/Ron Derby: Economic crisis an opportunity for fearless leadership

Ron Derby: Economic crisis an opportunity for fearless leadership

The winter will be longer and great suffering will follow, but in it, I urge that we use this crisis to define who we are with the playbooks we have in the locker room, writes Ron Derby.

One thing that has held true through any turbulent time in world history is that periods of crisis come with fracturing societies, heightened divisions where our worst human traits come to the fore.

These periods of grave danger come with political choices muddied by our own prejudices against different race groups and foreigners in the battle for survival.

But as much as this is true, we need remember that these periods come with opportunity.

Steering a country away from poor political choices in the main becomes the job of its leading political actors of the day.

Perhaps, it’s just a question of luck, of whether a country is cursed with the fervour and closed-mindedness of nationalism, bred by fear.

Some actors will look to stoke the flames of discontent for favour at the ballot box. This democracy game is old. 

Ron Derby

Ron Derby: “I don’t think we have to call on another Codesa that ushered in the new country. We just have to dust off plans of old and perhaps rethink solutions…” (Media24 Archives.)

We best hope that in the main, our legislative class, regardless of party, will see opportunity for good in this crisis and not choose panic.

Being opportunistic and in truth, brave enough to see a chance for realising reforms of yesteryear that have been in conflict with protecting wealth built in what essentially, was a corrupted economy before 1994.

Coronavirus threatens generational wealth across the globe and has capitalism’s leading lights, such as Richard Branson, pleading for state aid.

Did you ever think you’d see the day? But it’s true that no one’s bounty is safe, unless you are Jeff Bezos of Amazon fame or Facebook’s Mark Zuckerberg. 

South Africa will only emerge from this crisis if we look for opportunity in this most uncertain period in world history.

Just as an example of what I am talking about, I’ll use this opportunity to crow about a good friend of mine and business owner in this time of coronavirus.

A year ago, he and his partner decided to take the biggest risk of all and start a restaurant business in the most northern part of Pretoria in the township of Soshanguve.

In a township foreign to both, they sunk a significant amount of their own capital in building their first chain. 

As a worried, and sometimes too conservative, friend, I wondered about their venture that was a 70-kilometre daily travel from their home in Johannesburg.

No matter the entrepreneurial drive and the smarts of the couple, this was always set to be a monumental task.

On my visits, we’d talk up the prospects of a digital delivery platform and how it excited him as a medium-to-long-term growth prospect.

In preparation for that future and, given how badly the state has managed the broadband dissemination across the country, it’s anyone’s guess how long that will be, he signed up to one of the very few, if not only, digital apps in the township as an experimentation play, I would imagine. 

As is the case with most businesses, his first year was full of ups and more downs.

The five-week lockdown period that barred all restaurant businesses from operating was particularly brutal. Under the less restrictive, but just as crippling, Level 4 lockdown, he had only planned on opening over weekends because they feared the worst for their business and employees. 

But since the 1 May opening, the business has had its best ever performance on record.

His experiment with online digital delivery at the tail end of last year had inadvertently prepared his kitchen and his most prized “oven” for this new Covid-19 world.

Demand has exploded and his business has been able to meet the change in consumer behaviour.

Larger competitors such as Yum-owned KFC, Nando’s are struggling to convert their stores that are housed in malls to meet the demands of the digital economy, leaving the field to his small enterprise. 

Now if my friend had thought small and not sought to innovate in a “township” market in which many wouldn’t care to invest their efforts, he’d be worse off than these corporate giants, shielded by their sizeable balance sheets.

But by his efforts, he has landed on his feet in what, by all accounts, is the deepest economic crisis since the Great Depression of the 1930s. 

He has found or rather, through his own smarts, stumbled upon the opportunity in a crisis. 

Which brings me to that depression and the longest-serving US president in history, Franklin D. Roosevelt, who was heralded as the man to kickstart that country’s global dominance almost a 100 years ago.

I know it’s quite the jump from the dusty streets of Soshanguve to the jazz age of America, best seen through the pen of famed US author F. Scott Fitzgerald’s The Great Gatsby, but bear with me … 

There’s a thought. Had it not been for the duration and the hardships of the Great Depression that came after that jazz age, the break with conventional economic orthodoxy and reforms to social security that were introduced in its aftermath would have never seen the light of day.

The never-ending winter bought Roosevelt the space for his argument for reforms to win the day in a world that was up until then, solely driven by the cold and hard pursuit of profit. Maybe it still is in truth. 

Now, were measures used in the last global recession, such quantitative easing, employed in the 1930s, it is more than likely that the US and global economy would have bounced back sooner.

