Brace yourself for a long financial storm

As President Cyril Ramaphosa warned South Africans to prepare themselves for a new normal under the continued threat of the coronavirus, experts have urged the government to be smart in opening the economy, increasing the healthcare budget, and impressing on citizens the need to brace themselves for the financial storm ahead.

Meanwhile, an old comrade has warned about the lack of rationality in some of the lockdown regulations implemented by government.

Yesterday Ramaphosa announced in his Presidency newsletter that the country was in for worse times ahead. Citing experts who said the virus would remain a threat to global public health for some time, Ramaphosa was of the view that the country had to be prepared to continue living with the deadly virus for a year, or even more,

He said the transition to the next phase of the coronavirus response, that of recovery, would be more difficult than the present one.

“The risk of infection outbreaks will increase. The demands on our clinics and hospitals and medical personnel will grow,” he said.

“We must be prepared for a new reality in which the fight against COVID-19 becomes part of our daily existence,” he said.

Political economy analyst Dr Daniel Silke said the government needed to be smarter and more pragmatic in opening the economy and softening the lockdown regulations. Otherwise a continuation of the heavy-handed regulatory approach could spark civil rebellion, as people would want free movement to seek means of survival.

Silke said the government had to consider exercising agility and flexibility in opening the economy. “They really need to be a lot more agile and look at sectors of the economy that must open, and take a less regulatory approach, while giving a business-friendly message. The government needs to be much more flexible, much more pragmatic in opening the economy,” Silke said.

There appeared to be a lack of an economic plan during and beyond the Covid-19 pandemic.

Wits Business School senior lecturer in finance, Dr Thanti Mthanti suggested that as the president had raised the fact that Covid-19 was going to be around for a long time, his government had to prioritise healthcare budgeting if it was to succeed in overcoming the virus. It had to act like China and commit massive financial resources towards healthcare, so as to control the spread of the virus.

He said between R40 billion and R50 billion at the very least was needed for a healthcare response to contain the virus, and in order to prepare for massive infections. The quicker they do that, the cheaper it would be.
“It does not seem that there was sufficient complementary structures in place to do screening, testing and quarantining and the accompanying personal protective equipment (PPEs) at the outbreak of the virus,” Mthanti said.

Government must also increase the capacity of ICU facilities and procure equipment such as ventilators.

“Our ability to work or go back to work depends on our ability to control the virus. If people are sick, they won’t be able to work and without income many will not survive,” Mthanti said.

Prepare for some hard times

Both Silke and Mthanti were of the view that the current bond and loan repayment holidays extended by the banks were unsustainable, considering that the virus was predicted to stay longer. They said the banks would not be able to afford extending the arrangement beyond three months, because that would affect their own survival as well.

Mthanti advised that with the president’s focus of hard times ahead, individuals and households must severely tighten their belts.

“If it’s not an essential, don’t buy. Save as much as you can, even if you still have a job, because you don’t how long you will keep that job,” Mthanti said.

He said the social distress relief grants were poorly designed because they targeted beneficiaries that already enjoyed some income such as old-age pensions and child grants. The R350 for the unemployed was a pittance and did not take into account those that had lost their incomes due to the lockdown regulations, such as domestic workers, gardeners, restaurant and fast-food workers, construction employees, and the informal sector.

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“The government approach has failed to consider varying rates of poverty. In my view it should have been basic income grant of at least R1,000 for adults who are unemployed. The informal sector domestic workers are the ones that sustain the majority of the low-income households, while construction employees were used to a wage of R1,500 a fortnight which they have since lost because of the lockdown,” Mthanti said.

Silke said the government had to reprioritise its policy framework, and there appeared to be no reprioritisation of budget spending for the economy into the future.

Ramaphosa was optimistic, though, that government efforts would bear fruit, and promised to intensify the fight against the deadly virus. “The coronavirus crisis will pass. But for as long as it remains a threat to the lives of our people, we must remain vigilant, diligent and responsible.

“Now, more than ever, it is upon the conduct of each that depends the fate of all,” Ramaphosa said.

Lockdown regulations ‘not rational’

Meanwhile, former finance minister Trevor Manuel has added his voice to those questioning the rationale behind some of the lockdown regulations.

Speaking to Stephen Grootes on SAFM, Manuel warned that despite the pandemic truly representing a “deep health crisis”, it was important for government to take rational decisions that consider the economy, and also hold the security forces to account for their conduct.

The former minister, now chairman of Old Mutual, compared the behaviour of the police and military to that of the apartheid military.

“Nowhere under apartheid emergency regulations would we tolerate that kind of thing. In fact, the voices that spoke out against apartheid were largely about the abuse of soldiers,” he said. “We saw policemen suspended for acting violently against communities under apartheid, under the state of emergency. So why should we be tolerant of the misbehaviour of soldiers here?”

He suggested an alternate role for the security forces, which was one of social assistance, instead of “to go from shop to shop picking on poor shopkeepers”.

On the irrationality of certain lockdown regulations, he said: “We must ensure that the economic rules are rational, and I think that a lot of the decisions that have been taken don’t pass the test of rationality.

“The idea that you can only exercise for three hours a day – none of this passes the test of rationality.”

– ericn@citizen.co.za

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