DURBAN Chamber of Commerce and Industry has come out in support of President Cyril Ramaphosa’s “risk-adjusted” approach to reopening the economy.
Chamber president, Nigel Ward, said managing the lifting of certain lockdown regulations would be critical as daily rates of infection would have to be monitored and balanced against the requirements and needs of each industry sector.
“The Durban Chamber, is engaging with the details of this plan in order to determine how organised business can work with the government to ensure the successful implementation of a smooth transition back into economic activity and productivity that will help secure social stability,” he said.
Ward said the Covid-19 pandemic and the resultant lockdown had placed South Africa’s economy under tremendous pressure.
“Our economy and businesses will not be immune to the adverse exogenous and endogenous effects of Covid-19. The Durban Chamber welcomes the government’s R500 billion socio-economic relief package and is optimistic that this relief will aid our ailing economy. We applaud the R50 billion allocated to social grants, which will be a significant help on the most vulnerable and we urge organised business to supplement this through their own or jointly coordinated corporate social responsibility programmes.”
However, Ward said the Chamber acknowledged that the funding had been reallocated and redistributed from the existing national budget which had raised concerns.
He said the reprioritised funding would alleviate the immediate stress but meant that critical infrastructure and other development activities would now be placed on hold.
“Overall, established businesses will benefit, but we remain concerned about how funding will reach the informal sector,” he said.
Another concern raised by the Chamber is that the R200 billion in loan guarantees would not go directly into businesses but would be administered by the banks.
“Sadly, the lending practices of most banks and financial institutions have not transformed over the years or been adjusted to match the social reality of South Africa which has a staggering number of informal businesses that operate outside of the formal sector, very profitably in many cases. We are anxious to hear how the banks will cater to small businesses and micro-businesses that desperately need access to this relief offered by the government. We will appreciate some detail on how the credit committees of the banks will unlock the R200 billion, broaden their horizons and restructure their lending mechanisms as well as culture and approach to financing micro-businesses,” he said.
Ward went on to add that existing defaults and arrears that affected many businesses in the economic crisis prior to the Covid-19 pandemic, mean that certain businesses would be excluded from accessing the funding.
“Those who will benefit from the R70 billion allocated to tax relief are those who are currently tax compliant. Those who need help are most likely those who are in trouble and presently non-compliant. There is an opportunity here to look and the big picture and structure relief in a way that will grow and encourage future compliance,” he said.
Ward said the Chamber believed SMMEs, spaza shops and informal businesses would be the worst affected by Covid-19 given the fact that many relied on monthly income to sustain operations, with no access to additional capital to ride out the current outbreak.
“While Covid-19 has already impacted businesses across most sectors, the Durban Chamber believes that the full economic impact of Covid-19 will only become clear post-Covid-19,” he said.
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