Before the violence, that confidence was returning, thanks to important structural reforms government had announced. Chronic energy insecurity was being gradually addressed through initiatives like amendments to allow businesses to build plants of up to 100MW and future rounds of the renewable energy IPP programme. Addressing the security situation will be an important new task, assuring everyone that the security services will in future be able to be relied on to keep people and property safe. That plus structural reforms, including spectrum auctions, visa reforms and much else, are now key to whether businesses will have the confidence to rebuild. We need to redouble our efforts to get the economy moving.

Part of that of course is to escape the grip of the Covid pandemic. [On Sunday] night the president announced some relaxation to the restrictions that were intended to reduce remission rates. The resumption of alcohol sales, though limited, is extremely important for an industry that has been brought to its knees by the ban, as well as the rest of the supply chain from bottlers to restaurants.

The vaccine programme of course is critical to finally putting the pandemic behind us and the record vaccination rates achieved last week are very positive. We must keep up the effort and ensure that every adult is vaccinated as soon as possible so we can return to life as normal.

The implications for rural and township economies, where the bulk of the damage from the recent unrest, looting and destruction to property was incurred, will be far reaching, I wrote in Business Day. We may bicker about the makeup of the ownership of some of the larger companies that have sought exposure to an emerging black market, but what can’t be argued is that it has helped money to flow within these communities.

President Cyril Ramaphosa has emphasised that only through close cooperation between government and business can we address the new problems thrown up at us by the recent looting and violence. I wrote in News24 that the dialogue has already been extensive and resulted in a comprehensive matrix of sector-specific challenges at a granular level, with solutions outlined for each. Business is fully committed to restoring areas that were targeted.

Sadly, the cost of the economic carnage in KwaZulu-Natal and Gauteng will in the end be carried by the most vulnerable segments of South African society, I wrote in fin24. It will also set back efforts to boost confidence levels in the country that in May were at their highest in three years.

Busi Mavuso is CEO of Business Leadership South Africa

COMMENTS   22

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The real “humanitarian” crises is a large section of the population that simply does not want to work and just rely on handouts !!!!!

Pills and rhetoric cannot fix that.

If *only* that were the case. It isn’t though and trying to paint the unemployed as defiantly lazy is both unhelpful and insulting.

Last I checked, our dropout rate was at 40%. 4 out of 10 students who enter our schooling system never finish receiving a basic education. In a system where 40% is a pass and you are allowed to score 30% in two subjects and still matriculate.

The odds are stacked against a child born to a poor family. These children often face terrible nutrition and modern parental care at home, grow up in neighborhoods rife with crime and attend ‘free’ state schools which are so dire that 25% of them don’t even have running water.

The fact that state schools are able to attract poor learners with the promise of food should tell you exactly how hard their lives are and how unrealistic it is to expect them to grow up to be employable citizens in a modern economy.

Pointing to the exceptions and calling the rest lazy doesn’t solve anything because majority of us are not exceptional by definition.

sane comment.

I beg to differ, there is an easy answers to SA’s humanitarian crisis:

– Get rid of the ANC (and EFF);
– De-politicize the local Govt level altogether;
– Introduce transparency as law;
– Amend employment law to allow youth employment;
– Do away with BEE codes;
– Immediately change the ministers and heads of all departments;
– Tight border controls on immigrants;
– Deport the 10m illegal immigrants.

One more ,
I’m wondering, is it against the law or is it taboo or what, what , if you mention anything to do with overbreeding.
Lots of comments about whatever but never ,or hardly ever see anything that mentions part of the solution, a very big part I dare say, is the fact that there are simply too many people.
And it is certainly not helped by a Government that encourages young girls to have children so they can collect a Grant which ,in these days hardly will buy you a “loaf of bread and a pint of milk”

B.J. Voster had something to say about this in the ’70s when he said, with great respect, the birthrate for Africans at 3% outstripped the rate of creating new jobs of about 1% per anum. This more than anything else is what perpetuates poverty amongst the so-called disadvantaged!

We can also bicker about the ownership of spaza shops in townships. Mostly foreign as locals rather want free stuff!! If they don’t get they burn and toi-toi.

With this in mind and the whole BEE debacle SA is eating the ingredients of the pie they are supposed bake and share!

No ingredients, no pie no future. SA is smartly running out of ingredients as well. Go for it with the whole BEE, EE , AA thing. A “beneficiary” devours some of the ingredients so the pie gets smaller and smaller or turns into a total flop. Hahaaa. There is business rescue to deal with that. Hahahaaaa!

Like growth can be generated without electricity?? Stop dreaming and face reality. SA has millions of un-skillable “people” that will need the R350 in perpetuity as a reminder that eating the ingredients = Indignity and failure of state.

“No easy answers ..?” The easy answer is get the ANC out of power. Once their sticky fingers are removed for the till, SA can become great again.

No no no – how will Magashule, Mkhize and partners be able to get their multi-million Rands SASRIA ‘claims’ authorised if they are not in top positions in gubment?!!!

