It’s no secret that the longer government extends the lockdown, the worse the impact will be on the economy and jobs. While businesses fear closures over the uncertainty of the length of lockdown, they are also unable to guarantee that the spread of Covid-19 will be avoided in their operations.
As government is being pressured to speed up the process of reopening the economy, there are also incidences where some retailers have had to close down stores after detecting Covid-19 infections, despite having strict regulations in place to limit the movement of people.
More recently, 46 people at factories owned by fishing company I&J tested positive for Covid-19, Netwerk24 reported.
Minister of Trade and Industry Ebrahim Patel has stressed that government is taking a risk-adjusted approach to reopening the economy. He said that government has led with a health response, to contain the spread of the virus. “If we have a rapid spread of the virus in the society, it would have a direct effect on the economy,” he said.
While Patel has said that the lockdown would impact the SA economy in a “deep and significant” way, he has come under fire for underplaying the estimated impact it would have on growth. In a statement issued on Tuesday night, the Department of Trade and Industry defended the minister and said that he had consistently warned of the damage Covid-19 would have on the economy.
‘Cascading negative effects’
“The Department would also like to put it on record that Minister Patel recognises the very significant impact of the pandemic and the lockdown on the economy,” the DTI said.
The lockdown has dealt a body blow to an already weak economy, with estimates that it will contract more than 5% this year. Treasury’s worse-case scenario projects a 16.1% contraction, and seven million job losses.
In a meeting with 100 CEOs hosted by Business Leadership South Africa, Patel warned that firms and workers alike would be affected by the pandemic.
Some businesses are already expecting to close shop by mid-July, with 54% of businesses raising concerns over their ability to raise revenue, according to Stats SA.
“The situation is even more dire, as the economic effect of a lengthy lockdown will be geometric, not linear – that is it will cause an increase of cascading negative effects as households and corporates run out of savings and run up debt. The collapse will become bigger as it feeds off itself,” Investec chief economist Annabel Bishop warned, in a report on the impact of Covid-19 on the economy.
“The longer the severe lockdown persists, the quicker the number of business failures will escalate. This applies to unemployment too,” she added.
But the South African Chamber of Commerce and Industry (SACCI) does not think that government has been moving slowly, it just hasn’t been managing the process “optimally”, according to CEO Alan Mukoki.
Testing, testing, testing
Mukoki believes that government should have rather poured more money into testing, instead of having people sitting at home, relying on UIF benefits. Testing has to be focused on those returning to work, he explained. “The testing is supposed to be the centrepiece of business re-engagement.”
South Africa could work on getting 2.3 million people per month tested, which is not currently happening. This way government can ensure those re-entering the workplace are negative and won’t put each other at risk. He explained that testing should be implemented across value chains, as opposed to going about it in a sector-by-sector basis.
For example, government should target testing for businesses and others in their value chains including transport, in a particular area and make sure that people are negative before they can start working again. Mukoki said that SACCI had not yet received feedback from government on its proposal, but the chamber will be meeting with Minister Patel and Labour Minister Nxesi, among others, soon.
Mukoki criticised government’s model of lockdown levels, for not “making sense”.
“They have levels, but what are they basing decisions on? We cannot support things that do not make scientific sense,” he said. Mukoki said that moving from one level with higher restrictions to another with less restrictions did not explain how government intends to mitigate the impact of the pandemic. He said it made more sense to have those testing negative go back to work and to get the economy going again.
CEO of the National Employees Association of South Africa, Gerhard Papenfus, also slammed government for having regulations which do not make sense.
Papenfus said that Neasa was advising business to be compliant with government’s regulations in order to operate, but said that the administrative process was onerous.
“I think business will be ready but government will have to get their act together on this whole thing. You can’t build economy on so many rules, regulations and requirements.
“People go to work to actually work and not just fill in forms to get into a workplace,” he said.
Papenfus said that the curve of infections was increasing, as expected, and that the lockdown was meant to prepare government to equip medical services to deal with increasing infections once the economy reopens.
When asked if extending the lockdown would help reduce the risk of infection, Papenfus said that there was no option but to reopen the economy because the risk of infection remained regardless. “We do not have an option, we have to open the economy,” he said.
Responsible businesses would do all they can to comply with government’s measures to prevent the spread of Covid-19, but they had no control of what employees do after work, Papenfus said.