You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App
Join our mailing list to receive top business news every weekday morning.

SA economy silence contrasts with drastic virus steps

Treasury’s yet to announce whether government will support affected businesses and households.
Image: Waldo Swiegers, Bloomberg
South Africa’s government won praise for taking swift action to contain the coronavirus outbreak. It’s said little on how it plans to protect the economy.
With just 61 infections on March 15, President Cyril Ramaphosa imposed travel bans, instructed schools to close and outlawed large gatherings. He followed up with restrictions on restaurants and effectively closed bars, beating many worse-afflicted countries to the move. The central bank cut interest rates by the most in more than a decade at its scheduled policy meeting and boosted liquidity in local markets.The National Treasury is yet to announce whether the government will support affected businesses and households.

Ramaphosa was “firm, clear and decisive,” Fani Titi, the chief executive officer of Investec Ltd., said in an interview. “Where we have been slower has been in trying to support the economy.”

Usually packed malls have emptied and many restaurants and bars leave apology signs on shut doors after dark. City streets and highways flow freely in “rush hour” as firms send their staff home, while hotels and lodges are struggling to fill rooms.

The rand slid to a record low against the dollar and bond yields surged amid a global rout. The central bank forecast the first annual economic contraction since 2009, and small companies now face a uncertain future in a country where unemployment is already 29%.

South Africa’s Treasury is severely constrained. Finance Minister Tito Mboweni last month proposed sweeping spending cuts to trim a fiscal deficit projected to widen to an almost three-decade high. Bailouts to rescue collapsing state companies has seen debt surge and put the nation’s last investment-grade rating in jeopardy.

Dry powder

“The budget has been fundamentally undermined,” said Martin Kingston, vice chairman of Business Unity South Africa, the biggest corporate lobby group. “They can’t reset until they know what the trajectory” of the outbreak is likely to be, he said.

“There is an argument for keeping one’s powder dry,” Kingston said.

In a series of Tweets on March 19, the Treasury said provincial budgets will be refocused toward tackling the pandemic and that it will put together an economic response package.

“We are unable to give you a date, but shortly,” the Treasury said in response to questions on when the plan would be released. A tweet on Saturday showed officials from the Treasury and central bank meeting to discuss the response to the outbreak, and Ramaphosa’s spokeswoman Khusela Diko said the National Command Council on the virus planned to meet Sunday. On Sunday Ramaphosa met with business leaders.

Talks between banks and Treasury need to get going, said Titi.

“We will have to get together to come out with coordinated action to support the economy,” he said. Those discussions “will take a few days to a week or two,” he said.

South Africa could take its cue for what has been done in countries such as the U.K., where the authorities have agreed to guarantee some loans made to companies under pressure, said the CEO of Investec, a lender with operations in South Africa and the U.K.

Deferred payments

The Congress of South African Trade Unions, the nation’s biggest labor federation, called for commercial banks to defer loan payments by up to three months. It also wants lenders to cut interest rates on mortgages by more than the one percentage point the Reserve Bank reduced its rate by.

Cosatu also wants state lenders, such as the Industrial Development Corp. and the Development Bank of Southern Africa, to work with the government worker pension fund manager and private retirement funds to pay for stimulus for vulnerable sectors, said Matthew Parks, the group’s parliamentary coordinator.

The state could offer guarantees as “the easiest way to support banks doing the heavy lifting,” said Peter Attard Montalto, head of capital markets research at Intellidex. “In reality, we see National Treasury offering very little support.”

What Bloomberg’s Economist Says

“An immediate and targeted fiscal response is what is needed to keep businesses and households afloat, but the Treasury remains mum. We expect some fiscal action, but not enough to guarantee a big rebound in 2H.”

–Boingotlo Gasealahwe, Africa economist

For now, the banks are not even able to meet as they are prohibited from doing so by competition laws, according to Cas Coovadia, managing director of the Banking Association of South Africa.

“Until I get the exemption notice unfortunately I can’t bring people around the table,” he said. “There has been progress. The notice has been drafted and the minister spoke to me. I am hoping that by Monday we get the notice and we can get going.”

So, as the government has won praise for the measures it has put in place to contain the pandemic, fears are rising about the economic pain to come.

“Other countries are putting out huge economic stimulus packages,” said Rian le Roux, an independent economist and former chief economist for Old Mutual Ltd. “This place is going to bleed to death. There are literally businesses that have shut down. I don’t think we are thinking out the box.”

© 2020 Bloomberg L.P.

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   14

Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.

SIGN IN SIGN UP

Unfortunately, our beloved government is bankrupt. There is no money to help out. SAA and Eskom et al have swallowed all our money.

Don’t expect any stimulus from a gangster state.

CS please spell bANCrupt correctly!

We don’t have a choice – just start printing money and come forward with tangible stimulus packages (while we can!)and freeze/defer
all loan repayments for at least three months…we can deal with the resultant inflation etc when the ”dust” finally settles!

The consequences if we don’t come up with an immediate and targeted fiscal response is what is needed to keep businesses and households afloat, will be too ghastly to contemplate – we all know that most households are only one ”paycheck away from bankruptcy”.

Commercial banks are holding a lot of reserves (reserve requirement assets) at the Reserve bank – at zero rates. These funds should be applied as part of any huge ”economic stimulus package” by the banks and guaranteed by the government – if not, lift all bans and allow business as usual and let mother nature take care of the rest!

Raf and uif also bankrupt

ANC trying to deflect attention from the bad economy but it will get hit in the face with it even more

Health services budget cut by R4 billion, SAA given R16 billion. Go figure!

This is tough

I get the issue with a cash handout for workers on no-work-no-pay regime. But, maybe how many madams are going to let the domestic go now that the brats and hubby are stuck at home… the horror of having to actually clean a house !!!!

For sure tens of thousands of hotel, restaurant, bar workers are out of work next week with probably a month of same ahead. Zim and Malawi facing an influx?

BUT, paying the workers by government grant won’t keep those businesses open for two months. Lots of other overheads.

This looks more like a 9 month thing not a few weeks

…definitely

…so envy the folk right now living on the Falkland Islands

….well at least after cleaning house, a determination can be found if the domestic is just shoving dirt around or actually cleaning

Ask a Saudi …they pay inspectors to verify if the home is being cleaned

Sick and tired of these kinds of remarks denigrating women. Being a domestic worker is an honourable and necessary job done the world over. Only in RSA both the employer and employee must suffer snide remarks- the employer being “lazy” and the employee doing a job she should apparently be ashamed of. Plus the inference that housework is “women’s” work, not a shared family responsibility. Get over yourself and attempt to get into the 21 st century if you can.

Yes Griet, sorry Griet…

My comment was based on observation : a great many madams do no housework and leave that to their sisters.

The alternative? Very many sisters are jobless. Imagine the a-hole husbands and lazy sons pick up after themselves. The horror!

THEANC ate the dry powder over the last 20 plus years

End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR

Podcasts

NEWSLETTERS WEB APP SHOP PORTFOLIO TOOL TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: