Call off the hard lockdown immediately – or else: economist

Economist Mike Schussler has called for an immediate end to the ‘hard’ lockdown currently in place in South Africa, arguing that it’s not a question of the ‘economy versus people’s lives’, but rather ‘lives versus lives’ on the line.

Schussler said in a virtual briefing hosted by the Institute of Race Relations (IRR) that a continuation of the lockdown would be ‘unsustainable madness’.

President Ramaphosa will address the nation on Tuesday, 21 April 2020, on additional economic and social relief measures that form part of the national response to the Covid-19 pandemic.

It follows a cabinet meeting held on Monday that reportedly discussed the country’s socio-economic recovery plan post-lockdown, which is currently expected to end a week from Thursday.

Schussler said that the lockdown has illustrated the ‘digital divide’ in South Africa between white-collar workers who can generally carry on with their activities, working from home, and blue-collar workers, ranging from cashiers and waiters to factory workers, hotel staff and hairdressers, who have no way of earning a living

The economist estimates that for every white-collar job lost to the lockdown, up to ten blue-collar jobs could be lost. The expanded unemployment rate could leap from its current level of just below 40% to closer to 50%.

He noted that the economic decline due to lockdown was exacerbated by a number of factors, including high-interest rates, high levels of unemployment, and policy uncertainty, especially on such issues as the expropriation of property without compensation.

Analysing activity such as card payments showed that, in March, economic activity was about 55% of normal levels, while electricity consumption matched levels last seen over a decade ago. The service industry would be particularly hard-hit by this decline in economic activity, Schussler said.

He recommended that for South Africa to sustainably escape the crisis, the government has to begin engaging business as a partner rather than as an adversary.

Schussler said that if private businesses have confidence in the economy, much needed capital can be unlocked to help stimulate the economy.

However, business confidence is at its lowest in over two decades. Currently business did not perceive someone like the minister of trade and industry Ebrahim Patel as being on their side, Schussler said.

He also noted that South Africa is the only major emerging market with negative foreign direct investment – meaning South African companies invested more money outside of the country than foreign companies invested inside this country.

He also said that the government should scrap BEE as a policy, sell state assets such as power stations and radio frequencies, fix Eskom, allow corporates to work together to develop an export strategy and support young people entering the labour market.

But, as a matter of urgency, Schussler said, South Africa must transition to a soft lockdown.

Factories and shops must be opened while enforcing social distancing. Restaurants should be allowed to offer takeaways if not opened fully, and people should be encouraged to wear masks in public.

Schussler also argued that there should be a public transport subsidy which would mean that taxis could afford to transport fewer passengers than they ordinarily would.

The economist said that extending a hard lockdown would see more South Africans pushed into poverty, with all the health consequences that would have, on top of the broader health consequences of a major economic downturn.

Businesses buckling

Stats SA on Tuesday published the results of a rapid response survey conducted with businesses during the lockdown.

Businesses were asked how the current crisis affected their operations in the two-week period from 30 March to 13 April 2020.

More than 700 businesses in the formal sector responded to the survey, outlining the pandemic’s impact on turnover, trading, workforce, imports and exports, purchases, prices, and business survival.

According to the report, five in six businesses surveyed experienced a drop in turnover over the reference period.

About 85.4% of businesses surveyed reported turnover below the normal range. Respondents in the construction, real estate and other business services, and transport industries were the most affected by lower than expected turnover.

The report further shows that 42.2% of respondents indicated that they are not confident that they have the financial resources to continue operating through the Covid-19 outbreak.

When asked how long business can continue without turnover, 54% of respondents indicated that they can survive without turnover between 1 to 3 months.

“Half of the businesses surveyed have temporarily closed their doors, the industries reporting the highest percentages of temporary closure or paused trading activity were construction, manufacturing, trade and mining,” Stats SA said in a statement.

In terms of workforce size, half of respondents expected no change, while 36.8% anticipate a decline.

Respondents indicated that they have implemented a range of measures to cope with the impact of the pandemic on their workforce, including decreasing working hours and laying off staff in the short term.

“Most businesses (65%) anticipate that the Covid-19 pandemic will impact their business substantially worse than the 2008/09 global financial crisis. Only 4.3% of respondents indicated that the impact will be the same,” Stats SA said.

Read: What South Africans are doing to get through lockdown, financially

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Call off the hard lockdown immediately – or else: economist