SA could implode if Cyril doesn’t come up with a plan, says business

Business presented a bleak picture of the economic outlook to the National Economic Development and Labour Council (Nedlac) meeting chaired by President Cyril Ramaphosa on Friday, but its biggest concern is that SA’s social fabric may be irreparably damaged if the lockdown is not well managed.

And it has urged the government to bring calm and hope by setting out the principles and timeline for lifting the lockdown.

“We are concerned about prolonged and severe economic hardship and the potential for social unrest,” said Martin Kingston, who briefed Nedlac on behalf of Business for SA (B4SA), which is the broad business coalition formed to help address the Covid-19 crisis.

“We have to balance the health and economic risks but our biggest worry is social cohesion – an inability to enforce law and order and health protocols would risk livelihoods and threaten the social compact,” said Kingston.

With reports emerging over the past week of looting of retail stores and corruption by public officials in the distribution of food parcels, business also expressed concerns on Friday about the corruption and security issues around the lockdown, and flagged continued government service delivery as a significant risk.

B4SA’s economic modelling has painted a disturbing picture of an economy which is likely to contract by 8% to 10% this year, with more than 3 million jobs at risk in the formal and informal sectors.

And while globally economists are debating whether the economic recovery will be a sharp “V” shape or a slower “U” shape, here the likelihood is it will be an “L” shape – a permanent loss of economic activity and income.

But as SA’s infection rate climbs, finding the balance between health, economic and social priorities will become ever more challenging.

Business has been working with the government, and labour, on the health and hygiene protocols that will be required for firms in particular sectors, or geographies, to start to reopen, as well as on the economic criteria by which priority sectors should be chosen.

Kingston said business supported a progressive relaxation of the lockdown, based on health and economic risk models. It is also urging policymakers to focus on how to ensure that SA, which was already in recession before Covid-10, can stage an economic recovery beyond the lockdown.

Kingston would not give specifics of which sectors or regions should restart earliest.

However, he pointed to failures in parts of the food supply chain – in commodities such as sugar and flour – which needed to be addressed urgently.

Business has also intervened to get backlogs cleared at the ports which were blocking imports of essential goods. And it called on Friday for more consistency and clarity in the lockdown regulations themselves.

Last week’s amended lockdown allowed for the mining and liquid-fuels sectors to restart gradually, subject to stringent health and safety conditions. There are also talks over allowing the sale of hot food and over the reopening of highly automated export-oriented sectors such as the automotive industry.

The “broken” state of the Unemployment Insurance Fund has emerged as a key concern at Nedlac, with organised business, labour and community representatives flagging the fund’s inability to process or pay out on applications for TERS (temporary employee/employee relief scheme) which is aimed at providing temporary support for workers and helping firms to avoid retrenchments.

Ramaphosa has said there is R40bn available in the UIF for the scheme, and the TERS regulations have been revised to make applications much easier, but the fund’s administrative capacity continues to be extremely weak despite efforts to fix it and there have been calls for the SA Revenue Service or the banks to be brought in to help disburse the emergency funds.