South Africa needs a long-term coronavirus strategy – including the re-opening of takeaways and other stores

It has become increasingly clear that a return to normality without any restrictions on movement and without social distancing is not weeks away, but rather months, the Bureau of Economic Research (BER) says.

In a note published on Tuesday (14 April), the BER said that it is now crucial that government plans for a Covid-19 policy strategy that can be sustained for a long period of time.

“While necessary from a health perspective, the severe impact on the economy suggests that it is unlikely that the current full-scale lockdown measures can be extended for much longer,” it said.

“However, finding a balance between saving lives and sustaining livelihoods is extremely hard. Ramaphosa noted that government would consider how to implement ‘risk-adjusted measures’ in order to slowly start to open up parts of the economy.”

While no further details were provided, it is speculated this might, for example, include the reopening of take-away food services, the BER said.

“Indications are that cabinet will this week debate a more comprehensive package of support measures,” it said.

The Sunday Times has reported that the national command council – led by Ramaphosa – will discuss industry proposals to ease some of the lockdown restrictions, including lobbies from the tobacco and alcohol sectors, and a call to allow fast food shops to reopen.

“The results of these discussions are expected to be taken to the cabinet later in the week, where a raft of proposals that include a comprehensive financial package geared at scaling up the production of essential goods will be tabled,” the Sunday paper said.

Funding

To finance an ‘aggressive fiscal response’, the BER  said that South Africa might have to turn to the external loan facilities provided by the International Monetary Fund (IMF) and/or the World Bank.

Rough calculations suggest that South Africa would be able to access about R60 billion in emergency funding through an emergency loan facility, the BER said.

“In the absence of additional external funding, the risk is that government will pursue less-optimal financing options.

“These include forcing public (the PIC) and private pension funds to buy a statutory minimum amount of government bonds (i.e. prescribed assets).

“Linked to this could be a tightening of foreign exchange controls which reduces the amount (currently 30 to 40% depending on the type of fund, plus an additional allowance for Africa) of pension fund investments that may be shifted overseas. Ultimately, the SA Reserve Bank (SARB) may also be required to step up its government bond purchases in the secondary market.”

The BER said that South Africa could also tap the R15 billion contingency reserve budgeted for in the medium-term expenditure framework.

Other sources of financing could include the immediate auctioning of the long-delayed radio spectrum to mobile operators, it said.

“Estimates vary, but this could result in a R10 billion – R15 billion boost to state revenue.

“The bottom line is that South Africa will require significant resources to fight (fund) the coronavirus battle. Because funding is lacking, we should be open – or at least not be surprised by – (temporary) funding options that would have been unthinkable a mere two months ago.”


Read: Ramaphosa to discuss the sale of cigarettes, alcohol, and fast food during lockdown – report

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South Africa needs a long-term coronavirus strategy – including the re-opening of takeaways and other stores