Every Govt is worse than its predecessor incl the ANC after the Nats :
removing the ANC may well bring the EFF in which case civilisation essentially ends in RSA . Amandla

With politics and religion, you can get away with inferior strategies, irrelevant dogma, counterproductive policies, and downright lies, forever. Politics in general is a pseudo-science where you can massage the facts to suit your own narrow interests. Politics and religion create fertile ground for charismatic self-serving individuals to exploit ignorant and naive followers. It is very tempting for religious leaders to become career politicians. Politics offer the opportunity to use the law as a tool of extortion, which for this purpose, is more powerful and profitable than the scriptures.

The solutions for South Africa are obvious if we treat the challenges as part of a business plan. If we allow sanity to prevail, and use the market mechanism to bring equilibrium between the supply of resources and the cost of those resources, the nation will escape poverty. The cost of public sector employees should reflect contributions and the supply of those employees. Wages should fall by a third. Labour laws, the minimum wage and wage demands should reflect the unemployment rate. The scarcity of investors, property owners and business owners should reflect in a lower tax rate, less red tape and government interference, and effective financial incentives. BEE is a destructive tax on entrepreneurship that prevents innovation and investments.

The solutions contradict the ANC dogma. Therefore, charismatic leaders will motivate ignorant voters to let the dogma prevail and to let the economy fail.

I have read a number of articles by this person, but wonder what the purpose of such articles are. She proposes how and what needs to happen to the economy of this country but fails to address where the funding will come from, the government gets its funding primarily from taxes. If the tax payer numbers constantly reduce through unemployment and destruction of businesses where is the funding going to come from. Sure the government can arrange loans from a variety of lenders but the reality is these loans have a repayment date. The government is increasingly destroying growth and wealth creation and will become a failed state like so many countries in Africa. When is the government going to go after the thieves who have hollowed out our fiscus through a variety of government agencies. Pay back the money and a suitable jail sentence would be a good start

The ability to settle claims efficiently is one thing. The far bigger elephant in the room is that SASRIA only has R10bn or so available on its balance sheet, whereas the claims can be multiples of that – maybe R30bn or more.

So either most companies are going to have to take a haircut with their claims, or, guess what, the taxpayers will have to fund the big screen TVs that have now found new owners by giving SASRIA a cool R20bn or so from tax revenue.

The humanitarian crisis was already predicted in the 1960″s, when the academics saw where population growth trends are leading.

The UN acted thereon and declared family planning a human right. The apartheid government, to their credit, instituted family planning for everyone. Unfortunately black leaders opposed the program.

If that program was successful, we would have had a population of say 30 million people and most people would have had jobs today.

New buzzword in South Africa: “rebuild”. Unfortunately no track record of success, quite the opposite.

Yup, SA will forever be “rebuilding” until nothing is left of the country.

One of SA’s problems is over-population (the more populous the nation is, for its given wealth….the poorer the average person becomes)

The cause of over-population is easy to identify & fix.

Until we really DO something that moves us forward the “all talk and no action” play will continue to garner us more of the same, or as it would seem, more decline. For years and years now government, business and the well meaning public in general have put their ideas forward for the benefit of all. Surely by now someone that has no hidden agenda and an IQ above 50 would’ve put together some cohesive plan to do so? The thing is that those who do hold the reins of power do not want this; they want a “dumbed down” electorate, docile tax payers and scape goats within a part of the population and business sector. It’s easy when the ruling class, whom it would seem are beyond redemption, to use smoke and mirrors campaigns such as WMC, proposed state sanctioned land seizures etc. as a distraction of the masses to keep themselves in power. This all whilst the state continues to stick their hands into our pockets with more finger wagging at us who are just trying to make a living for ourselves and our families? To think that the current lot will ever pick all of us up out of the muck is delusional at best or idiotic at worst. Their track record speaks for itself for all South Africans. By now I am sure that a few of our top ranking exports must be: tax payers, skilled/experienced labour, high net worth individuals, law abiding/conscientious citizens, entrepreneurs etc. etc. You know, those types of people you need for a stable democracy and for any hope of a sustainable economy?

What a match up:

Between the stunningly incompetent “bad ANC” of Zuma and the pathetically incompetent “good ANC” of Ramaphosa.

You can start by ending all race-based laws otherwise the country is just getting what it deserves for rampant racism i.e. did the country/Anc not learn anything from the past.

South Africa has many problems but it’s not over population, unemployment, high taxes, not even poor service delivery…

The real problem in SA is the election process and how we are forced to beg for the accuracy accountability.

For when we elect a person we are placing them in a position to both understand our needs and improve our environment.
There are many comments from the diverse group of MW readers that point to this fundaF@¢€πMental principal.

Any problem can easily be overcome with the right leadership who act in the most pure and selfless manner for the betterment of society.

To give everyone an idea, of the 100 problems mentioned by SA society, the issue of land was right at the bottom 90, so disjointed are the leaders that the only rational conclusion one can states is that the leaders simply do not care for the care for the betterment of society whilst having selfish self serving motives.

I know, Purge Coin.

But 67% of the SA voting population will convince you that “eish monna, we have the right ANC leadership” 😉

End of comments.

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