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Economy and employment: Where to now SA? Part I

The pandemic means things will never be the same again. There is no normal to return to.
For a country afflicted with unemployment and in recession before this apocalyptic scene, this will be unlike any challenge we’ve faced since democracy. Image: Shutterstock

If 2020 so far could be described in one word, that word would be carnage.

The Covid-19 pandemic has claimed lives and caused devastation in stock markets, economies, production and consumption, and it continues to do so globally.

For South Africa, with an economy that was already on a downward spiral characterised by increasing retrenchments, a poor absorption and participation rate of young workers, struggling businesses and rising government debt – besides the bonds collapse, the likes of which has not been seen in 20 years – the national lockdown couldn’t have happened at worse time.

If the United States, an economic power, was already seeing a record 6.6 million applications for unemployment benefits in the last week of March, despite a labour market that has been creating jobs and is for all intents and purposes flourishing, can you imagine the supplanting effects on South Africa’s labour market, which has an unemployment rate of 29%?

You get the point.

Put another way, as the lockdown continues, everything that could have gone wrong did go wrong.

In a fortnight, SA was reduced to junk status from downgrades by rating agency Moody’s, which spurred the rand’s free-fall.

Read:
Moody’s junks SA at the ‘worst time’
Our uncertain future

A few days later, both agencies downgraded South Africa’s top four banks and the domestic currency and markets continue to be bear the brunt.

Furthermore, as Covid-19 persists, its tentacle-like reach is everywhere. This is forcing many countries to impose lockdowns, quarantines and to limit economic activity – simultaneously causing the global economy to halt all at once.

This time we are all affected

For once, the loss of income is not and will not be limited to workers alone; companies are going to suffer too. In some instance both the employer and employee are going to be unable to service their debts and will have to declare bankruptcy.

But hold on, it doesn’t end there.

No one really knows how long the current wave of Covid-19 will last. This has prompted the World Health Organisation to caution that:

“If countries rush to lift restrictions too quickly, the virus could resurge and the economic impact could be even more severe and prolonged.”

As such, countries must continue to test and trace, and ramp up measures to reduce the spread of the pandemic and fund public healthcare. Failure to do this will result in an inability to control the spread of the virus and will have far worse implications for society.

SOEs were already teetering …

Sadly, the lockdown affects activities in industries where ailing state-owned entities operate – in particular those already facing rising debt, inefficiencies, poor governance, bloated staff complements and dependence on state support. For example, South African Airways (SAA) cannot generate much-needed revenue because many flights across the world have been grounded.

Undoubtedly, it will not be business as usual for SAA when economic activities resume. This supports the earlier case I made for the need to relook and rid South Africa of some these entities.

Read:
Rethinking South Africa’s SOEs
Eskom and SAA: The SOE project has failed

On the business front, the lockdown has knocked small to medium-sized companies that were already affected by needless regulation and bottlenecks that hampered their growth, curbed their ability to hire and fire, and imposed high-wages requirements on them – all of which serve to discourage job creation. For primary sectors that were already struggling, such as mining, the lockdown means limited operating capacity or total shutdown.

Consequences unknown

The above-mentioned considered, we cannot anticipate never mind comprehend the consequences of the pandemic and the ensuing lockdown. For a country like ours that is afflicted with unemployment, has been junked, and was in recession before this apocalyptic scene, this will be unlike any challenge we’ve faced since democracy.

But it’s not all doom and gloom.

In the current disaster, South Africa has seen some brilliant responses from its political leadership: President Cyril Ramaphosa’s economic assistance measures, Health Minister Zweli Mkhize’s informed and decisive action, and pragmatic consideration from business in the willingness of some banks to give people a payment break.

Of course, there will be mistakes (such as the enforcement mechanisms of the police and the military) and shortcomings, because none of us, including our politicians, have dealt with a pandemic as disruptive as this.

The government has been good at coordinating action by responding quickly and effectively. However, it will take much more to rebuild the economy, because there is no returning to the status quo.

Where to now South Africa? What needs to happen?

I offer suggestions in Part II.

AUTHOR PROFILE

COMMENTS   17

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Dare I say it? Corona 19 did not cause the carnage. Lock Down caused the carnage. Corona 19 is a storm in a teacup.
There, I said it.

How dow we reduce lockdown in areas and open up the economy a little?

This may create a structural change in RSA imagine the following
1. Tito plan is implemented
2. Results in slashing red tape
3. Rapid roll out of spectrum (jobs created and data costs drop)
4. Energy sector uses green funding and jobs are created
5. Tourism(local) opens up later in the year more jobs
Let’s use his plan as the blueprint?

