Business organisation Business Leadership South Africa CEO Busi Mavuso in a weekly newsletter says big and small businesses alike are facing a serious calamity as a result of the Covid-19 crisis.

She says she is disturbed by comments made by Trade and Industry Minister Ebrahim Patel, as quoted by a newspaper, that economists’ forecasts are “thumb suck”.

“This trivialises the situation and how tough it is out there for business,” Mavuso notes, adding that major institutions from the World Bank to ratings agencies have set out the impact Covid-19 is having on South Africa’s economy.

She further explains that if government continues to refuse to recognise how dire things are, then the next policy steps are going to be wrong.

“As important as the lockdown was to protect the country from the Covid-19 epidemic, the economic crisis is serious and requires as decisive an intervention, driven by the best evidence and policy advice available.

“In the Minister’s comments, I see a disregard for evidence. Of course, no economic model is perfect, but they are how economists bring together many causes to try and anticipate the effect of policy. The Reserve Bank, for example, models how interest rates affect inflation and the economy generally.”

Unfortunately, the lockdown approach taken does not appear to reflect evidence and is not perfect either. "We have not been shown the evidence that informed them, or how the health and economic trade-offs were made," Mavuso points out.  

She adds that while President Cyril Ramaphosa’s health experts have presented details on the models and other science that informed the basis for the lockdown, there has been no equivalent expert presentations on the phased lockdown relief and the economic thinking that informs it.

“But we also understand that this is not a perfect science, that we are in unchartered territory and are building this plane as we are flying it.”

Mavuso previously wrote that the economy is an adaptive system. It responds to the incentives and obstacles it encounters. She says South Africa should be using this adaptive capability to its advantage.

That means setting the goal posts clearly – a set of working protocols that keeps the infection rate low; then we should let the economy get on with innovating and adapting within that, rather than setting out voluminous rulebooks that are often inappropriate to specific working environments.

“It is the principle that matters. This is the way to ensure the economic hit of the crisis is less painful than it might otherwise be. We can also support how fast it adapts by providing the basic tools to keep operating, particularly on the logistics side.

“We could also improve its adaptability by suspending certain labour regulations that currently prevent companies from switching staff to part-time work or lower salary packages if it means saving their jobs,” Mavuso states.

The R500-billion economic package announced in April consists of a mix of clear deliverables and some measures that depend on how well they work in implementation.

This week, banks should start to offer special Covid-19 loans that are part guaranteed by the government, with an aim of distributing R200-billion to businesses that need bridge financing through the crisis.

Mavuso believes that, so far, this is the single most important intervention for ordinary small and medium-sized businesses and it is important that it works.

“But we need to maximise the impact of these interventions, which means bringing the best thinking possible to the policy table. If our economy has a chance at changing its trajectory then it will require that we assume the worst-case scenarios being modelled and put drastic measures as we have done for health. Cynicism will land this economy in hot water,” she notes.

Further, Mavuso highlights that the bans on cigarette and alcohol sales have dramatically boosted the fortunes of criminal syndicates and even seen gangs expanding their activities into these markets as their regular criminal activities have been disrupted by the lockdown.

The concomitant loss to the fiscus, as the formal traders in these sectors are barred from trading, is massive and something the country can ill afford. This was the view shared with attendees of a webinar, hosted by Business Against Crime South Africa late in April, on illicit trade.

Mavuso laments that when South Africa first moved into the lockdown at the end of March, it was done with much goodwill. But as the weeks passed and the economic damage unfolded, so social tensions arose.

With the lockdown restrictions having been eased slightly from May 1, there is a great responsibility being placed on business for a renewed commitment to the social contract.

“With an expected 1.5-million people back at work, we should remember that the lockdown restrictions are not being lessened because the pandemic is no longer a threat to our health; we are still in the eye of the storm.

“In easing lockdown restrictions in Phase 4 from May 1, the State is placing responsibility on citizens and business to ensure there is no explosion in cases.

"If we fail here, it is a possible return to another hard lockdown – something that will send our economy into a coma that will require a stimulus shock much larger than the half-trillion rand raised, something the fiscus cannot afford.”