EDITORIAL: Different lockdown levels across SA make little economic sense
A variable lifting of the restrictions might be pointless for many businesses and workers
The lockdown of the past seven weeks has done a lot of good, curbing the infection rate while buying time for health minister Zweli Mkhize to assemble our health-care resources to prepare for peak infections.
Crucially, we got the message that social gatherings of more than a dozen people is not a good idea, and face masks and basic hygiene will keep us safe. With luck, it’s leading to a change in behaviour that will become ingrained as we move a few notches down in the lockdown levels.
We have also picked up a few lessons from the lockdown that President Cyril Rampahosa should consider when he announces further easing of the restrictions.
One of them is that the uneven lifting of the lockdown could force other businesses, those that might even have a permit to start operating, to join the likes of Edcon and Comair in business rescue.
It’s not surprising Comair and other companies that are banned from opening their factories, stores or flight cabins would be among the first to tumble into bankruptcy protection.
What may come as a surprise is that even those whose services and products are deemed more essential than ever are starting to feel the effect of the rolling economic calamity.
Consol, one of SA’s biggest makers of glass used in packing everything from soft drinks to beer, is finding that with each passing day there is decreasing logic in running factories to serve just a small portion of its potential clients, or what is known as economies of scale in corporate parlance.
“We’ve been able to operate at almost 15% capacity, producing essential products for pharmaceuticals, food and nonalcoholic beverages, but that is a small part of our business,” Consol Glass CEO Mike Arnold told Business Day.
The dilemma faced by Consol, whose costs of keeping furnaces burning and keeping employees at work far outstrip the revenue it earns from the sale of glass to sectors considered essential, highlights the complexities of operating in a partially closed economy.
It also points to the problem Ramaphosa’s national coronavirus command council is likely to face if the plan is still to forge ahead with the variable reopening of the economy by the end of the month, in which areas with higher infection rates could remain under tighter restrictions.
Just as there’s little commercial logic for Consol — whose biggest clients AB InBev, Heineken and Distell are out of action — to run a factory at a loss when the alternative is to bring the entire output to a standstill, it would not make a difference to the fortunes of airlines such as Comair or FlySafair if the uneven lifting of the lockdown means they might not be able fly to Cape Town or Durban.
Brian Joffe, founder of industrial conglomerate Bidvest, also rightly called into question the government’s idea of putting different provinces, cities or districts on different levels at the same time because one company could have built a warehouse in Pretoria and have clients in Johannesburg or any other area that might still be under tougher restrictions.
One’s plant could be open for business but there would be no way of getting products to customers. What would be the point of opening?
It’s not just businesses that would find the mechanics of the variable lifting of the lockdown problematic. As Gauteng premier David Makhura pointed out last week, millions of people live and work in Johannesburg and Pretoria simultaneously.
Ramaphosa should weigh the potential lifting of the lockdown, and any suggestion of a tiered approach with how commercially sensible it would be for businesses to run their factories, stores and airlines.
As things stand, the result of a fractured approach may just be that the majority of businesses stay shut irrespective of the directives from the government. Ministers might have enjoyed the opportunity to experiment with their “command” instincts. The lesson they should have learnt by now is that this simply doesn’t work in a modern, market-based economy and its complicated supply chains.