Ramaphosa walks a tightrope as SA braces for further economic pain

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SA may need "less orthodox" approaches to finance the unprecedented R500 billion stimulus package announced by Predident Ramaphosa, say economists.
SA may need "less orthodox" approaches to finance the unprecedented R500 billion stimulus package announced by Predident Ramaphosa, say economists.

The SA economy will likely endure pain for a little longer, with the economic hubs in the country likely to remain at Level 4 of the lockdown for the foreseeable future.

President Cyril Ramaphosa on Wednesday night announced that government would be working on getting most of the country onto alert Level 3, with the parts of the country with the highest rates of infection remaining at Level 4.

Data shows that infections are mostly concentrated in metropolitan municipalities and districts in the country. Government will, however, be announcing changes to the Level 4 regulations to expand business activities which may be permitted in the retail space and e-commerce.

Hugo Pienaar, chief economist at the Bureau of Economic Research, said that it appeared government was starting to heed calls for a quicker relaxation of the lockdown regulations. But with Level 4 being applied nationwide for the next two weeks, as well as metropoles like Cape Town likely to remain at Level 4 beyond May, means "economic pain" will persist. "Day-to-day life will continue to get worse, especially for the most vulnerable in society," he said.

Commenting on the Level 4 regulations which should be amended, Pienaar said that government should allow all clothing to be sold. There has been public outcry over the restrictions of certain clothing items which may be sold under Level 4. Flip flops and curtains are among the items which controversially are not allowed to be bought under Level 4, Business Insider reported. Pienaar also thinks that all e-commerce should be allowed under Level 4.

Is the worst over?

Alexander Forbes chief economist Isaah Mhlanga also expects the impact of the lockdown to be felt going forward, but is optimistic that the worst is over. "As far as the economy is concerned, it would indicate the worst of the damage is behind us," he said.

While the highest rates of infections arguably are in economic hubs, Mhlanga pointed out that some sectors do not operate in cities. "We do have a significant proportion of economic activity that does not happen in the cities, although the administration of those sectors may happen in cities," he added.

Tutwa Consulting economist Azwimphelileli Langalanga does not see a reason for strict conditions to remain at metropolitan areas. "It is something that he (Ramaphosa) has to consider carefully. Where there are high infections there is high economic activity, he cannot be seen to be relaxing restrictions in areas outside of the economic engines of Johannesburg, Pretoria, Durban and Cape Town," Langalanga said.

Tough balancing act

The president appears to be taking pressure from all sides, whether it's the tobacco industry petitioning to trade, or individuals who want to exercise for longer hours, the risk of infections surging remains. "it's a very tough balancing act the president is facing right now," RMB analyst Matete Thulare said.

"We want to have economic activity, but at the same time we have a real health crisis. Everyday numbers escalate and get worse," Thulare added. It would be prudent for corporates to have risk adjusted measures in place to make sure people can work while also avoiding social interactions as far as possible and adhering to health and safety requirements set out in regulations, he said.

"That is the sad thing about all this, you cannot please everyone at the table," Thulare said.

With Khulekani Magubane

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