Covid-19 travel ban would destroy SA economy

Should the coronavirus intensify to levels similar to those in Italy, which has had to impose a travel ban, the South African economy would face widespread ruin, an economist has warned.

A usually thriving tourist economy and a favourite destination for many travellers, including South Africans, Italy has been reeling from the impact of the respiratory disease, with the death toll reportedly soaring by 133 in a day to 366.

The total number of infections is said to have leapt 25% to 7,375 from 5,883. South Africa, meanwhile, has seen its number of infections jump to seven, after four more members of the group which travelled to Italy and among which the first three cases were diagnosed, tested positive.

Stringent measures introduced by Italian Prime Minister Giuseppe Conte have also led to the closure of schools, gyms, museums, nightclubs and other venues across the entire country, with up to 16 million people in Lombardy and 14 provinces requiring special permission to travel under new quarantine rules.

Restrictions are expected to last until next month.

Asked what impact a similar travel ban could have on the South African economy, economist Mike Schussler predicted near-complete ruin.

“Definitely, the crumbling of the whole tourism industry would have a widespread devastating effect on the entire value chain of the economy. This could affect the hospitality, cleaning and food industries – leading to the collapse of SA Airways (SAA) and other airlines being adversely affected.

“If this was to happen to SAA, which is surviving on state bailouts, the situation could hurt all other local and foreign airlines,” said Schussler.

He said there would be a “huge knock-on effect” across all sectors of the economy.

“Trains would come to a halt; guesthouses would close and events management companies would also be affected. We should remember that the tourism contribution to the South African GDP (gross domestic product) is bigger than that of gold and coal mining combined,” added Schussler.

Dr Anja Smith, a researcher at Research on Socio-Economic Policy at Stellenbosch University, described the country’s economy as being “at an extremely vulnerable stage” due to the advent of Covid-19. She said the disease emerged when South Africa “officially entered a recession, in large part due to the energy crisis and general investor uncertainty”.

She explained: “Local and international economic effects due to the coronavirus will merely constrain growth further. It is unlikely at this stage that our economy will be able to successfully ride out the energy crisis, economic downturns expected from the coronavirus, and general investor uncertainty.

“The biggest effects are not likely to come from a downturn in local economic activity, but rather from constrained demand for South African goods and services internationally – reduced export demand. There is currently a lot of global panic and fear about deaths due to the coronavirus.

“There is, however, reason to be more concerned about the secondary and longer-term effects on health via economic factors.

“The focus on the virus and attempts to curtail it has led to the closure of many factories and industries in China, one of the world’s biggest exporters of all types of manufactured goods.

“There are certain pharmaceutical products that are already in short supply because of manufacturing closure in China.

“This is of big concern for a country like South Africa, with many chronic diseases, including HIV, tuberculosis, hypertension and diabetes.”

Smith predicts that the secondary health effects of the virus will only become clear in the next year or two.

brians@citizen.co.za

For more news your way, download The Citizen’s app for iOS and Android.