Country of contrasts: An empty street outside the JSE. Picture: Siphiwe Sibeko/AFP
Country of contrasts: An empty street outside the JSE. Picture: Siphiwe Sibeko/AFP

If you listen closely, you can hear the panic shifting. A month ago, it was about how many thousands of South Africans would succumb to Covid-19, overwhelm our hospitals and obliterate the country’s health system.

On March 23 — five weeks ago, which feels like five months — President Cyril Ramaphosa announced the national lockdown. At the time, Covid-19 felt like an endless black hole. Italy’s death rate was rocketing, and the US was only just beginning to rattle its sabre at the virus.

Since then, the earth has shifted, and so should our policy. So what exactly has changed?

Well, first, the virus no longer feels like the bottomless whirlpool it once did. We’ve seen the infection curve flatten in Italy, Spain and France. It signifies that social distancing works and while the number of global deaths — now at 209,000 — is scary, it’s not the millions many predicted. In SA, partly due to the lockdown, there are 4,793 infections and 90 deaths — fewer than expected.

Second, there is now far more data about the impact of the virus on society and the economy.

As the FM went to print, a wide-ranging survey of 19,330 respondents from the Human Sciences Research Council was released, with some rather devastating findings.

It indicated that 24% of people surveyed had no money to buy food while between 45% and 63% said the lockdown made it difficult to pay bills, earn money and keep their jobs. Now, there may be selection-bias issues in who answered the survey, but it’s an alarming economic picture.

It adds to other, equally scary, data.

Willis Towers Watson, a global firm which advises pension funds, found that a quarter of the 412 SA companies surveyed will be retrenching employees to survive Covid-19. Nearly three-quarters of them, it found, will be cutting costs.

Stats SA, surveying 707 businesses, reported that 46% of them had either shut down temporarily or paused trading, thanks to the virus. Disturbingly, more than half said they could only survive up to three months without any revenue. "Many businesses — 65% — anticipate that the Covid-19 pandemic will have a substantially worse impact on their business compared with the financial crisis during 2008," it said.

Read all this together and it’s clear why, today, the sense of dread you pick up isn’t mainly about SA’s coronavirus infection rate; it’s about the death spiral of the economy.

The question is, will the R500bn stimulus remedy this? And at what cost?

In this edition, the FM details why this package won’t sow the seeds of SA’s fiscal unravelling. That is because nearly all that funding can be sourced from within the current budget, from external institutions like the International Monetary Fund or from existing surpluses.

The problem, however, is that any stimulatory effect it might have is likely to be offset by the government’s intensely bureaucratic approach to reopening the economy.

As Claire Bisseker details in these pages, economist Peter Attard Montalto reckons the delay in restarting the economy is costing the country R3.5bn a day. It means that with no-one working, and companies folding all the time, you can expect up to a R200bn hole in next year’s revenue collection numbers. That’s a number the bond market will not be able to fund.

It is for precisely this reason that Ramaphosa must simplify the reopening schedule. He must allow every company to open that can safely do so, rather than indulging the securocrats and those with some sort of pious aversion to tobacco and alcohol who’d rather exert an iron fist than bend to reason. If he lets that happen, that iron fist will crush the economy.

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