Profits Over People - While Some Stay Afloat Others Try to Keep a Profit
The Covid-19 pandemic has left many people frantically ransacking stores to stock up on basic essentials whilst some businesses have seized the opportunity to maximise profits. The lockdown saw a rise in mark-up on basic essentials, like surgical masks and hand sanitisers, to approximately a 1000%. But are these extreme price hikes really necessary at the expense of people’s health, and have businesses lost sight of their morals and ethics?
In these trying times, face masks and hand sanitisers have become necessities and are needed more than ever. Some companies have therefore taken advantage of people’s vulnerability and the fact that they need access to these products. In their desperation, many are willing to pay the high prices that businesses demand. But what about those who are unable to bear these costs?
In South Africa, 18 million people depend on social grants from the government, with 40% living below the upper-bound poverty line. Gaining access to basic essentials during lockdown has proved challenging for many people, as they are barely able to make ends meet.
To combat the risk of price hikes during the Lockdown, Acting Consumer Commissioner in South Africa, Thezi Mabuza warned that: “A fine of up to R1 million or up to 10% of a firm’s annual turnover or even imprisonment for a period not exceeding 12 months will be imposed to a company/retailer found guilty of price gouging.”
However, this was not a sufficient deterrent, as about 1 354 complaints of excessive pricing had been reported to the Competition Commission, according to Tembinkosi Bonakele, the Commissioner of the Competition Commission. He further stated in a virtual meeting of parliament that in some cases suppliers had hiked their prices as much as 1000%. In addition, there were also many opportunistic traders who did not previously trade in masks and sanitisers but saw an opportunity to sell these at excessive mark-ups. Ongoing investigations by the Commission have revealed thus far that 13 such companies contravened the ‘over-pricing’ regulations, which has led to settlements by some firms amounting to R12.9 million. One such company that exercised its new-found market power was Dis-Chem. The well-known pharmaceutical and cosmetic retailer was found by the Commission to have excessively priced face masks, with a mark-up of between 43% and 261%.
However, the big business bigots are not the only ones exploiting customers. Many consumers have also taken advantage of the pandemic and turned it into a money-making scheme. In the UK, some have stockpiled excessively, leaving the shelves empty. This left desperate consumers in search of basic essentials, with no other choice but to bid online for these products at excessive prices.
According to the Guardian, one such seller sold a 48-pack of toilet paper for £59.99 which was 3 times its usual retail price of £18. The same seller sold a pack of anti-bacterial wipes for £10.95, whereas the same product retailed for £1. The CNBC reported earlier in the year that the price of hand sanitizers in Malaysia skyrocketed to 1 million Malaysian ringgits ($237 176), which was 800% higher than the amount the country spends on hand sanitiser in a week.
Although some businesses have utilized the pandemic for their own financial gain others have been forced to increase the price of goods as a means of survival.
Small and medium-sized enterprises (SMES) are the largest source of employment (since 2008 to 2015) in South Africa and contribute to the country’s economic growth. They have been harshly affected by the pandemic. These businesses, unlike larger corporations, have more to lose than gain from the pandemic, as they run on low expenses and even lower profits in a usual and stable economic market. But of recent, the pandemic has escalated such that South Africa’s population has undergone an extensive three-month lockdown (for now at least), leaving many shop owners concerned about whether they can pay their business bills, employees and most importantly stay afloat during this trying period. According to a recent poll by Statistics SA, 47.9% of businesses closed temporarily or paused activity during the lockdown. 45.6% Of these companies expected to implement lay offs as a temporary measure due to reduced turnover.
Many businesses as a result, have utilised the lockdown to help keep their businesses running. Many small shop owners, particularly those who operate in urban communities, have increased prices on basic essentials such as bread, milk, eggs and more importantly face masks, hand sanitisers and gloves. However, these businesses are not increasing their prices to profit, but as a means of survival. Due to the lack of consumer frequenting stores, monthly profits have decreased immensely, and shop owners are unable to pay workers. It is estimated that more than 14% of households have been affected by job losses as a result of the pandemic, making it difficult for those workers that have been recently unemployed to keep up with their monthly household bills and to maintain a healthy lifestyle. In addition, most small businesses are unable to provide as many goods for their consumers, not because of the recent decrease in the supply of goods, but rather due to the increase in the price of these ‘scarce’ items, which have become unaffordable.
In response to the poor financial position of small businesses, the government has set aside funds to aid businesses that cannot afford to keep their doors open due to the economic implications of the virus. In fact, the South African Reserve Bank and Treasury have partnered with large banks to set up a R200 billion credit scheme for distressed small businesses. Such efforts by the government are essential to keep the South African economy thriving until the end of the lockdown. Yet after such extensive efforts, not all businesses owners have been able to benefit from the fund in order to maintain their livelihoods.
The corona virus pandemic leaves many concerned about their businesses, households and the shortage of funds. As the world is at risk of a recession, many businesses have found their own ways to earn a profit. Even as a consumer, it is frustrating to know that there are not enough financial resources readily available, in addition to the fact that the prices of essential goods are escalating due to the current economic situation.
The Coronavirus pandemic has not only disrupted economic markets worldwide but has also exposed the unethical conduct by some businesses who seek to exploit vulnerable consumers with excessive prices. In addition, it has also brought to light the plight of small businesses and raised complex questions on whether the consumer is the only one suffering.