I have stated in previous columns that the pandemic is not the cause of our economic woes – South Africa was already in a recession before the outbreak. However, the shutdown of an economy that was underperforming and crippled by structural problems is a disaster with huge economic costs.
What is urgently needed – yet is missing – is a conversation on economic recovery that moves beyond returning to the way things were before the pandemic.
The simple truth is that the government does not have clue how to do this.
South Africa is facing a catastrophic outcome: apart from the many people losing their lives, people are losing their livelihoods and facing poverty. Business is losing income across sectors, as many are unable to sustain themselves unless they downsize. Many will close their doors for good.
As important and necessary as the preventative measures against the spread of the pandemic are, the financial impact of the coronavirus has already caused long-lasting effects. It is almost certain that for South Africa, 2021 will be a year of recession.
The continuation of lockdown restrictions and delays on the vaccine front thwart any chance of economic recovery this year, adding misery to an already dire situation with catastrophic outcomes.
This is worsening the situation for three reasons:
First, an economy that is shackled by restrictions does not produce income because it locks people out of economic activity, forces business to reconfigure their operations such as reducing working hours, and constrains consumer spending.
Second, South Africa’s ability to rebuild its economy will be directly related to how well it has approached, coped with and tackled the pandemic. While the initial response was mostly positive in how the government acted fast to curb the spread, its subsequent actions have been far less successful.
For example, the failure on contact tracing and procuring rapid testing kits.
These two measures may have been effective in containing the spread of the virus without the imposition of another lockdown.
Furthermore, the debacle around the oversight and lack of preparedness to secure vaccines and the non-payment points to a government that has no clear plan. For a country that was among those that had clinical vaccine trials for several companies, the mess regarding the management of a Covid-19 vaccine means the government has failed in its responsibility to the citizenry – especially its duty to provide healthcare services to people.
Alarmingly, neither President Cyril Ramaphosa nor health Minister Dr Zweli Mkhize have come out to inform the nation about what really happened, why the government had to ask the Solidarity Fund for help and how such an oversight in not securing the vaccine (via a down payment) could happen … an indication of leadership failure and government disfunction.
Third, in mimicking approaches taken by advanced economies, the Ramaphosa administration appears to assume that a lockdown will work; in so doing the government has not developed its own test and tracing strategy.
For example, what stops the government from employing community workers to implement tests, trace, isolate and quarantine and simultaneously educate the public about the virus and safety? Nothing but the lack of its own strategy.
What government’s approach has revealed is that South Africa does not have policies and strategies to contain the virus.
The economic outlook for 2021 will be even gloomier if characterised by stop-and-go intervals due to lockdowns.
Moreover, if the government cannot afford the vaccine for a fraction of the population, how will it ensure universal vaccination for all? What happened to the R500 billion economic and health package – how was it spent, and why was a portion of it not set aside for the future vaccine since the beginning of related trials?
These are some of the questions we the public must persistently ask and seek accountability for.
So what can be done?
As a start, any government action and policy to tackle the crisis ought to do the following:
(i) Maintain the economy’s productive capacity since it will be important in the times of recovery; lockdowns impact people’s capacity to generate income hard and hurts productivity.
(ii) Give liquidity to business with certain stipulations (such as preserving jobs and/or creating jobs when recovery occurs) – this can be in a form of credit or grants.
(iii) Have clear sector-by-sector policies in a way that prevents the financial impact and recession from becoming a depression.
We must remember that the loss of income incurred by the private sector is hurtful to the country’s economic wellbeing because it means lost jobs, and the inability of families and companies alike to service their debts and keep afloat.
However, these suggestions would be futile if the government cannot fix its balance sheets by tackling its deepening debt.
What the pandemic has made visible is that until a cure is found, there will be waves and phases of the coronavirus as it adapts and mutates. The notion of riding out the storm will not work.
By all indications the virus will be our reality for the next 24 months or more. Unfortunately, these actions will happen because we have a ruling party that is obsessed with ideology; an incompetent government that is engaged in destroying the economy and has not taken the responsibility to protect us seriously.