Lockdown exit: what’s at stake
Looking at the country’s move from lockdown level 5 to level 4 – and what the future may look like
Is it the beginning of the end, or merely the end of the beginning? SA’s move into the next phase of the Covid-19 response is a subtle and certainly complex one, but the strategy is based on a sophisticated risk matrix.
May Day brings an end (at least for now) to the "hard lockdown". The government has adopted a "risk-adjusted approach" to the reopening of the economy and the easing of other restrictions. It envisages five levels, which will enable SA’s economy to stir back to life incrementally over the coming months.
At its core it is a commendable strategy: prudent, comprehensive and evidence-based. Yet, despite its detail, it raises as many questions as answers.
Is it deliverable? Businesses across the land will be asking straightforward but penetrating questions, such as: what can companies actually do, and what can they not do at each level? How can management ensure that the company is complying, and how much wiggle room, if any, is there? Will smaller enterprises, which lack legal and compliance expertise and capacity, be able to cope with the new and changing rules of the game?
We delve into some of the most pressing questions raised by the new strategy, some of which may be answered when the co-operative governance & traditional affairs (Cogta) regulations are formally gazetted.
Are things getting better, or worse?
It is certainly true that level 4 of the SA Covid-19 response, into which SA will now move, is little different to level 5. Most sectors remain under restrictions and social visits remain unlawful. You can buy cigarettes, but you still can’t buy alcohol.
The government remains focused on the looming spike in Covid-19 infections, and the effect this will have on the public health system.
The infection rate is still rising, and the science suggests it will continue to do so until it reaches a peak in September. So it would have been irrational for the government to have set in motion a more significant move (for example, from level 5 to level 3).
The move to level 4 is indicative of two facts. The first, is that a "hard" lockdown is not socially and economically sustainable in the long term. People and businesses need to see that there is a light at the end of the tunnel. The second is that the virus may not yet have spiked with the same force that was feared in the worst-case scenario.
Can the government implement its ambitious plan?
A detailed, technical strategy such as this has several benefits, and at least one considerable drawback. The more intricate the approach, the more scope there is for certain cabinet ministers or the public service to miscommunicate or misapply the new rules.
The bigger the role of the state in responding to the crisis, the more opportunities for its weak links to be exposed. There are likely to be missteps and oversteps among the regulatory and enforcement bodies.
Most of the money will be well spent — certainly more than would have been a few years ago — but some will almost inevitably be lost to corruption and maladministration.
The conflicts in the messaging of some cabinet ministers risk spilling over into more pronounced battles along ideological and factional lines.
No government that is substantially affected by the virus will get through it with a perfect score. At the end, the assessment will be made on the balance of play.
So far, the SA government has done more than enough to claim that the net response is a positive one. The craft and guile of the exit strategy gives some confidence to predict that this will continue to be the case. But the toughest battles are still to come.
Who decides on the ‘levels’?
It is interesting to see the two Nasrec combatants, President Cyril Ramaphosa and Cogta minister Nkosazana Dlamini-Zuma, now joining hands at the pinnacle of SA’s Covid-19 co-ordination. It would be even more satisfying if their communication was more aligned.
While the entire country will fall under the level 4 regulations initially, the possibility exists for different provinces and district municipalities to fall under different levels at a later stage. What isn’t entirely clear is the extent to which provincial and local governments will have the power to make unilateral determinations as to the risk level in their areas.
In his address to the nation on April 23, Ramaphosa suggested the determination would be a national one. This view is supported by a document on Cogta’s website that states the determination for each province and municipality will be made by the National Command Council (NCC), on the recommendation of the ministers of health, trade & industry and Cogta.
But at the ministerial press conference on April 25, Dlamini-Zuma raised the possibility that at some stage provincial and local governments will be able to make that determination themselves.
It makes sense for the national framework to be the overarching governance mechanism when it comes to defining risk — it would disrupt the fundamental purpose of the Covid-19 response if different parties and factions could simply deem the risk minimal, even in areas where the infection rate is modest, and sing from their own hymn-sheet. Within that framework, however, there may be some scope for regional differences in the approach to mitigating the risk, but it is likely that power will continue to reside substantially at national level.
Therefore, any differentiated levels will be based on objective criteria, and not political judgments. A departure from the national norm will need to be justified with evidence to the minister of health and the NCC.
What businesses can go back when?
The "what" is far easier to answer than the "when", as it is reasonably well defined in Cogta’s draft framework for permitted goods, services and movements.
Each sector is allocated a risk assessment, which considers the risk of transmission of the virus in the course of business, balanced against the impact of the lockdown on the sector, its value to the economy and the need to sustain the livelihoods of its most vulnerable employees.
The "when" question is much more difficult to answer.
There is no objectively quantifiable "number" in terms of the transmission rate or caseload to go on. The decision will be made according to the rate of the spread of the virus, and the preparedness of the health system.
To move from level 4 to level 3, for example, requires a move from a "moderate to high virus spread and low to moderate readiness" to a "moderate virus spread to moderate readiness".
For the transmission rate, two factors are considered: the percentage of the population tested, and the rise or fall in the percentage of those tests that are positive.
Preparedness is essentially measured on the availability of hospital beds. So there is some detail, but it is not entirely unequivocal.
What does it mean for the fiscus?
The medium-to long-term impact of Covid-19 and its economic response in SA remains one of the issues where full clarity is lacking.
Finance minister Tito Mboweni has had to take something of a back seat in the cabinet’s communications in recent times. Along with Dlamini-Zuma, trade & industry minister Ebrahim Patel and health minister Zweli Mkhize have formed a sort of "Covid-19 politburo", driving the exit strategy agenda and governance, as well as communication to the public.
The draft adjusted budget bill, promised imminently by Mboweni during another below-par media conference on April 24, is, at the time of writing, still to be released. It is urgently needed to understand exactly what areas in the current budget will be reprioritised, as well as to provide clarity on what impact the various funding instruments may have on SA’s treacherous, long-term debt trajectory.
what this means:
There may be some scope for regional differences but it is likely that power will continue to reside substantially at national level
However, there are some positive signs. It is a sure sign of Ramaphosa’s political muscle that SA could access financing from the International Monetary Fund in the face of some considerable contestation from within the tripartite alliance and other opponents dogmatically trapped in a 1980s/1990s world view.
Ramaphosa and Mboweni know they must be realistic and pragmatic, and access whatever finance is available to fill the growing fiscal chasm; and they are likely to continue to prevail, politically.
There are hopes in the international investor market as well as at home that the economic devastation of Covid-19 will give further impetus to the structural reforms that we all know are needed to achieve meaningful economic development and to contain rising debt levels.
However, the political space remains contested and fraught. The crisis provides an opportunity to move a progressive structural economic reform agenda forward harder and faster than was politically possible before the arrival of the pandemic.
This is the potential upside of an otherwise grave situation.
The ball is now very much in the National Treasury’s court. There is concern about, and additional risk attached to, the Treasury’s lack of clarity on the fiscal implications of the Covid-19 crisis response. This is a nettle that will need to be grasped soon, otherwise the credibility of the government’s economic response to the crisis will be severely stretched.
*The Paternoster Group is an independent consultancy that provides political risk and political economy analysis, and strategic advisory services. The group’s Covid-19 political risk analysis is produced in association with Discovery. For more information, e-mail email@example.com or visit www.thepaternostergroup.com