There’s a cartoon that ridicules the angst among financiers about putting the world’s economy on ice. The scene is a placid grassland, 65-million years ago. Two brontosauruses gaze at a meteorite burning through the sky, destined for somewhere in the Yucatán peninsula of what is today Mexico. The one turns to the other and exclaims: "But what about the economy!"
To those who’ve seen patients gasping for air on ventilators in New York, the clamour for lockdowns to be lifted "to save the economy" must seem a bit like this. And with a virus that has caused 125,000 deaths around the world now seeping into SA’s townships, it seems borderline sociopathic to speak about "necessary collateral damage" (read: the elderly) to keep the global economy chugging.
But the reality is, small businesses are being brutalised to an extent we’ve never experienced in this country. Our economy, which was already gasping for breath before this, is now firmly in the ICU.
This week investment banker Martin Kingston, who is part of Business for SA — a task force from the private sector formed to tackle the virus — painted a bleak picture. "Our view is there is going to be a very significant 8%-10% contraction in the economy for 2020 depending on the length and extent of the lockdown," he said. Later, Reserve Bank governor Lesetja Kganyago projected a 6.1% GDP contraction this year. Either way, there’s going to be serious damage.
Worse: "A million people added to the unemployment numbers is what we expect," said Kingston.
Based on Stats SA’s February labour force survey, that would mean about 7.7-million people unemployed, out of a labour force of 23.1-million. It would push unemployment from 29.1% to 33.3%. And if you add in the 2.85-million "discouraged job seekers" who want work and can’t find it, that expanded rate blows out to 45.6%. (Or, put another way, there will be just 15.4-million people with jobs, supporting the other 43-million South Africans.)
It sounds like a horror show, but as economist Paul Krugman has argued in The New York Times, it’s actually fine if people lose jobs temporarily, if they’re given cash to tide them over. The problem comes when you want to start the economy again, and those businesses have folded and those jobs don’t exist any more.
In recent weeks, Ann Bernstein’s Centre for Development & Enterprise spoke to 233 entrepreneurs about the impact of Covid-19. In all, 95% of them can’t pay staff and half expect they’ll go bust
"I think that’s the end of our business," said one man, who runs a fruit and vegetable business in Philippi, Cape Town. A Soweto spaza shop owner said he won’t be able to pay a cent to his four employees; as it is, "I will not even be able to sustain myself during this lockdown," he said.
A fashion designer from Khayelitsha said her situation felt hopeless. "I do not qualify for a business grant either, because my documents aren’t up to date."
These are the people who should be getting the emergency funding you read about. But 86% of these 233 businesses don’t know where to get this aid. And fewer than half would qualify anyway — some aren’t compliant with one or other rule, or don’t have the "six months of bank statements" and financial projections. Others are excluded because they’re foreign-owned.
If you want to get a sense of why well-meaning initiatives fail, you can see it right there.
The danger is clear — myopic soldiers of bureaucracy, with their strictures and forms, mindlessly vetoing applications because someone wasn’t smiling in the passport picture. You’ve seen them in our labour departments, our home affairs offices and even our banks — unhelpful power-crazed grinches who would sooner bequeath their first-born than part with a cent of the money that isn’t theirs to begin with.
During an emergency, these bureaucrats are a pillow over an economy’s face. And make no mistake, it is an emergency. Take the story of Nosapho Dukuda, a car guard in Mthatha. Dukuda told City Press that without the R50-R70 she takes home on most days, "our reality is that we are going to die of hunger before the coronavirus kills us".
President Cyril Ramaphosa, health minister Zweli Mkhize and their team get this. Which is why the talk is shifting to a "managed lifting" of the lockdown. But that is weeks away, you’d wager.
So it means that the government, and business, must do better to get relief to those who really need it. If they want any businesses left standing, we can’t have the pencil-pushers manning the counter.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.