….bets on Tito will be the next chair and managing director (MD) of the IMF

The ANC “Wise Guys” are too stupid to appreciate him ….but the international crowd will

Linking BEE to assistance is not the way to go us out of the hole. But this is the way the ANCwant to tackle it.

South Arica already had economic corona and the current corona lockdown might kill more people in the end through economic deprivation than the virus itself.

The carnage was already there with so many years of ANCmismanagement and corruption.

The tea was stolen. Covid-19 just made it a whole lot worse.

Very good Mamokgethi. I trust that this debate will allow for meaningful interaction as I, observing little pro-active leadership in leading the pack.The only normality is change and that includes change.For starters, how would the financial institutions conduct their primary task to grow the economy? The bath plug has been pulled.

Really??. This is a nothing article.Stating the obvious in many words. The author offer platitudes to the ANC who caused the problems but avoid the real hard issues. Like the DM said-praised the fish for swimming. ANC and not the Virus is the problem.

Agree 100%. just like people will deny humans are the cause of Global Warming, people will deny that the ANC is the cause of South Africa’s “untergang”. The CCP Virus only accelerated the Bankruptcy of SA, same as humans are accelerating climate change. Again, look at our Municipalities and you will see the future of our SA Government & Country. Municipalities were dysfunctional and bankrupt long before the CCP Virus existed – all due to ANC mismanagement, corruption, greed, incompetence and racism.

There you have it Mamokgethi. Some pointers in this debate under the heading: Cristism. Now, anticipating real contributions?

Nothing has really changed or will change. All SOE’s and municipalities and Government will still have bloated workforces. The socialist / unionist / communist way’s of doing things will continue.

The only thing that has changed is when protesting in mass groups the result will be unfortunate.

Agree mass protest could get messy, and I am not referring to the national sport of kicking dustbins and burning tyres. It will be our new police force attitude, knee bends and mud rolling…………

The carnage is worsened by the 10 year Zuma and others loot.

If and it is a big if the government had a storehouse they could draw that down and help. Even a storehouse would have been looted.

Massive unemployment is coming and with it crime. Hungry people trying to feed families and keep a roof over their head.

Part of the solution:
1. Get rid of unions and minimum wage. This way people can work for what they can get, for as long or short as they like.
2. Open the lockdown asap it has served no purpose. Taxis are full, cabinet ministers and crooks party at will.

Perhaps Gina Schroeder and other experts can comment:

A simple solution that might save businesses, jobs and prevent mass liquidations and sequestrations?

It does not make sense to prevent people in the economy from working – and then expects that all debts and obligations must be met.

Why not call a debt and obligations freeze for two months across the whole economy? That means no salaries, rent, rates, taxes, debit orders and accounts are paid by everyone?

The retail chains with their refusal to pay rent is already on that road. It is unfair to the landlords, who also have obligations to pay. If the landlords obligations are also frozen, there is less pressure on them.

Salary earners would have virtually no expenses other than food. The government can provide a R1 000 a month for food for the needy.

Declaring a total debt freeze is much simpler that a piecemeal approach to try and rescue a complex economy.

I agree there is nothing new in this article, the author just rehashes what we allready know. What might be interesting is part 2 of this series. The best suggestion I have read recently is a government of national unity ,pooling the best people to manage us out of this mess. Unfortunately too many people put ideology about the best interests of the people.

How can you praise lock-down ?
There is no proof that lock-down is the correct action !!

Social distancing +
Over 60 year old self isolation +
Masks would have done the trick – look at Beijing, Denmark, Sweden and others.

The permanent destruction to the economy will push masses of the next generation into poverty and leave SA in a debt trap.

Maybe do some work on WHO – and who leads WHO – DG Tedros Ghebreyesus and then you will know what led to the world panic and why?

Maybe show us how many people have died to date due to lack of ICU beds in the western world to date – NONE have been reported

Maybe show us how many people have died with the virus versus from the virus

Maybe show us what studies have been done on BCG vaccinations – do they temper the virus symptoms or not – its been 3 months – there must be some information out there

Some of these would be useful articles

Offering suggestions and solutions won’t help.

The government has already decided to print money to monetize the debt. Not sure your average South African has realized the significance of this. It’s not an emergency measure, it’s the new standard policy. They have chosen not to go the path of IMF and correcting failed socialist policy. Human rights, property rights etc can’t save you when the regime wants to devalue its way out. Locked up pensions, RA funds, annuities will tend to zero.

The inflation train train has just left the station. We’re all on our way to Zimbabwe and Venezuela.

End of comments.

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