But the New Deal would have remained an idea gathering dust in Roosevelt’s office. 

The depression lasted 10 years and came with grave danger to the global order, but also offered opportunity for reforms that the US president had considered even before moving into the White House.

Reforms that would help build the America that current US president, Donald Trump, keeps reminding his countrymen and women of.

Of course, he leaves out the fact his fellow Republican president in Ronald Reagan and his partner across the Atlantic, Margaret Thatcher, would embrace policies that broke that old America. Anyway, I digress. 

The depression was perhaps an ugly necessity in bringing about social justice in what’s still the world’s most influential economy, the US. 

And herein lies a central characteristic of a crisis; danger and opportunity.

It takes a certain kind of leadership to see that opportunity and inspire confidence in the common man that there will be better days ahead. The US was lucky with Roosevelt, who served four terms and died in office.

It inspires very little confidence in me when we have a finance minister breaking down on Twitter about the pressures of the political contestation in these very dark hours.  

Successful wars are fought with a strong Treasury.

A case in point was South Africa’s swift recovery from the last global recession in 2008, where we had the necessary arsenal to follow a counter-cyclical fiscal policy, where the state spends in a downturn to stimulate the economy.

We are now set on a similar path without the buffers of yesteryear because of the bad presidency of Jacob Zuma and a finance minister questioning his position. 

Leadership will be key to getting out of the economic ruin to come and a roadmap. We shouldn’t have a problem in that regard. 

Now in South Africa, we’ve invested much in re-imagining our economy.

At last count, I think there were some six plans to tackle structural unemployment, land reform, a weak schooling and healthcare system for the vast majority and spatial divides that sentence us to a life lived apart.

Apartheid’s work still lives. 

For more than 20 years, these plans have hit their own roadblocks from either established business and their pained adoption of transformation efforts, or to union movements more concerned about monthly contributions than job security or growth.

Corruption was certainly the antagonist-in-chief over the past decade as it relegated the National Development Plan (NDP) to a coffee table decoration in the impressive hallways of the Union Buildings.

I wonder if it ever made an appearance in Luthuli House. 

What we do know about this coronavirus pandemic is that it will fundamentally change how we conduct commerce across the globe.

For us, it will deepen our structural flaws that have been highlighted in the many plans welcomed with much song and dance initially. There’s been lots of thinking and solutions considered in smoke and whisky-filled rooms, I like to imagine. 

No one can ever fault us for not being reflective of our weaknesses and by doing so, the requisite reforms have already been written. In re-imagining the South African economy, as President Cyril Ramaphosa, has sought to inspire us to do.

I don’t think we have to call on another Codesa that ushered in the new country. 

We just have to dust off plans of old and perhaps rethink solutions because of this unprecedented crisis.

The president himself was one of the 26 commissioners of the NDP released nine years ago, an economic roadmap that was wholly adopted by all political parties.

It’s an economic blueprint to which a clearly frazzled Finance Minister, Tito Mboweni, and an increasingly panicked Minister of Trade and Industry, Ebrahim Patel, should perhaps cling to at this time, instead of contradicting each other at every possible turn. 

Following this course is the only manner in which we land on our feet when the curtain on the entire global economy finally lifts. Our years of navel gazing may in the end prove more useful than even I thought.

Much in the same way my friends experimentation with a digital economy in an analogue world may have just saved his business and ushered it into a new realm. 

There’ll be casualties of the Great Lockdown, the economy needn’t be one, if a course has been set.

Our greatest advantage is that we’ve never been satisfied with how we were and for all our political theatre, we’ve all agreed on the need for change and the plans have been drawn in the pursuit of a just society. 

What is clear is that monetary policy that papered over the cracks in the global economy after the last recession won’t be able to repeat its magic trick this time around, nor will fiscal policy alone. 

This crisis isn’t one borne from a crash of asset bubble. Were it so, we have the proven tools to swiftly recover.

There’s an old military dictum that “… generals always fight the last war,” which the men and women at the world’s leading central banks have proved true once again.

But their armoury of low interest rates and quantitative easing won’t win this war.

Policymakers and corporate titans, the world over, remain baffled. We need not be, given the work that has already gone into restructuring what country we live in. 

This economic war differs from any other as Covid-19 will fundamentally change our everyday lives and to what extent, we just don’t know.

The winter will be longer and great suffering will follow, but in it, I urge that we use this crisis to define who we are with the playbooks we have in the locker room.  

There’s no need to reinvent the wheel.  

What we will ultimately need to accompany the years of thought that have been put into the economic story of us is for someone to take the lead and not fear making the mistakes that naturally come with it.

There’s opportunity in crisis. 

– Ron Derby is the editor of Fin24.

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