When we are reminded that South Africa was in Covid lockdown five years ago, it dawns upon us that time flies. We also realise that we have short memories.
Children born during the lockdown and shortly thereafter are nearly of schoolgoing age. I cannot help but wonder what they will think when they see notices about “keep a safe distance” or “stand at least 1m apart” in businesses and schools.
Covid and the lockdown are distant memories, but some of the notices remain. Some of the political and economic damage done by the lockdown also remains. As I am not a medical expert, I cannot deal with the question whether the lockdown limited infections, allowed time for inoculations or saved lives.
As an economist, I can say without any doubt that some of the silly (and often plain stupid) actions of the government did serious damage to the economy. One consequence is that South Africa’s employment numbers have levelled out since the lockdown. We have had population growth of about 1.5% per year, but very few additional jobs.
As could be expected, employment declined in 2020 and 2021 because of the lockdown. Only in 2023 did total employment surpass the figure of 2019.
The lockdown changed the way people work. Many people now operate from home, as the use of electronic communication has increased. The impact of these developments on overall productivity will only be measurable in time.
Some of the regulations were silly. Those dealing with the sale of clothes were shockingly inappropriate. Selling winter clothes was permitted in terms of regulations signed by Ebrahim Patel, at that time minister of trade & industry. Yet the sale of summer clothes and “open shoes” was prohibited.
It was as if the minister believed that customers who shopped for winter clothes were protected against the coronavirus, but serious danger lurked in shopping for summer clothes, in which the virus waited to attack them. In short, any cabinet member who wants to be taken seriously should refrain from signing such inappropriate regulations.
The police’s response to some of the regulations was also questionable. For instance, officers tried to arrest surfers. Beaches were out of bounds and surfers trespassed on beaches to get into the sea.
The sale of alcohol was banned and resulted in considerable smuggling. It recalls the period of Prohibition in the US from 1920 to 1933. Alcohol smuggling cost the fiscus, as excise duties and VAT were circumvented.
The ban on the sale of tobacco was also stupid; smokers did not quit just because the government told them to.
Things got even stranger as the lockdown continued. Following a public outcry after the ban on cigarette sales, President Cyril Ramaphosa informed the nation on April 23 2020 that the ban would be lifted from May 1 2020. Smokers rejoiced.
Their joy was short-lived. On April 29 2020, then minister of minister of co-operative governance Nkosazana Dlamini Zuma, defied Ramaphosa and announced a continued ban on cigarette sales.
I still regard April 29 2020 as the day the Ramaphosa presidency ended. A president who makes a long-awaited public commitment to citizens is challenged by a cabinet minister and she keeps her appointment. It is not necessary to elucidate, other than to add that the past five years have shown repeatedly Ramaphosa’s reluctance to deal with issues and make decisions.
The ban opened the doors for the trade in illegal cigarettes. The legal trade has not recovered from this blow.
Research published by Nicole Vellios and Corné van Walbeek of the University of Cape Town estimates that by 2022 the illegal trade in cigarettes in South Africa was larger than the legal trade. The government’s estimated loss in excise revenue was R15bn and in VAT revenue R3bn.
On an annual basis, this loss is larger than the extra revenue of about R13.5bn that the government was planning to raise from a VAT increase of 0.5 percentage points in the 2025/2026 fiscal year. The lesson for the government is that decisions, irrespective of how stupid they are, have consequences.
The conclusion is therefore that the South African economy and the fiscus have not fully recovered from the Covid lockdown. The government should have been less rigid and much more pragmatic in its response.
Ramaphosa should have contained the damage to the economy, reining in those cabinet ministers who obviously delighted in living out their dogmatic views about their pet hates and inclination for overregulation of the economy.
But then, his presidency in effect ended on April 29 2020. Clearly, he has also not recovered from the lockdown.
*Rossouw is an honorary professor at Wits Business School and a former head of the school, as well as a former deputy general manager and currency specialist at the Reserve Bank
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