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Turning the tide: We need to work in order not to starve


Mike Abel is a leading marketing and advertising practitioner. He is Founder & Chief Executive of M&Saatchi Abel and M&C Saatchi Group of companies operating in SA. He is former CEO of M&C Saatchi Group, Australia and before that, co-led the Ogilvy South Africa Group as COO and Group Managing Director, Cape Town. Mike has been awarded Advertising Leader by the Financial Mail and Finweek and his company was named Best Agency in SA in 2015. His company is home to The Street Store, the open-source, pop-up clothing store for the homeless which has become a global movement. He is a speaker and writer.

Without earning and spending, there is simply no recovery. Only poverty. And more Covid-19 due to lowered immune systems and enormous stress.

A number of people have asked me to unpack my growing concerns regarding an extended #lockdown in a simple and accessible way.

As I’ve said all along, I’ve always been a great supporter of the initial five-week lockdown as we, together, heeded the call to flatten the curve and give our country time to prepare our health services.

But now, without a certain cure on the horizon, and possibly even 18-24 months away, Covid-19 is, sadly, the new normal, lurking among us.

So, below is my view of where we find ourselves and what we can actually do.

There is currently a certain narrative in our country which wrongly implies that discussing the socio-economic impact of Covid-19 is somehow being disrespectful to the intention of saving lives. I’d like to point out why this is not the case, but in fact, the complete opposite.

It’s an essential conversation we need to have if we indeed do want to save lives and help fend off a calamitous tragedy.

Having worked from time to time at the coalface of poverty across various initiatives for over 35 years, one can quickly see how the perils of unemployment manifest in various guises. 

Malnutrition, for a start, dramatically lowers people’s immune system and makes them highly susceptible to Covid-19 and a host of other illnesses including tuberculosis. Malnutrition comes from the inability to buy proper food and eat regular meals. This is the direct and irrefutable consequence of unemployment. Where there is simply no money in the house.

Going into the Covid-19 crisis and lockdown, South Africa had already reached record unemployment levels of 32%-plus, across all citizens, and more than 50% youth unemployment for those young and passionate individuals seeking jobs. Six weeks into lockdown, we hear of the further hundreds of thousands of jobs that have been lost.

I have also worked closely with a job creation NGO for the past year, and know precisely how difficult and costly it is to create a job, in pre-Covid South Africa, so this note isn’t from someone who hasn’t had front row seats to this unfolding tragedy, even before it hit.

Let me point out some of the economic realities of unemployment and businesses closing down. Fewer people working means less income tax paid to SARS. Less tax revenue allows the country to do fewer things in terms of education, healthcare, infrastructure and supporting the needy. More unemployment means fewer purchases. So, less VAT earned by SARS. Fewer purchases means less turnover and profit made by companies, so less company tax to SARS.

So, what we see in this simple paragraph, is less income tax, less VAT and less company tax.


Our R500-billion “injection” in the economy is not free money. It comes with strings attached, compound interest and growing debt. It’s less of a stimulus package than simply an oxygen tank for our economic body. It’s triage.


When companies perform poorly as a result of a downturned economy, the owners and investors in those companies also have far less money to spend on assets. When they trade these assets, like shares or properties, they pay capital gains tax (CGT), so this is also going to decline radically.

I point out in the above few lines, there will be less, far less tax revenue generated by South Africa than there was before Covid-19.

Now, an unfortunate reality is that prior to lockdown we were collecting too little tax revenue as a country, as we had failed to grow our economy and as a result have far too few taxpayers as a percentage of our citizenry. This also means that investors, both local and foreign, had insufficient faith in South Africa providing a fertile and stable environment for growth (return on investment) so they either chose not to invest here – or not to invest at all.

The reason our attraction to investors was so low is because of our yet unproven ability to tackle corruption and bring the perpetrators to book. Other unclear policy statements about radical economic transformation and redistribution of land without compensation made foreign investors jittery and wary.

It’s not that they don’t believe in helping create a far more equal society. It’s simply that whenever a government talks, without absolute clarity and a clear sustainable, viable plan, about taking assets away from some citizens or companies and giving them to other citizens, it breaks trust and creates a low-faith environment. 

In addition, our power company, Eskom, could not cope with the existing demands of our country, so manufacturers, factories, mining and related companies requiring stable, ongoing electricity supply, could not risk unpredictable power output. So the money simply moves elsewhere internationally.

Investors today have the whole world to choose from in terms of where they put their hard-earned money.

So it is easy to understand how our situation here is very different from wealthy and developed markets. They have the investments, reserves and tax revenues to afford certain lockdown dynamics and related subsidies and stimulus packages that we can only dream of.

Then, one week into Covid-19, Moody’s decided to implement their long-expected downgrade. Unimpressed by our Budget and our cost control measures, they could no longer wait for us to deliver on our fiscal promises and intentions and made the hard call. The timing was awful and it was indeed kicking a dog when it was down, but at the same time, they knew Covid-19 would only exacerbate an already dire economic situation.

The problem with our new investment rating, is there are certain foreign investment funds worth billions of dollars that are not allowed to stay in a country that has junk status. These are not arbitrary decisions, but regulated ones, where regardless of belief of recovery or sentiment, the money must leave until we regain our former investment grade. Our crippled economy has not yet dealt with the looming impact of this multibillion-dollar disinvestment.

Now, you may think I am being negative. I am not. All of these comments are plain, cold and unemotive facts. A financial report card that paints an incredibly worrying picture if not meaningfully addressed in the short term.

Our R500-billion “injection” in the economy is not free money. It comes with strings attached, compound interest and growing debt. It’s less of a stimulus package than simply an oxygen tank for our economic body. It’s triage.

