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Lockdown: Devastating economic consequences are avoidable

Government needs to be more transparent in its decisions – and consider long-term impact – BLSA CEO.
Image: Chris Ratcliffe, Bloomberg

The government is having to spend an increasing amount of time in court defending its regulations to control the spread of the pandemic. South African Breweries has gone to court to challenge the alcohol ban and now the restaurant industry is doing the same.

The alcohol industry lost 165 000 jobs as a result of the first two lockdown bans, with this third one expected to add to the tally. Last week, SAB announced it had axed R2.5 billion of planned investment in 2021 as a result of the sales ban.

Read: SAB cancels R2.5bn investment

Similarly, the wine industry has run out of storage space for the wine it has produced but been unable to sell over the last several months. It is now harvest time when it must pick the next grape crop. Unless it can move stock from cellars and tanks, it will have nowhere to put this year’s produce. It may be forced to leave the grapes to rot on the vines at a cost of billions.

Listen: Wines of SA communications manager Maryna Calow on how the extended alcohol ban is likely to further hurt wine farmers

These devastating economic consequences are avoidable.

We don’t need to take a view on whether the alcohol ban was necessary to be able to agree that it was handled badly. As regulations stand, alcohol producers have no idea how long they are going to be required to shut down. That uncertainty is the real problem.

As a businessperson, it puts you in an impossible situation. You can ride out a period of closure if you know you can plan around it.

For example, you can determine what cash resources are needed if you know how long you need cover. You can borrow if you have a business plan that shows how you will be able to generate cashflows once you reopen. But when your shutdown is indefinite, with an unpredictable and opaque process to determine when you can resume, you are in an impossible situation. You must assume the worst, cut jobs you otherwise might have protected, and go into a cash conservation mode in the hope you can last however long you might have to.

Clarification needed

Government has lent on business often during this pandemic, most recently to help access supplies of vaccine.

Government has needed business in the ring with it to fight against this pandemic. But at the same time, it has regularly tied our hands behind our backs, leaving us unable to play the supportive role we would be able to play.

The decisions we make to confront the health crisis should not have unintended consequences for the economy. We should know and understand what the economic impact is. Then we can look for ways to mitigate those while still achieving the health outcomes we intend.

The alcohol industry’s challenges could have been lessened if a clear end date was put on the ban, or at least clear conditions under which it will be lifted. Government could have worked with the industry to make it easier to export stock that cannot now be consumed locally. Instead, the industry has been forced to turn to the courts.

Short-termism

Since the start of the crisis the policy response seems to have consisted only of short-term thinking. We have not thought through the 12 or even six-month scenarios we face and how to maximise outcomes. Capricious changes to rules are made without understanding the economic impact they have and the causal connection to government’s own longer-term objectives. Government seems not to recognise that its plans to undo the jobs impact of the crisis are so much harder to deliver if it fails to protect as many jobs as possible now.

The short-termism is why we hadn’t planned a vaccine procurement strategy until only two weeks ago and why it took so long to develop an economic recovery plan. We have been better on short-term interventions like social grants and the TERS scheme, but don’t follow up with the longer-term thinking that will enable us to withdraw those and spur the economy back onto a growth path.

The pandemic will be with us for a while yet. Vaccines will, eventually, end this crisis, but there is so much we could lose in the interim if we are not careful. Business has, since the start, been a keen partner to government to fight this pandemic. We need to work closely together to ensure we can finish the fight with the least possible damage on our economy.

Business should not have to turn to the courts to try and save themselves.

President Cyril Ramaphosa gave the country a glimmer of hope when he laid out plans for the Covid-19 vaccination programme, assuring us that 20 million doses had been secured. I wrote in Business Report that business, with its resources, stands ready to assist. Only with successful implementation of the vaccination programme can South Africa’s economy truly begin to recover from the devastation caused by Covid-19.

Deeper engagement between government, business and labour is crucial in the country’s effort to combat the pandemic, I wrote in Business Day. I’ve repeatedly argued for more transparency in government decisions. Perhaps such an approach could have averted SAB cancelling its R2.5 billion investment programme.

Busi Mavuso is CEO of Business Leadership South Africa

COMMENTS   8

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Actually, the short-termism came from the restaurant and hospitality industry that wanted to open up quickly. Borders reopened and the hospitality industry restarted just long enough for a new and highly infectious mutation to arise (or enter from overseas). The irony being that the tourist markets quickly shut THEIR borders to SA thereafter.

What was needed was a stimulus to support industry (wage subsidies etc), but with extremely conservative fiscal policy and the ANC’s general looting, there wasn’t help forthcoming.

As for the booze biz….cry me a river. They don’t account for their negative externalities, and the harm caused by booze far exceeds its economic benefits. Once they pay tax proportionate to the harm they do (or put the money into a privately administered general welfare fund if they don’t want the cadres to steal) they can whine about their wine not being sold.

“Government needs to be more transparent in its decisions”

Truth and the ANC? Everyone basically in the ANC is an oxymoron

Economic destruction — proudly brought to you by the ANC — and of course big buddy – China !!

Self-imposed economic destruction, no need for a tax revolt.

I don’t think the government needs to be more transparent in their decision making. It is very transparent they are so addicted to their feeling of power and the ego trip they are on. It is also very transparent that they only care about the ANC and how they can syphon more money into their own and the ANC s pockets. We need totally different decisions to be made and for them to also lose their salaries in this period.

No sane person will be able to clarify kopdoek’s thought processes. There is nothing there to clarify. Everything is an opaque mix of communalist doctrine, rent-seeking and stupid opportunism wrapped in layers of incompetence and unaccountability.

The Chinese solve this kind of problem with the firing squad. They do not try to clarify it.

Who cares what the government wants to do or is trying to do. Since when does business ask government for advice?

End of comments.

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