Action needed now to prevent catastrophe
Preventing a humanitarian catastrophe in SA as a result of the Covid-19 crisis will require simultaneously maintaining the greatest possible degree of economic activity within the limitations imposed by a sensible isolation policy.
Institute of Race Relations CEO Frans Cronje warned that failure to balance isolation with preserving economic activity could trigger a devastating economic contraction, with massive business failures and job losses, leading to economic desperation among the population and raising the spectre of the very health catastrophe that isolation efforts are intended to prevent.
In this event, “South Africa could face an apocalyptic socioeconomic reversal amidst rapidly deteriorating internal policy stability and we would go as far as to say that the consequences may trigger a domestic political realignment on a scale last seen in South Africa in the 1980s and 1990s”.
The very real risk facing the country was not only shortterm but the prospect of “a long era of ever-deepening impoverishment”.
Cronje was speaking after an online briefing on the institute’s Covid-19 scenarios, crafted to identify how the pandemic is likely to evolve in SA and what the health-care and economic consequences will be.
He also discussed the IRR’s policy proposals, contained in the report, “Friends In Need”, aimed at saving #LivesAndLivelihoods.
He warned: “South Africa faces a near unique degree of Covid-19 vulnerability should its economy buckle early under shutdown pressure.”
The IRR’s Covid-19 scenarios and its Friends in Need report “starkly revealed ... the very weak economic state in which SA has entered the Covid-19 crisis”, he said.
“Put plainly, South Africa’s government has wasted so much money and chased so much investment out of the country over the past several years that its fiscal cupboard is virtually bare when it comes to helping those people and communities who now face losing their assets and livelihoods to the pandemic.”
Cronje said: “Our scenario model demonstrates that if the right policy decisions are taken now then it is perfectly feasible that South Africa might weather the Covid-19 storm relatively well — the term ‘relative’ being all important — from both an economic and health- care perspective and that the number of jobs, businesses and lives lost can be greatly minimised.’
However, he added: “For this to occur, sensible isolation protocols are essential, but should be implemented in a manner that enables the greatest possible extent of economic activity to occur within the limitations posed by those sensible isolation efforts.
“Our model demonstrates that should this not occur, and should isolation and shutdown efforts trigger a devastating economic contraction together with millions of job losses and the closure of tens of thousands of businesses, then the ensuing economic desperation of South Africa’s people will see those important isolation protocols themselves failing, raising the spectre of the very health catastrophe that isolation efforts are intended to prevent.”
Cronje said the condition in which the country entered the Covid-19 crisis was one in which “corruption and statecapture efforts of the past decade, coupled with the populist nature of policy in areas from mining, to health care, education, labour and, most prominently, expropriation without compensation, has decimated the economy”.
Thus, the health crisis comes amid rising rates of unemployment, already a multiple of emerging market norms, and worsening living standards indicators, a forecast deficit of -6.8% against an economic growth rate of just 0.9%, government debt levels that have more than doubled since 2009 and the continued squandering of “scarce financial resources on bailing out failing state-owned companies and sustaining cadre-deployment networks — often via effectively corrupt empowerment schemes”.
SA’s unique degree of Covid-19 vulnerability arose from the fact that the country did not possess the fiscal and financial-rescue resources of more successfully and pragmatically governed emerging markets and developed economies alike at the time when such resources were essential in mitigating the harm caused by shutdown efforts and long-term isolation protocols.
For these reasons, urgent policy interventions were needed now. These must include:
● Doing away with the distinction between essential and other economic activity to allow any business to operate should it be able to do so without posing a serious danger to public health;
● Removing as a matter of great urgency every policy threat to SA’s standing as a competitive investment destination (including repealing all race-based policy and legislation and focusing on genuinely empowering the disadvantaged, permanently abandoning threats to property rights posed by the drive towards expropriation without compensation, deepening democracy by giving communities more say over schools, police stations and clinics, and dramatically altering labour legislation to price poor people into jobs); and
● Applying practical measures as spelled out in the Friends in Need report to reduce health risks to the most vulnerable.
Cronje said: “If that is not done forthwith then literally millions of people now stand to lose their livelihoods, not just for the duration of the Covid-19 pandemic, but for many years after it has abated.
“What is quite clear from our analysis is that South Africa will not have the resources to withstand with present pandemic, let alone rebuild society thereafter, if it does not now do everything in its power to ensure that the country is positioned as one of the world’s most attractive investment destinations.”
Read the Friends in Need report at: https://bit.ly/IRRCovid19-policy
South Africa faces a near unique degree of Covid-19 vulnerability should its economy buckle early under shutdown pressure Frans Cronje
CEO, INSTITUTE
OF RACE RELATIONS