Business organisation Sakeliga on Tuesday hosted a webinar around “unusual” and meaningful practices that have become necessary as Covid-19 continues to spread in South Africa and the rest of the world. 

Sakeliga CEO Piet le Roux advised business to do its best to protect itself in the long run and, therefore, endeavour to keep its doors open, while doing its utmost best to limit the spread of Covid-19, as well as protect employees and society at large.

Should business fail to deliver goods and services and the economy stagnate further, it would lead to further consequences, including higher rates of unemployment and other impacts on human wellbeing, he noted.

Le Roux said South Africa and many other countries would continue to be cautious for the foreseeable future.

Sakeliga will actively observe the domestic business sector’s efforts to curb the spread of the virus, as well as measures to preserve economic growth.  

“We have to ensure that improving hygiene and other measures to contain the spread of the virus in the short term balances the economic risks in the long run,” he stressed.

Le Roux said businesses were already coping with crises including regulatory issues, weak government service delivery, a lack of infrastructure and unreliable electricity supply.

Businesses have had to be “government-proof” for a long time and now also had to become “virus-proof”.

“Regardless of the effectiveness of measures to mitigate the impact of the coronavirus, the underlying problems in the country will remain.

“However, the gaps left by the State presents opportunity for business to fulfil the neglected needs of people and other businesses in South Africa, which may become more acute following the virus surge,” said Le Roux.

ECONOMIC IMPACT
JSE-listed financial services company Efficient Group chief economist Dawie Roodt, meanwhile, unpacked that “before corona”, international monetary policy had been exceptionally accommodative, meaning that monetary policies from central banks around the world ensured low interest rates and quantitative easing, while inflation rates were low in most developed economies.

This while developing economies struggled with different kinds of debt and high inflation.

Roodt said it had increasingly dawned on financial markets that the spread of the virus had real impact on the world economy and respective economies. Only last week, the first cases were conformed in South Africa, however, the financial markets have moved to advanced stages of reaction already.

He explained that the mitigating measures adopted around the world have typically included travel restrictions and the temporary closure of schools, but, in some instance, also included lowering interest rates and central banks ensuring liquidity in the world financial markets.

However, he questioned if these measures would be enough to support the financial markets.

In the case of South Africa, the economy had been experiencing a crisis long before the virus outbreak, with the economy in a recession and electricity supply under pressure, coupled with a dire fiscal deficit and tight monetary policy.  

Roodt believes the South African Reserve Bank’s Monetary Policy Committee could justifiably, in these circumstances, reduce interest rates by 100 basis points to help in the short term.

He said there was not much else Finance Minister Tito Mboweni could do in terms of fiscal accounts or fiscal policy, owing to high debt levels, to mitigate the economic impacts of the virus.

Meanwhile, Roodt expressed concern that local authorities remained too weak to manage the current crisis and deal with infected people effectively. The health authorities were also badly managed and compared badly with its international counterparts in terms of quality.

South Africa was now in a crisis on top of a crisis. Roodt said the economy could have grown at 0.5% this year, however, he now anticipated a growth rate of 0%, if not a contraction of up to 3%, considering the impacts of the virus on the economy, as well as consecutive quarters of growth declines since mid-2019.

Roodt expected a significant drop in the economic growth rate to a contraction of 5% during the second quarter of this year. He said the second quarter would suffer the effects of the virus outbreak the hardest, owing to a further slowdown in economic activity.

On the plus side, Roodt lauded South Africa’s financial markets, which were already “cheap”. He said he was actually quite bullish on some assets on the South African financial market, especially the bond market, while the capital markets, including financial assets such as banks and insurance companies, presented abundant opportunities – considering a liquid market, weak currency and attractive dividend yields.

He urged people to not make hasty decisions and ask their brokers to sell their assets out of fear amid the Covid-19 outbreak.