TI: two clear opportunities for a better post-Covid world

Poverty and Inequality

South Africa as a developing country relates to most – if not all – of the 10 mentioned key focus areas, and especially to poverty and inequality. Our huge inequality – one of the world’s highest in terms of income – has had devastating consequences on the poor during the Covid-19 pandemic. The working class cannot go to work and informal traders are struggling to make ends meet owing to the lockdown regulations that prohibit them from running their businesses.

The report confirms what we already know – that the pandemic takes a disproportionate toll on the poor and the marginalised members of society. They have limited access to proper health care and social protection and most importantly, they cannot afford to stay home and not be able to provide for their families. This means these members of society cannot fully comply with the lockdown regulations and restrictions. Being denied the opportunity to make a living has caused a rift between governments and their citizens around the world. The report names Brazil and US as countries where people broke the regulations and took to the streets in protest to demand their liberties back.

To remedy the situation in South Africa, the government introduced a relief fund for small businesses struggling to stay afloat during lockdown and for the unemployed, and increased the amount for social grants. These relief packages were widely welcomed, along with concerns that the funds would be misappropriated. Those concerns were realised when a month after the announcement of the special grant for the unemployed, it was revealed that only 10 people out of a verified 2.6-million had received assistance.

The TI report sees this pandemic widening the inequality gap even further, undermining the progress of recent decades. It also reflects on how the essential low-skilled and low-paid workers – such as nurses or cashiers – are more at risk of contracting the virus. Nursing services have been in great demand during this time; as such they are more exposed to the virus than a normal person as they deal with infected patients on a daily basis. In some health facilities across the country, nurses had to treat the sick without the much-needed personal protective equipment (PPE), putting themselves at an even bigger risk.

This led to unrests in certain health facilities as nurses refused to work without PPE. Likewise, cashiers in supermarkets have been at the heart of the crisis, ensuring that during the lockdown people still manage to get essential supplies, thus placing themselves at risk.

Concurring with President Cyril Ramaphosa’s recent admission- that jobs will be lost, the report states: “The rich, well-connected, well-resourced populations are better equipped to cope with the crisis.”

This situation at some point will potentially fuel social unrest and bring the debate of wealth distribution back to the table. The report makes the argument that the disease will spread faster in poorer areas, and will overwhelm informal settlements where people are not able to practice social distancing because of overcrowding, or because their informal jobs require social or physical contact with others. The spread to townships was inevitable, and Soweto, the biggest township in the country, became a Covid-19 epicentre in Gauteng.

The paper reveals that others argue that in the long-term the effects of this pandemic might create better wealth redistribution in this regard, however some sectors will benefit from the crisis.  Covid-19 continues to expose global interdependence and the need to lessen inequalities; it puts pressure on governments to invest in health care, housing and education for their citizens.   The report cites Germany as one country where politicians have begun advocating for a tax on the wealthy to finance the battle against Covid-19. South African finance minister Tito Mboweni proposed a similar approach to Parliament – this wealth tax will not be particularly to fight the crisis but it will help in clearing debts incurred in combating the pandemic.

The effects of the Covid-19 pandemic on the poor might generate political will for governments to adopt stronger policies to address inequality.

The economy

In terms of economy, the report discusses how governments and businesses initially treated the pandemic only as a health crisis, with the main objective of preventing the spread of the virus and saving lives. The escalation of the disease across countries led to government-enforced lockdowns to avoid the virus spreading even further, and then it became clear that the long-term economic repercussions caused by the lockdown restrictions will be calamitous. Lockdowns halted a huge number of economic activities including international production and supply chain, and these drastic measures continue to cause decline in countries’ gross domestic product (GDP) and economic growth.

As expected, the restrictions are likely to affect poorer, more vulnerable and export-dependent economies more intensely than richer countries, as the latter have more money to invest in health care and infrastructure to bolster their economies. The restrictions on travel and tourism will cause even worse damage to poorer countries who make a chunk of their GDP from the tourism industry.

The tourism sector in South Africa accounts for almost 3% of the national GDP and it is hugely affected by the crisis as a big number of the visitors come from outside the country. Tourism-based businesses had to shut down, leading to more job losses. The industry missed out on over 16-million visitors recorded in 2019, a number that was expected to steadily rise in 2020.

The report also stresses the fact that countries had to take loans to subsidise their efforts in dealing with the crisis, something that might hinder their development in future as they try to pay back the loans. South Africa was no exception – Mboweni suggested getting a loan of approximately R100- billion from the World Bank and the International Monetary Fund (IMF) to form part of the stimulus package of R500- billion the government planned to spend to address the Covid-19 pandemic. The proposal was, and continues to be, highly debated by opposition parties and political commentators, some fearing that the conditions of the loan might strip the country of its sovereignty.

Governments in many countries responded to the lockdown of economic activities by introducing relief funds and stimulus packages to ease the financial and economic burden on those most affected. In South Africa this includes a special unemployment grant for the poor, increase in social grants, and funding for small businesses. As a result, it is estimated that government spending this year will exceed 2% of the global GDP.

The downside of such relief packages is to present opportunities for people and businesses to solicit for resources and benefits they are not entitled to, the report said. It added that in countries with high levels of corruption, the economic rescue packages might fail to reach their intended beneficiaries if special interest groups capture them. Already in South Africa there have been reports of the relief fund being looted – the Special Investigating Unit (SIU) is reported to be currently investigating over 20 cases of people who fraudulently benefited from the relief fund.

The TI report further argues that the pandemic has exposed flaws in the current economic structures and this could present an opportunity for policymakers to design rescue measures in the public interest.

Keeping in mind historic events that may have had similar impact – the world wars, the Great Depression – countries may emerge with stronger welfare systems and more equality-based policies.  “The UK, Canada and a number of other countries sharply increased the top income tax rate after cataclysmic world wars in the first half of the 20^th century, while the Great Depression ultimately led to the New Deal in the US.”

The Covid-19 crisis could ultimately see a rise in popular demand for governments to invest in essential services; it could also increase the level of public scrutiny on economic decisions made by states and corporations.

 

Illicit financial flows

The report further shines the light on the impact of illicit financial flows (IFFs) during a pandemic where countries need as much funds as they can get. There has always been a heated debate on the impact of illicit financial flows, tax evasion and tax avoidance, as these deny countries the ability to provide public and social services.

According to TI, the pandemic has shown that IFFs could have been used to improve health care systems or contain the ongoing economic crisis, but instead, embezzled from public purses, they ended up in tax havens or were invested into luxury properties abroad.  Close to 2 000 South Africans were mentioned in the Panama Papers and the South African Revenue Services began investigating those names.

Without proper transparency and accountability mechanisms in place, the resources released to curb the pandemic might also be embezzled. According to the report, the World Bank suggests that previous relief funds resulted in significant money flows to offshore bank accounts, therefore financial institutions, financial intelligence agencies, and law enforcement should stay alert as the flow of dirty money will likely increase in the coming months.

“Experts believe that funds stashed in tax havens should be used to pay for the crisis. There are also proposals that the poor and vulnerable should pay less and receive more, while rich people and strong, highly profitable corporations should pay more – a lot more,” said the report.

However, for this to be effectively implemented, the paper argues that it has to be established who owns assets and where those assets are located.

One concern is that companies that pay little to no taxes in countries where they operate are now requesting government bailouts while they have stashed large amounts of money in tax havens. To avoid this, countries like Poland, Denmark and France are proposing to exclude companies that operate in offshore tax havens from Covid-19 financial support.

State capacity

Most countries’ state capacity has been put to the test during the Covid-19 pandemic – and the reports suggests that not all government will pass. “Countries with low state capacity will likely be less able to enforce social distancing measures, stock and distribute essential goods, or even maintain a monopoly on violence.”

South Africa has been struggling in this regard, in terms of distributing essential goods and maintaining social distancing. Essential goods like personal protective equipment have been slow to reach hospitals and schools, or were stolen along the way. The crisis puts more pressure on the health care system across the world, and exposes flaws like labour shortages in health care facilities and lack of essential medical supplies such as gloves, tests, masks, hospital beds and ventilators.

The report also notes that health care will be the centre of focus for months to come, which might lead to other state sectors being overlooked.

It also highlights the call from across the political spectrum for more investment directed at public infrastructure, and an increase in government resources and capacity. Amnesty International has also called for governments to use this pandemic as an opportunity to strengthen health care systems and state institutions and support them with sufficient resources, according to the report.

The report states that countries with inadequate state capacity are often distinguished by weak institutions, instability and kleptoctratic networks. South Africa’s political landscape of recent years and the continued looting of state coffers without consequences is more than enough to place it in this shameful category of countries with low state capacity.

 

Civil and political rights

When the World Health Organisation declared Covid-19 a pandemic, governments around the world implemented strict measures – including limited movement and freedom to assemble – to control the spread of the virus. These measures are not generally lawful except during a time of a crisis and are supposed to be revoked as soon as the crisis has been put under control.

Citizens are forced to deal with strict curfews and some countries use technology to track the movement of the public. In the early stages of the lockdown, a mayor in Limpopo used a drone to track people violating lockdown regulations.

The report raises the fear that some of these draconian emergency measures might become permanent. Such occurrences are not rare. Another fear is the strict measures against civil and political rights may be sustained beyond the crisis.

