Country faces tough lockdown decision
As SA reaches the halfway mark in its 21-day national lockdown, the trade-off that must soon be faced is becoming clearer: extend the lockdown to prevent infections or let people get back to work to avoid deepening poverty and crippling the economy.
Last week, when the government amended the lockdown regulations to allow informal food traders to reopen it in effect chose the second option. This could provide a signal about what it will do come April 16 when the lockdown is supposed to end.
The government has yet to come up with a plan to support the estimated 3-million people working in the informal sector. Clearly, measures intended to provide formal small business with tax relief or workers with augmented Unemployment Insurance Fund (UIF) benefits will not reach people in nonVAT-registered businesses.
Some have argued that the quickest way to reach the poor is to raise existing social grants. However, just over 30% of households in the poorest 50% of the population are not eligible for grants, either because they’re not disabled or are aged between 18 and 59, which makes them too old for the child support grant and too young for the old-age grant.
Development expert Kate Philip suggests that by screening people for eligibility against their ID numbers and tax status, it would be possible to initiate a special Covid-19 grant aimed at informal-sector workers, with payment taking place over mobile money platforms. But there is no time to design an entirely new grant and delivery system.
El Salvador has found a partial solution in granting all firms, formal and informal alike, a three-month holiday from their utility bills. However, given that a culture of non-payment is widespread in SA, this reprieve might not have the intended effect here.
Another proffered solution is that SA institute a universal basic income grant. However, if 10-million of SA’s 60-million people were to receive R1,000 a month for three months, it would cost R30bn — the amount the government spends on agriculture and rural development in a year. The most SA is planning to borrow from the New Development Bank is $1bn (about R19bn), and that will presumably have to go towards priority medical supplies.
Alternatively, the government could just allow informal traders to reopen. Wisely, I think, it chose the latter option, though the relaxation of the lockdown rules is restricted to food traders. Part of the reasoning is that since 83% of SA households live within 5km of an informal food vendor, allowing people to access their closest provider will aid containment efforts. But given the complexity of designing a new support system under current conditions, did the government really have any choice? And how long can it keep the rest of the informal sector in lockdown if it’s unable to offer any kind of safety net? To keep it closed beyond April 16 would be to court disaster.
The bottom line is that fiscally constrained developing countries with poor, vulnerable populations are going to be forced to exit their lockdowns sooner rather than later. As Ricardo Hausmann, one of the world’s foremost development economists, puts it: “At the limit, people will have to decide between a 10% chance of dying from the virus and a 100% chance of starving to death.” He recommends that countries isolate the elderly before they reopen, and then reopen the most-critical, least-networked activities first and in phases while continuing to test extensively and quarantine the infected.
It’s hardly a perfect recipe, but then the world has become one huge live experiment in which the moral choices appear clear but come with devastating economic costs.
So far, SA has done a good job of sticking to international scientific best practice, but it’s far too soon to be patting ourselves on the back — the waters are going to become a lot murkier after April 16.