Investec calls for an acceleration of lockdown easing

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Investec CEO, Fani Titi says banks will also need to support large businesses and others not covered by government's relief packages.
Investec CEO, Fani Titi says banks will also need to support large businesses and others not covered by government's relief packages.

Banking group Investec, which expects bad debt costs to more than double because of the Covid-19 crisis, says South Africa should accelerate the easing of the lockdown.

Speaking to Fin24 after the release of the Investec's annual results to end-March, group chief executive officer Fani Titi said the country needs government and industries to work towards a common objective of saving both the economy and lives because projections are not looking good.

"Our economy is under pressure. Ordinary citizens are under pressure. We need to have the courage to go into some level of acceleration in easing the lockdown in a safe manner. The notion that you either have lives or livelihoods is a false one. I think we can do both, in a safe manner," he said.

Titi said medical advisers who are helping government navigate the road to easing the lockdown can impose conditions that companies, and industries can adhere to so that the economic wheel keeps turning while also limiting the spread of the virus.

Trouble brewing

The pandemic has impacted Investec's adjusted operating profit by some R2.2 billion as the market turmoil that began in late February wiped away value in its listed investments and on some of its unlisted assets like private equity.

But now, with lockdowns in both SA and the UK, where it operates, the group's expected credit loss impairment charge – a forward looking picture of how things are likely to turn out under the current state – has increased to about R2.8 billion, more than double what it reported last year.

Let's work together

Investec Bank CEO, Richard Wainwright said the private sector can also help fund screening and testing of people to enable this accelerated easing of the lockdown. He said government has been listening and collaborating with the private sector more in the past two weeks.

"Even today we had a long session. All the six major industry bodies met with the President and his cabinet ministers for over two hours in a very collaborative and open dialogue," he said adding that this will hopefully be the start of building trust between the government and business.

But Wainwright added that because the lockdown came at a time when the South African economy was already in trouble, having slipped into a technical recession and was later downgraded to junk status by Moody's, structural reforms need to be accelerated.

"The unemployment levels that we've got as a country are just not acceptable. The only way to get out of that is through growth and in order to achieve that growth, we need increased business confidence, investments and structural reform. The President was on that path but some of us would like him to be faster on that," he said.

South Africa's unemployment rate sits just under 30% and is expected to increase significantly as a result of Covid-19 that has seen the country operate under lockdown since the end of March. The worst projections are that the jobless rate could reach as much as 50% by the end of the year.

Wainwright said even without Covid-19, the group's profits from continuing operations would have been down 10% because of the recessionary impact in SA and Brexit uncertainty in the UK.

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