Real economic cost of lockdown not clear yet, says Patel
Minister plays down estimates by economists
Estimates by economists of how much the lockdown has cost the economy were a “thumb-suck”, according to trade & industry minister Ebrahim Patel. He said the government had not calculated the cost.
Patel told the Sunday Times the “guesstimates” did not reflect that some industries remained active and at some companies people worked from home.
It has been reported that the daily losses are between R13bn and R20bn. Patel said the real figures have yet to be known.
“All they have done is to take the GDP of the country, which is about R5-trillion, and they have divided it by 365,” he said.
“All of the food industry was at work during this period and was producing. All the health-care suppliers and industry were at full production.”
Patel said a “full sense” would come when more companies returned to work.
He said estimates by the Industrial Development Corporation indicated that sectors that account for about 50% of economic output would be back at work under level 4. Including those working from home would bring it closer to 60%, he said.
“I would like to see additional hard figure work being done before I release a figure. But I do think that the credible figure of close to 2-million additional workers would be able, over the next period, to get back to work.”
Government financial support to companies must be based on strict conditions, such as protecting jobs and improving productive efficiencies.
Patel and colleagues in the economic cluster are watching the spread of Covid-19.
“The first step is to reduce the chance of regressing. The second one is to begin to put in place enough systems that enable us to move away from a single national level, where in future the system has the ability for us to have different parts of the country at different levels of risk so that you don't shut down the whole economy when you have a surge of infections in one part of the country.
“You can find ways then of having a partial lockdown rather than a full lockdown, if it becomes necessary. When you pass the worst of that in an area, you can then begin progressively to reopen it,” he said.
Patel is working at creating infrastructure in which the recovery of the economy can take place after the pandemic. His department is looking at three scenarios.
“The first is the L recovery, which is the worst-case scenario in which the economy goes down and it stays flat for a long period because we had lots of losses of critical personnel in key industries as a result of Covid. Massive loss of export markets because other parts of the world don't go back to restarting, and weak investor confidence.
“The second scenario is a U-shaped scenario where we have the drop that we are seeing now. It stays flat for a period and then it gently goes up. And finally economists globally, and our own people, have talked about a V-shaped recovery where [there] is a sharp drop but a sharp upturn also. Obviously, we would be hoping for a V recovery and there are some factors in our control which we can use to try to do so.”
The R500bn stimulus is the first move towards creating the conditions for the V-shaped recovery, he said. It would avoid a massive collapse in the economy.
Patel said he was not married to a “hostile” approach in dealing with companies in distress seeking relief. He said the government was putting many resources on the table and he favoured President Cyril Ramaphosa's approach of master plans, or social compacts.
The deputy finance minister, David Masondo, wants a stricter stance.
“Government financial support to companies must be based on strict conditions, such as protecting jobs and improving productive efficiencies. The world experience of government bailouts, which transferred financial resources to banks and companies, shows that bailouts of companies do not necessarily lead to the transfer of these resources to the poor,” Masondo said.
If the government did not secure jobs in exchange for bailouts, it would suffer huge unemployment numbers after the pandemic, he said. It could not shoulder such a burden alone.