Covid-19: The Impact On The Relationship Between Business And Government
With economies across the world shutting down and unemployment rising, the relationship between business and government has changed. Expectations have changed and these will last well beyond the end of Covid-19.
The most obvious example of government support comes in the form of the massive financial support being provided to the private sector, including the self-employed, but also charities. Well operated and run organisations appear to need bailouts as much as others. But those with a greater cash reserve seem very well placed to rebuild themselves once the crisis is over.
Of course there is no single model of relations between business and government, including across Africa. There is a wide array of approaches from free market led, privatisation programmes, state ownership and welcoming inward investment. Even those governments the world over, normally most in favour of a free market approach, have been prepared to offer direct financial support. They appreciate the consequences of letting any organisation simply fail.
But governments are publically demanding help and support from business as well. They are being expected to step-up in everything from helping and supporting staff through to filling gaps where ventilators or protective equipment for frontline staff are needed.
And that is just the start.
Following the financial crash of 2008, the banks were similarly supported financially. There is though a widespread belief that they were never really held to account for their actions and despite calls for them to support, especially, small and medium sized business, start-ups and entrepreneurs, they never really played their full role in doing so. In other words, taxpayers bailed them out for little or no return.
Whilst that is a gross simplification of the truth, it is the one that has largely taken hold. No government will allow this to happen again. So all those that have taken monies from their governments this time around can expect demands on them to follow. Quite simply, there will be price to pay. They will be expected to listen closely and deliver for their government in future. So businesses will have to get used to not being quite so free of governments as many were used to pre-Covid-19.
Another implication across business will be the possibility of more economic nationalism. Countries will look inwards to their businesses rather than adopting a more outward and internationalist perspective.
Many countries, including across Africa, have enjoyed a close relationship with China in recent years. But China’s position in the global economy will certainly be scrutinised because of its perceived handling of the Covid-19 crisis to start with. Speaking recently, former UK Foreign Secretary, Lord (William) Hague of Richmond warned that China “isn’t going to play by our rules”.
That may not be a problem for some, particularly where it comes to infrastructure and 5G rollout, but it could complicate relationships with other countries, such as the US and across Europe, which as a consequence of the current crisis choose to adopt a more adversarial relationship with China. This will lead to a more complicated economic relationship. Consider, for instance, companies seeking access to a post-Brexit UK that is more sceptical towards China than their own domestic government.
The repercussions will vary in different countries but as a general rule we can expect to see:
- – An emphasis on companies, and individuals, paying tax – this is not just about helping governments pay off the massive debts being incurred but also paying for health and social care services;
- – An expectation of better support for staff, especially lower paid members of teams;
- – Businesses being asked to play a role in the delivery of social priorities set by governments;
- – Governments being explicit in expecting companies to deliver for their own country first before looking elsewhere;
- – More complicated arrangements for foreign markets.
So businesses need to engage closely with their governments, opening up dialogue and keeping them informed of developments, especially internationally, and what they can be realistically be expected to deliver.
Business needs to plan for the new level of expectations. There will be a changed environment and no more business as usual.