Research institute Trade and Industry Policy Strategies (Tips) says the main topic of discussion at the moment in South Africa is how medical issues are balanced with economic issues, considering the Covid-19 pandemic and the Phase 4 Level the country is entering.
Among the flaws that Tips highlights in government’s approach to economic risk mitigation is the fact that it did not offer entrepreneurship support through digital means, for example to support poor people that will need to start informal enterprises post-lockdown because they have lost their jobs, notes chairperson Saul Levin.
“We have seen difficulty and lack of resilience that businesses and households struggle with just around surviving for a month without income. It shows the daily distress businesses and households are experiencing in this country even in normal circumstances,” Levin adds.
Tips economist Neva Makgetla in a virtual webinar hosted by the research institute discussed the idea behind a risk-adjusted reopening of the economy, while highlighting the need for business and society to start preparing for what a national Phase 3 Level might hold.
During Phase 3 Level, she says it will be ideal if individual producers can apply to produce based on risk management plans, to which end government can issue permits and monitor implementation thereof.
In citing other experts globally, she says the standard approach to emerging epidemics can be described as the hammer and the dance, with the hammer being the Phase 5 Level lockdown to buy time for ramping up of screening, testing, tracing, developing targeted quarantine isolation systems, preparation of health systems and to get a head start on developing treatments or vaccines.
The dance involves how the risks of the epidemic, or in this case pandemic, is managed with less draconian measures imposed on business and society, she says.
Makgetla points out that the “hammer” has helped to bring down the number of new Covid-19 infections a day, from 450 new daily cases on March 27 to an average of 50 new daily cases from April 4 to 8.
At that time, the new daily infection rate fared well compared with the US, which had reported 200 cases of Covid-19 for every 100 000 people, while the Western Cape in South Africa, currently the epicentre of new infections in the country, reported 25 cases for every 100 000 people.
Makgetla says this contribution towards flattening the curve was made owing to a combination of an early lockdown and South Africa’s experience and existing capacity to deal with diseases.
“We have capacity that we do not recognise, with about 30 000 community healthcare workers in the country, compared with just 10 000 in the US with its much larger population, thanks to experience with human immunodeficiency virus and tuberculosis.”
However, on the economic side, the statistics look more bleak, with half of employers surveyed by Tips over the last month indicating that they cannot survive another month without having to retrench employees or declare bankruptcy.
Most employers also indicate that they cannot shift to producing or supplying essential products, especially small and medium-sized enterprises (SMEs).
“Businesses need to undergo profound changes in work organisation and facilities. Some may need assistance to develop new solutions. However, the ability to manage risk varies by industry.
“Some of the hardest areas to manage risk is labour-intensive manufacturing and where customers are directly served and needs crows, such as recreational services, education, traditional retrial and public transport,” Makgetla explains.
She adds that many industries now also need more equipment for screening and digital migration purposes, as well as safe worker transport and data, which imposes additional costs on businesses.
To this end, government needs to fast-track systems and capacity.
“Our government has always been risk-aversive. Part of the problem is that we do not have systems in place to minimise risk and then talk about trade-offs. We have to accept that we cannot entirely eliminate risk, but we can seek practical measures to minimise risks from production and then decide whether to allow certain activities.
“Government has to evaluate risks of specific reproduction systems, and to weigh them against the benefits of restarting production. It saves resources in the short run to generalise by industry, but often there are big variations within them and we end up with some high-risk activities, while many lower-risk opportunities are barred,” she says.
The bulk of South Africa’s employment is in services and retail, which involves direct contact with the public and working in teams.
It is hardest to manage risks in a range of services that are traditionally handled in-person. A lot of the most labour-intensive sectors tend to be higher-risk, which includes many SMEs.
“We are now in the dance phase of risk-based implementation, but are we maximising safety in terms of Covid-19 while opening up the economy enough?
“Looking at Phase 4 as a risk management system, it has been largely guided by minimising workers going to work, instead of the potential for individual workplaces to manage risks,” Makgetla notes.
She adds that it is unclear how government decided on products that are allowed to be traded during Phases 5 and 4 of the lockdown, for example, heaters may be bought but not kettles, and cigarette sales have been allowed at times, but not alcohol.
SMEs, in particular, are not getting assistance on bringing in risk-mitigation measures. There is also no visible effort to mobilise capacity for monitoring workplace and commuter transport.
Makgetla says Phase 4 as a recovery plan does not address challenges to reopening the economy besides the health risks.
Specifically, liquidity crunches for small business – UIF and small business support from government – are slow to roll out, while there is crashing domestic and global demand, especially for tourism, domestic personal and recreational services and retail.
She also questions why e-commerce is not being recognised as a less risky mode of retail and whether government has considered what will be a just transition for the tourism sector.
“Regulations are often unclear, arbitrary and hard to appeal, including around trade – what imports are permitted and what exports?
“How do we create a more consistent environment for small business? This should be a core obstacle to change in the long-term,” Makgetla suggests.