Economy and employment: Where to now SA? Part II

21 April 2020 by Mamokgethi Molopyane 

With no normal to return to, here’s what the country can do next.

Following the report of South Africa’s first positive case of Covid-19 by the National Institute for Communicable Diseases on March 5, government was quick to react. However, it’s too early to tell whether it prevented what could have been a rapid spread of the disease.

President Cyril Ramaphosa rightly extended the lockdown to the end of April 2020. However, this action has meant lost income for many citizens and businesses.

So what now, South Africa – how do we rebuild this country?

We adopt a head-on approach informed by lessons from countries that have thus far been successful in fighting the coronavirus.

Then we come up with plans that are informed by South Africa’s socio-economic reality.

Adopting strategies

Firstly, useful lessons can be picked up in how Singapore, Taiwan, South Korea and Hong Kong reacted to the outbreak. Through public-private partnerships (PPPs), those countries did not wait for the pandemic to become a crisis; they produced essential equipment necessary for both private and public health facilities to deal with the outbreak, then implemented preventative measures.

South Africa must ramp up the production of protective masks, sanitiser, gloves and other equipment needed by health workers, including the relevant infrastructure in public hospitals that will specifically deal with a Covid-19 worst-case scenario.

The public health sector already has overworked health workers, is understaffed and has poor infrastructure. The state therefore cannot afford to adopt a wait-and-see approach, or hope the lockdown will be sufficient in tackling the virus.

The death of over 100 Italian doctors and health workers in the US who were at frontline of this pandemic must motivate South Africa to better adapt.

Cut the red tape

Secondly, as the economy was already in recession and vulnerable, the lockdown was a particularly hard blow. Efforts must therefore be focused on ensuring that the effects of the extended lockdown are not excessive. The quicker government can process the funds mentioned below and ease access for businesses that have applied and qualify for assistance, the faster they can produce goods, maintain services and have income for necessities.

  • R3 billion from the Industrial Development Corporation for procuring essential medical supplies;
  • R1.2 billion in relief for small farmers and to ensure food security;
  • R40 billion being availed by the Unemployment Insurance Fund (UIF) for employees who can’t work due to the lockdown; some R356 million in payouts have been made so far; and
  • R500 million available from the state for small business.

If bureaucratic red tape prevents access to these funds, it deals a death blow to medium and small businesses.

The sudden halt in economic activity meant that production stopped. As result, so did the global demand for South Africa’s export goods. You can see how two key sectors, manufacturing and mining, are immediately affected. Consequently, because there is no production, foreign capital that comes with demand for those exports also stopped, leaving business and labour with no income.

A way out is to lift restrictions on these sectors.

Enable them to return to operation, because we know that although the pandemic and its ensuing restrictions affect the global economy, there are some foreign markets that are still working, albeit in constrained conditions.

Remove the regulatory barriers

Related to resuming production and some economic activity, the government and policymakers must also remove regulatory barriers such as the tax procedures that can take weeks, thus delaying companies including medium and small business in providing their services.

Further, business aid must be spread out across the country and not limited to metropoles. And it should be made broadly available to diverse businesses in varied industries instead of favouring specific sectors.

Thirdly, the lockdown affects workers differently.

However, in South Africa it is the most vulnerable who bear the heaviest cost. Therefore, I hope Ramaphosa emphasises the importance of government prioritising vulnerable workers – those who are going to be most affected by this disruption.

Be realistic, and accept our limitations

EU governments have been quick to assist employees with an income-replacing scheme. In South Africa this is almost impossible. However, any government should ensure that aid goes to vulnerable workers. For example, efforts to provide financial assistance and cushion the blow for those who will lose their jobs should be part of existing programmes such as the UIF, instead of new ones being created, and must prioritise those already vulnerable.

There is an opportunity here.

This pandemic has done away with the normal way of doing things, creating room for the establishment of new normal through moves such as a reform of the labour law.

For one thing, it should be extended to include zero-contract workers, the freelancers, and the self-employed who not only miss out on the assistance measures during the Covid-19 crisis but were already excluded from the UIF safety net because work for them is already work from home, without collective labour rights or being a union member, or having employers to protect and support them.

There is no going back to what we used to regard as ‘normal’.

But there is an opportunity to create a future normal that works better.

Source: Moneyweb at https://www.moneyweb.co.za/moneyweb-opinion/columnists/economy-and-employment-where-to-now-sa-part-ii/