Other countries have gone as far as arresting journalists who are critical of the regulations, and instituting measures that limit the ability of journalists and institutions to demand accountability.   The attack on journalists and civil society groups shuts down the vital information-sharing function that is needed during a pandemic.

Lindiwe Zulu, the minister of the Department of Social Development, drew up regulations that prohibited NGOs and soup kitchens from distributing food parcels during the lockdown; the Western Cape High Court overruled the minister’s decision.

Some of the restrictions imposed by governments are considered to be heavy-handed and irrational. In some countries people have taken to the streets to fight against the regulations, while others have resorted to social media to mobilise and demand accountability.

Lockdown regulations means that people cannot hold anti-corruption protests in the streets; instead, this has encouraged digital activism.

Social cohesion and trust

According to the report, well-developed social cohesion structures are believed to be essential to overcome challenges such as Covid-19.  In spaces where such social cohesion exists, there are high levels of interpersonal trust.

This could present an opportunity to implement anti-corruption efforts, as such spaces generally have lower incidences of corruption because participative and civically minded citizens are more likely to act as watchdogs.

The show of solidarity between people during this crisis has led to some political commentators suggesting that this could lead to a decline in political division in the face of the “common enemy”.  The pandemic has also shown people’s willingness to put the wellbeing of society before their own interests, citing gestures of unity from individuals like providing food parcels and soup kitchens.

Information landscape

With the lockdown regulations in place, more people have found refuge on social media and the internet, spending time on these platforms as they consume news related to Covid-19 and other issues. The report reveals that people are more at risk of consuming “fake news” now. While social media has made it easier to communicate with others during lockdown and social distancing, it has opened the door for propagandists to discredit technical expertise through fake news.

The report cites the 5G mobile technology conspiracy theory that was consistently pushed on social media and even led to the burning of 5G masts in some countries. The conspiracy theorists claimed that the coronavirus was caused by the technology through radiation.

The dangers of this conspiracy theory did not end there, as people strongly advised others against taking any form of vaccine claimed to be for Covid-19, thus putting more people in danger of the virus.

The report suggests that exchange of accurate information between policymakers, experts, journalists and citizens in a timely manner will deny fake news the chance to take root in fertile ground. Social media companies like Facebook, Twitter and YouTube are clamping down on Covid-19-related fake news while Google is prioritising information from credible sources like the World Health Organisation.

Checks and balances

This key area stresses the importance of checks and balances of a state – especially during a pandemic. This is when governments are given extreme powers and can shun accountability institutions. State functions like courts, parliamentary committees, and audit institutions are vital in controlling corruption as they ensure that public office is not abused for private and political gain.

During a pandemic, provisions that allow for the suspension of checks and balances are often imposed; however, these are not immune to abuse.

A temporary suspension of checks and balances is expected during a crisis, as the government is expected to act fast. Conversely, these functions need to be maintained and adapted to the crisis to ensure accountability. The report explains that corruption thrives where the rule of law is compromised as those in power exploit the lack of accountability during the time of a crisis and engage in abuse of office with impunity.

These checks and balances have flexed their muscles in South Africa – notably, the Gauteng High Court judgment declaring certain parts of the lockdown regulations invalid. But when it comes to corruption the picture is less rosy. National Director of Public Prosecutions Shamila Batohi recently admitted to the Portfolio Committee that the country is not winning the fight against corruption.

International affairs

The report delves into how the lack of unity between countries – especially powerhouse nations – could lead to a more fatal outcome. Multilateral bodies have failed to drive the agenda. The UN Security Council has failed to produce any action or statements on the coronavirus, and the US announced that it would cut off funding to the World Health Organisation.

“The relationships between the biggest powers has been as dysfunctional. Covid-19 is showing dramatically, either we join or we can be defeated. Rather than co-operate to defeat a shared threat, nations have repeatedly taken unilateral steps to shield themselves and engaged in counterproductive sniping over who is to blame for the pandemic,” said UN secretary-general Antonio Guterres.

The report calls for multilateralism between countries to avoid further health and economical damage. It also highlights the need for global co-operation to ensure global access to medicine.

Twenty-four countries, including South Africa, Canada, Peru, France and others, are named as those who have issued a joint declaration to tackle the pandemic.

Big tech companies

While most economies have been affected by the pandemic, it presents a good opportunity for big tech companies; lockdown restrictions have made technology the only way of communicating.

Platforms like Facebook and Twitter have established themselves as prime outlets for news consumption. These companies have also had an active role helping in the fight against Covid-19. They have donated millions of dollars to relief efforts and have also played a role in disseminating crucial information from organisations like the World Health Organisation.

The pandemic has opened a door for collaboration between governments and big-tech companies; it has also caused a cross-pollination of ideas. These collaboration efforts, should they continue beyond the pandemic, will be beneficent to society through the sharing of credible information and the curbing of the spread of fake news.