When I then express my concern for our country and its people, it’s taking all this into account. A vicious circle of growing debt, less revenue and far too little local and foreign investment. You cannot cure the body, without understanding exactly what you are dealing with, in order to bring it back to good health.

So, what is the muti required to fix South Africa’s economy?

The first thing we all need to do, hard as it is, is adopt a positive attitude. I have seen people achieve remarkable triumph over adversity when they approach problems with a constructive mindset. A victim mentality and negative outlook is the guaranteed formula for failure. Nothing positive ever emerges from negativity. And whether you like it or not, believe it or not, in one way or another, we’re all in this together.


It is extremely foolish to think business is like a light switch that you simply flick back on. Hundreds of thousands, if not millions of jobs have been lost in the past two months, that will never come back in their same shape or form. How many more jobs are we prepared to lose, given we were at record levels of unemployment before Covid-19?


When I suggest that we all need to head back to work, some critics have found my observations ill-considered, naïve or at worst, irresponsible and dangerous. To think this is to sadly ignore what I am actually saying, to ignore the science and to ignore the data.

What I have said repeatedly, is I fully supported the five-week lockdown which allowed us to flatten the curve as a country (which we have all successfully done) while giving the healthcare services time to prepare for a possible onslaught.

I also did state, repeatedly, the immuno-compromised and elderly among us should remain under a voluntary lockdown. We need to assist those at most risk from having to head out and be susceptible to infection, whilst ensuring, as far as is possible, that we provide food and shelter for these people.

I’ve been at pains to mention workplace safety as part of a returning to our jobs.

Barring a miracle vaccine, this virus is among us for the next 18 months, perhaps even longer, so we need to adapt to a new normal, as science and our understanding of this virus progresses. Social distancing, mask-wearing, hand-washing and sanitisation may be with us for a while, but unless we get the cogs of industry moving and across all businesses, we are guaranteeing a profound socio-economic disaster. We need to be vigilant. To monitor staff, temperature checks, tracking and tracing anyone who has been around someone overtly infected as we already know, a high percentage of those who have had the virus, demonstrated no symptoms.

We can only deal with the current facts as they present themselves and wide-scale testing therefore remains critical.

Public transport naturally poses a huge challenge regarding infection, and whilst every precaution must be taken with masks, sanitisers etc, the mortality rate is extremely low among healthy individuals, so if those susceptible remain under lockdown, the mortality rate among healthy commuters should also be extremely low. This is not my opinion. It’s the data available at this moment.

There are no perfect answers. There is sadly not a no-risk option on the table.

It is unfortunate that those who have their own transport are certainly at lower risk from infection as they commute to and from work – but they are simultaneously also at lower risk from starvation. It is in such examples where our social inequality is most amplified, in how those who need money most urgently, are simultaneously those who will have less protection against the virus due to the challenges of their everyday circumstances.

Here’s the rub. The only way out of an economic depression is spending. Buying groceries, clothing, cars, phones, investing in businesses, infrastructure, development, property. This spending creates jobs, those people in jobs spend and create other jobs. When a business dies, it’s not an automatic defibrillation that gets it going again. Certain businesses and industries which die remain dead, and all the jobs along with it.

It is extremely foolish to think business is like a light switch that you simply flick back on. Hundreds of thousands, if not millions of jobs have been lost in the past two months, that will never come back in their same shape or form. How many more jobs are we prepared to lose, given we were at record levels of unemployment before Covid-19?

Without earning and spending, there is simply no recovery. Only poverty. And more Covid-19 due to lowered immune systems and enormous stress. So, investment by people, companies and government is the ONLY way out of this mess. And without producing stuff, manufacturing, creating and selling, locally and internationally, there is no investment.

We need to reduce our debt as much as possible. The government needs to create urgent and favourable conditions for local and foreign investment through cutting red tape, being extremely business-friendly and through tax-friendly incentives.

We need new investment packages and schemes that are hugely compelling and attractive to investors and are underpinned by legislation to protect and enshrine the rights that protect these investments.

You cannot save yourself into growth. You invest yourself into growth. You can save money, most certainly, but it must then be reinvested in order to grow. In your businesses, investment policies, banking products and other key investments. This pertains equally to people, to businesses and to government.

We must contain and even reduce debt as far as is possible. The same way compound interest is the magic formula for wealth creation, it has the equal effect on loans and debt where they grow and grow and then spiral out of control. Unless the spend is essential, or unlocks growth opportunities, curtail your borrowing.

We must manufacture and farm locally, and we must buy local and spend local. We must keep our money here for the next five years as far as is possible and also get behind the hospitality and tourism industry. Take advantage of our weak currency for the next few years on local holidays, if you can afford them and let’s use our cheap currency to attract the world to come here once we have a better fix on this virus and have a vaccine.

It’s a clear and simple picture I have painted. People must work in order not to starve. Working people support those who can’t or don’t work. Working people earn and spend. They pay taxes essential to government, which in turn is able to supply basic services. Our president and our Finance Ministry know this. They knew it before Covid-19. They know we cannot afford to go beyond a five-week lockdown.

We are now playing well into crisis overtime. And for those who believe I am being irresponsible, I say this from my heart. I am not. Your best intentions to sustain a lockdown may indeed secure the worst possible outcome. My points made are economically and factually irrefutable.

May we all start turning the tide together. DM


"Information pertaining to Covid-19, vaccines, how to control the spread of the virus and potential treatments is ever-changing. Under the South African Disaster Management Act Regulation 11(5)(c) it is prohibited to publish information through any medium with the intention to deceive people on government measures to address COVID-19. We are therefore disabling the comment section on this article in order to protect both the commenting member and ourselves from potential liability. Should you have additional information that you think we should know, please email [email protected]"

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