Extending lockdown in current form will kill economy, says premier
A leading world economist says blanket lockdowns are not sustainable, but more Covid-19 testing is needed to make localised judgment calls
Extending the coronavirus lockdown in its current form will not be economically viable and the national government should consider a hybrid model, Western Cape premier Alan Winde says.
Winde said, during an online briefing on Thursday, that, should the lockdown be extended, regulations should allow more businesses to operate but under strict health guidelines, such as an emphasis on social-distancing and compulsory face masks for workers and customers.
SA’s 21-day nationwide lockdown is due to be lifted on April 16, as the government battles to contain the highly infectious and potentially deadly Covid-19. Lockdowns around the world have brought most economies to a standstill, and while the lockdown in SA has slowed the spread of the disease, it is set to come at a huge cost to the economy and lead to a jobs bloodbath.
Indications are that President Cyril Ramaphosa will announce an extension of the lockdown, but it’s unclear whether it will remain in its current form. The current regulations aim to limit the movement of people, allowing providers of essential services, such as healthcare and grocery retailers, to operate.
The stringent regulations prohibit restaurants and fast food outlets from operating, and even the sale of alcohol and cigarettes has been banned. Many businesses have been forced to cease trading.
“Obviously [extending the lockdown] is a national decision, but right now the lockdown is having a massive impact on the economy,” Winde said. “If I had a choice, we would still have a kind of a lockdown — a mechanism of managing the spread of the disease.”
Covid-19 infections in the Western Cape topped 500 this week, making the province the second-most affected after Gauteng.
“We have definitely slowed down the coronavirus, but we are not ready to just say everything is back to normal. We will definitely not be back to a normal state for many months,” Winde said.
Earlier in April, economist Ricardo Hausmann said lockdowns are not sustainable and can bankrupt economies, especially those without fiscal space. Fiscal space generally refers to the availability of budgetary room that enables a government to provide resources for a desired purpose without compromising its ability to finance its operations and other obligations, such as servicing debt.
Hausmann, who is director of the Growth Lab at Harvard’s Centre for International Development, and the Rafik Hariri professor of the practice of international political economy at Harvard Kennedy School, said that governments have to make decisions quickly and without much time to think.
He said that countries, in spite of their small or dwindling fiscal space, have opted for lockdowns and social-distancing, but that this is not sustainable.
“At the limit, people will have to decide between a 10% chance of dying from the virus and a 100% chance of starving to death. Unsustainable situations cannot last. So you will eventually need to resume production, but how? How can the cost of the lockdown be lowered, and how should it be shared?”
Hausmann said general lockdowns are costly as they lack or do not use information about who is susceptible, who is infected and who is immune, and add that they could bankrupt an economy.
“Countries need more information-intensive strategies. One ‘poor man’s’ strategy is to isolate the elderly, suggested by Israel. Other smarter strategies would require much more testing.”
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