News · Published 27 August 2020
When Covid-19 bit in March, the world of work changed forever. This is true of factories, mines and retailers which, when they reopened, had to adapt operations to shifts and had to accommodate new sanitisation and isolation methods in the workplace.
But these changes pale when compared to the massive shift in how the service industry operates. Covid-19 caused businesses to initiate change that might have otherwise taken a generation.
The disruption caused by digital innovation, which created the “gig economy” and changed everything from the way news, movies and music was consumed to how goods were stored and sold, was already entrenched when Covid-19 struck.
What the disease has done is force businesses in the service sector to abandon office towers and send employees home to work remotely through fast internet or phone connections.
This change was already on the cards but was stuck in the inertia created by long-term leases and the fact that organisations were headed by people with work habits going back decades – habits which included the daily commute and having employees clocking in and working in close proximity to each other.
What Covid-19 did was force a massive global experiment in abandoning the office for home-centric work in the services sector.
In the words of one insurance-industry leader: “Covid-19 may have forced the industry to make a change to a more efficient model that might otherwise have taken several years.”
The “work-from-home” culture has reshaped urban geography and nowhere is this more apparent than in Gauteng, where the economy is dominated by the services sector.
Highways that once moved at crawling speed during rush hour and were congested throughout the day are now relatively open as commuters keep their cars in the garage, stay away from the taxi ranks and settle in front of their computer screens or phones to do their jobs from the house.
This work revolution has seen the abandonment of the traditional home to office commute and the emergence of a new home-centric culture which emphasises short local trips to obtain supplies.
Some of these changes may be temporary, but it is not certain that the services sector will ever revert back to the full concentrated-office model because of several factors, among them:
- There are substantial savings in office rentals and telecommunications costs if staff work from home or at less-expensive shared workspaces;
- Staff save substantially on commuting costs and the opportunity cost of travel; and
- Improving connectivity has made it possible to do larger and more complicated work at a distance.
Beyond banking, the fast-growing business process outsourcing sector is also resilient and able to adapt to the work-from-home culture. It is an undeveloped sector that has massive potential given the English-language fluency of South Africans and the time-zone synchronisation with Europe.
This large-scale shift in living and working patterns will change the face of the modern city in the short term and rewire it for a more resilient future less dependent on commuter-based office work that is vulnerable to health events.
To understand this change, you need to follow the journey of the average office worker. Pre-Covid-19, the office worker left home, travelled by car or public transport to an urban centre where he or she worked an eight-hour day. While at work, they consumed coffee, food and snacks from businesses operating in the concentrated office area. They conducted meetings at their place or work or travelled to meetings. They used office telecommunication lines and bandwidth. Finally, they commuted home in the evening.
The goods consumed in this typical office cycle were:
- Fuel and maintenance for the vehicle or public transport costs;
- Electricity and water supplied to the office area;
- The portion of office space rented;
- Office supplies bought by the company from a bulk supplier;
- Corporate telecommunication lines and internet bandwidth;
- Food supplied in the office area; and
- Household shopping for food and other supplies conducted in the office area and transported home.
Once the same worker works from home, all of this changes and they now consume:
- Household electricity and water;
- The portion of home space used for office work;
- Household internet bandwidth;
- Food purchased locally; and
- Office supplies purchased locally.
Like this? Subscribe for free to receive the latest.
This dramatic alteration in how tens of thousands of Gauteng citizens in the province’s largest economic sector are consuming goods and services will threaten several established industries and create new opportunities in the suburb and township economies.
The most immediate effect will be on the office rental industry as demand for fixed space in centralised operations declines.
Yet another dramatic change will be around the auto industry, with a substantial decrease in commuter-miles, which will affect suppliers of cars, fuel and parts and will decrease wear-and-tear on roads.
Inside the offices are thousands of miles of fixed line cabling for phones and computer terminals that are going to be unused, threatening the income of telecommunications operators and service providers. Only a fraction of these costs will be recouped from domestic users as they are likely to use the much-cheaper internet and telephone services available online.
The shift in the consumption of office supplies from bulk-buying by corporates to individuals buying what they need locally (and claiming back from corporates) is likely to stimulate local suppliers. The same is true of food and beverages which will now be obtained locally.
Those who adapt to this new environment best are likely to survive – perhaps even thrive – while those who hold on to the old model are doomed to increasing uncompetitiveness.
Owners of office blocks have two choices – use their empty space to join the shared workspace industry, which began to rise prior to Covid-19, or turn office space into residential accommodation.
The latter option, although requiring heavy capital outlay and regulatory approval, may finally see the much-talked-about “densification” of urban areas.
There is an opportunity for the revival of the niche neighbourhood suppliers of these goods that have been unable to compete with centralised bulk-supplying corporates – provided there is fair competition in the wholesale market.
What about the business culture more attuned to this new environment?
Those who can move quickly to capitalise on new technology and highly mobile employees, while circumventing growing webs of policy and governance regulation, will thrive. They will more easily accommodate digital natives, the new worker generations – the millennials and Generation Z – who have never known life, from media to banking, without the internet and the smartphone and who have a different outlook on the relationship between workspace and workplace.
Attracting quality employees will require highly flexible and dynamic organisational working environments as traditional structures become redundant. In such a “digital way”, the emphasis will no longer rest on communications within the physical structure; the structure itself is now centred around people and their ability to move freely and to adapt and innovate.
To attract highly skilled and mobile human capital talent, institutions will have to offer what Deloitte’s refers to as an “irresistible” workplace experience.
But some things will remain the same. As we reach, as we plan to do, a world where there are no great disparities in access to bandwidth, then the skills of people and our tools for collaboration will attach a premium. The digital skill of workers will have to be matched by an ability to work constructively with others. Trust in leadership will attach a premium. A people-centred world demands people skills.
And the pointers are the same for the government as a business. Together, the combination of bandwidth and responsiveness, driven by empathy, will determine success or failure in the post-Covid era.
Ray Hartley and Greg Mills are with The Brenthurst Foundation and authors of the paper “South Africa’s Greatest Economic Adversary … Itself”.