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It's near impossible to forecast with any certainty what awaits South Africans beyond the national lockdown. The only certainty at this stage is that things will not be as they were before. Many of our social and economic constructs are being altered - hopefully for the better - as the whole world battles together to contain the rapid spread of the coronavirus.
John Manyike, head, financial education, Old Mutual
The Covid-19 crisis has forced many ‘non-essential’ businesses to close temporarily to help reduce the infection rate. The less contact we have with other people and the greater the physical distance we keep, the better the chances of limiting the crippling effects of the virus on our already ailing health care system.
The lockdown is necessary, but there is no doubt it will have a major negative impact on our economy, which is already embattled and wrestling with the triple threat of unemployment, inequality and poverty.
While investors have been expecting it for some time, Moody’s recent downgrade of SA to junk status has added more salt to the wound. The rating agency cited the country’s inconsistent power supply, poor economic growth and deteriorating fiscal position as some of the reasons for the downgrade.
The full impact of the pandemic is yet to be experienced but early indications are that it will be unsettling, in particular for the poor. While the downgrade could put pressure on the rand, the current weak economy and low oil prices mean that higher petrol or other prices are unlikely. In fact, petrol prices will likely decline again in May (after a huge drop in April) and overall inflation could decline to below 2.5% over the next few months. Sharp declines in interest rates over the past few months will also help indebted consumers.
South Africa has for some time seen very weak growth in the economy. Expectations the economy is likely to record -5.7% real GDP growth in 2020, tipping the budget deficit to -12%. Prolonged contraction in the economy will lessen employment opportunities in an already depressed labour market.
South Africa is among the most unequal societies in the world. Income distribution remains skewed; a large section of population earns below R1,277 per month while only a small percentage falls within the R48,000 per month income bracket. If the disease were to spread mostly across low income areas, it would disrupt the earning potential of many breadwinners and essentially destabilise society.
Society under threat
There’s another aspect to the coronavirus which threatens the very fabric of our society: the loss of breadwinners due to severe illness, prolonged absence from work or death. Unlike developed countries where breadwinners tend to provide for their nuclear family, in South Africa the opposite applies; extended family members depend on a small number of breadwinners. Experts have pointed out that people over the of 65 at higher risk of severe illness once infected by the virus. This is the demographic that earns state grants and fulfils the role of breadwinner in many families.
If younger people understood the risk to breadwinners, they would realise that it’s not just their own lives they are putting at risk when they break the lockdown rules. With the cooperation of all citizens, the virus can be brought under control, and the lives of many South Africans can be spared, including the lives of the breadwinners on whose income many people depend.
Citizens carry an enormous responsibility in ensuring the virus does not spread further. This means abiding by the rules of the lockdown – stay home, limit venturing out to shops unless absolutely necessary and stick to the physical distance protocols.
Corporates have a key role to play
It is vital that the private sector partners with government in the fight against the virus. It is in everyone’s best interest for all sectors of society to work in a united way. Corporates cannot achieve their aims if their employees are sick or distracted by ailing family members, nor if there are no customers with the means to buy their products or services.
I commend all the organisations that have already taken steps in this direction. For instance, financial services providers have put various concessions in place such as ‘payment holidays’ to help consumers, and especially breadwinners, keep their savings, investments and cover active during the lockdown period and the uncertain months to follow.
While there are terms and conditions attached to this, it does offer some relief to consumers in the short to medium-term - and equips them to restructure their personal finances for the challenging times that lie ahead.
Our most effective weapons against this virus remain relatively simple: washing our hands, keeping a physical distance from others and abiding by restrictions. The time is now for all of us to set aside our differences. Let’s cooperate and pull together in every way like never before to save lives and reclaim the future.
About the author
John Manyike is the head of financial education at Old Mutual.
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