Macro Forum: The Street View
Actom, working with the Red Cross, providing food parcels to support 1000 families from neighbouring informal settlements.
Actom is Africa’s largest manufacturer and aftermarket solutions provider of power generation, transmission and distribution equipment and services. The group, based in Johannesburg, had sales of nearly US$500m in 2019 and >6,000 employees.
Most of our sales are to South African customers. Exports (mainly to neighboring countries) account for about 15% of sales.
Like many, we first learned about COVID‑19 in late-2019 but never thought it would spread to South Africa.
Then, on 16 March 2020, exactly one week before lockdown was announced in South Africa, Actis invited us to a “Crisis Management” video call with their Heads of Value Creation and Responsible Investment, Ed Williams and Shami Nissan.
Ed and Shami, with their homes in the background as we still sat in our Boardroom, shared insights and responses from other businesses Actis owns around the world, including a handful in China (one in Wuhan). They told us about the Actis response, including their Coronavirus Committee, which they both sat on. We heard about governments around the world gradually enforcing closures of hospitality outlets and manufacturing plants as the virus spread outside China and how Actis was working with management teams to “plan for the worst but hope for the best”.
I must say, this jolted us into action. Straight after the call, we took the decision to set up our own Coronavirus Committee (using the agenda and minutes from the most recent Actis meeting as a framework) and began making our own plans.
Our main concern was of course how to protect the health and safety of our employees. In our market, this can be particularly challenging given the high incidences of immunosuppressive conditions such as HIV and AIDS, as well as the use of busy public transport for commuting, leaving many of our employees particularly vulnerable. Actis pointed us to useful guidance from trusted sources and was able to share some best practice examples from other businesses who had already implemented new measures and policies.
Inevitably, we were also worried about the economic and financial impact of the virus on our business, customers and staff – and this is where some of our most challenging decision-making was put to the test.
We were advised to run a range of cash flow scenarios to understand how broad and deep we would need to go. Within days, we sat as an Executive team to approve a number of cash preservation initiatives. In a difficult 3-hour session, a series of tough decisions were voted through. We didn’t have time to be diplomatic, we needed to take extreme action.
But the timing was terrible. Days earlier, annual salary increases and incentives had been announced. And yet now, on 24 March, with less than a week to go before these were due to come into effect, we had to communicate a pause in pay rises, a pause in pension fund contributions (requiring us to change the fund rules), cancellation of annual incentive payments and, as if that wasn’t bad news enough, scaled pay cuts amounting to as much as 50% across the board. We are all in this together and I was determined to treat everyone equally and fairly. One of my top performers threatened to resign, so I took the decision to let him resign rather than open the door to inconsistency. It’s at times like these that you see people’s true colors – who is committed to the business and who isn’t, who shares your values and who doesn’t.
On the very same evening as we announced these draconian measures, the Minister of Labour called on employers to continue to pay staff as normal and consult broadly. Understandably, our people felt wronged. Some even felt we were acting illegally. But as a management team, we believed we were on the right path.
In hindsight, we made absolutely the right call. Two days later the government changed their tune; and three weeks later, people saw others not getting paid at all and were grateful. One of our biggest customers paid full salaries in April and May; by June, they had run out of cash.
By our estimates, acting when we did (thanks in no small part to the early warning and follow-up advice received from Actis) has avoided some $4.5m of losses and mass retrenchments.
At times like this you can’t take the capitalist approach to life. We live in a nation where many live hand-to-mouth every day, with no savings. The official unemployment rate before COVID‑19 was 30% (36-38% unofficially). This is estimated to rise to as much as 50%. The risk of social unrest is high and increasing.
Our Head Office and main manufacturing facility is surrounded by informal settlements (or “squatter camps”) with 120,000 living in sheet-metal shacks. Some of our employees come from these same areas. In our industry, we use a lot of copper cable and other valuable metals. When lockdown started and commuter trains stopped running, people ran on to the tracks and started stealing the power cables from the electrified network.
In addition to putting in place a basic living allowance and sustaining medical aid contributions for our staff, one of the Corporate Social Responsibility (CSR) measures we worked on was with the Red Cross to deliver 1,000 food parcels to those most in need in our local community. We could have done it ourselves but that leads to chaos in a community that is (literally) starving. The Red Cross has experience of identifying who is most vulnerable and how to approach it in a structured way.
Given the likely rise in unemployment following COVID‑19, we are now looking at how we can engage with the Red Cross to help offer basic skills training to the informal sector (such as welding or fixing a plug) so that at the very least they can earn a living. This is good for our community and at the same time helps to protect our business. It also continues our long-running CSR theme of supporting schools and universities to educate people to be self-sustaining.
Unfortunately, this isn’t over. As restrictions start to lift, you would expect the infection rate to have declined, but here it’s growing. So we need to find a way of protecting lives while protecting livelihoods. We’ve now put in place a factory map with multiple cells – if there’s an infection, we can isolate a cell without having to shut down an entire plant, which would be catastrophic.
So as we look forward to a new normal, I can reflect on some lessons learned during this pandemic which forced us to navigate our business and stakeholders through this unprecedented crisis.
First, people: I have been humbled at how my team has remained so committed despite working longer hours for half their salaries. A crisis brings out people’s true qualities. This is particularly true of the HR and Health & Safety (H&S) community who have been at the front line in bringing about unprecedented changes to people’s livelihoods and ways of working. As I write this article, one of our Senior H&S Managers, who has been at the front line developing and executing policy and protocols, lies in an Intensive Care Unit at a hospital on a ventilator, after being infected by COVID‑19.
Second, leadership: you need strong leadership in times of crisis. Clear, tough, timely decisions have got us through this crisis. We acted early and we didn’t blink: with our own people plans, issuing force majeure notices to customers, engaging with our lenders, pushing back hard where we felt we had to. For example, our lenders wanted reforecast after reforecast, which I completely understand – but in the end I had to ask them, “Do you want me to focus on running the company practically or developing academic models, which we both know won’t be right?”. They backed down.
Third, preparedness: always have a contingency plan and always save for a rainy day!
And finally, move with the times: COVID‑19 has changed our outlook on life and revolutionised our operations. It has fast tracked elements of The 4th Industrial Revolution (4IR) in our markets with factory acceptance tests and inspections even done on-line. Entire governments and companies have been run remotely when they never thought this possible. Working from home has not only proved to be possible, but appreciated, with potential cost savings to boot.
Whilst COVID‑19 has wreaked havoc in economies and resulted in a global humanitarian crisis, it has forced us as humanity to stand together in unity and support one another, in a world which has traditionally been dominated by capitalism and selfishness.