For the past five months, every conversation about the health of the economy hinged on the response to the pandemic and the level of our national lockdown.
Now with our peak seemingly reached and the president’s decision to move us to level 2 of lockdown, we are at the stage where virtually all sectors of the economy can operate. The rebuilding can now officially begin with the peak infection rate having occurred in most provinces, health capacity has held up and field hospitals are not overrun.
We’ve averted an uncontrolled outbreak and it seems at this point that the models were overly pessimistic. These are hopeful signs that we may have overcome the first wave of the pandemic and we can hope that promises of a vaccine breakthrough come to fruition in the coming months. Until then, it is up to us to remain vigilant in combating the spread of the virus that has turned our world upside down.
As frustrated as we’ve grown in more recent months with the restrictions on commercial activity and the impact on the economy, we have to acknowledge that the shift to level 2 comes earlier than most forecasts. Many said we’d reach this juncture by the start of September, so we are two weeks early. Speaking to economists, this will be marginally positive for our GDP. Given our dire economic conditions, it’s a marginal improvement we need.
From today, nearly all restrictions on economic activity are lifted, with interprovincial travel being allowed and important sectors that we’ve highlighted, such as domestic tourism, able to operate. That’s a sector that employs mainly women who’ve been set back the most by the loss of income along with increased childcare and home-care duties in our patriarchal society.
It is the main upside from the changes in lockdown regulations over the weekend, though there will be constraints with borders still closed. One can hope that overturning the ban on alcohol will keep the almost R10bn spending plans by brewers such as SAB and Heineken on the table after they had warned that under a ban it was implausible.
It has been an extremely challenging time for the country and for businesses that have either had operations curtailed or found themselves in the distressing position of seeing demand for their product dissipate as incomes have come under pressure. That inflation sits just above 2%, near the lowest it has been in nearly 15 years, is testament to falling demand in an economy that, like many others, has been bludgeoned by the “great lockdown”.
While the rest of the world scurries to find a way back to normal growth patterns, we have a different job here. We have to find a new normal altogether; our target really can’t be the world we knew just before the pandemic struck. As a reminder of the world before Covid-19, SA was in the throes of yet another recession.
Chronically low confidence levels and the return of load-shedding in the middle of December 2019 had economists already pencilling in negative growth for the year. State-owned enterprises such as SAA continued to weigh on the fiscus. At the end of March, despite the efforts of the National Treasury under finance minister Tito Mboweni, our credit ratings dropped into junk status. The pandemic served to pile further pressure on an already desperate situation
As the cloud of the lockdown now lifts, we still face all those factors. Eskom’s situation is particularly concerning: even with the curbed economic activity under level three of lockdown, the power utility couldn’t meet demand in recent weeks. With the uptick in economic activity in level two, more load-shedding is likely. Meanwhile, SAA is still an unsolved funding nightmare for the Treasury with more than R10bn being sought to fund yet another turnaround plan.
We urgently need to undertake the sort of reforms we’ve long called for to get to a new normal where the country is not weighed down by confidence-sapping stories about our struggling state-owned entities.
As such, we will wait for the publication of the government’s recovery strategy for a cohesive, central vision of how we finally get the country back to working closer to its full potential. The strategy, in whatever form it takes, must move the needle and not merely be just another document that has a sign-off of cabinet members. It is time for real action for an integrated and inclusive economy.
As business for Business for SA, we given our detailed proposals for a new economic recovery strategy that leverages the new social and economic compact between government, business, labour and civil society. Issues such as policy alignment have to be central if we are to steer this country and its economy onto a more secure and certain path.
This opinion piece was first published in Business Day