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SA needs to rebuild the economy and rescue failing businesses now

20 May 2020 - 09:00 By Ryan Ravens
Government's approach to the economy during the Covid-19 is under scrutiny.
Government's approach to the economy during the Covid-19 is under scrutiny.

While everyone in SA appreciates regular updates on the crisis from our head of state, President Cyril Ramaphosa’s recent address to the nation was sadly vague and uncertain, without any clear sense of how SA will protect its fragile economy.

Reading between the lines, the one aspect that did become extremely clear during his address is the pace at which government believes we should proceed.

The astounding lack of urgency around salvaging our economy is cause for considerable alarm, if not flat out panic.

One of the most critical factors for the success of a country’s response to this pandemic is trust.

The extent to which citizens trust government to protect their welfare, and lead the nation through this crisis, will be a key determinant in maintaining social order and civil obedience.

Trust is generated through regular and consistent releases of transparent and accurate information, and through clear evidence of efficient implementation of support measures.

Our government, through the obscure national command council, has been making some incredibly irrational decisions. The uncertainty and lack of transparency around how certain decisions have been made, along with the failure to provide even a basic indication as to the rationale behind many regulations, is eroding trust in our political leaders at an alarming rate.

The economic cost of the ongoing lockdown is being severely underestimated, and the government seems completely oblivious to the carnage playing out in business at the moment.

The vast majority of South African businesses, across all sectors, have been under enormous pressure during the past decade as we tried to navigate a particularly difficult operating environment hampered by policy uncertainty and rampant corruption.

This extended and overly severe lockdown will be the death blow for many companies, and those that survive will only be able to do so through considerable cost-cutting. Companies are being forced into a situation where they will very soon need to start mass retrenchments, implement salary reductions and cease all non-essential expenditure, including an end to planned investments and growth initiatives.

Government simply cannot micro-manage the entire country and its economy.

The attempts to dictate which items can and cannot be sold are simply ludicrous.

It is a frightening thought that the national minister charged with safeguarding our economy is spending his time determining which specific items (out of millions of products) might be allowed for sale. Would his time, and that of his countless minions, not be better spent on strategies to rebuild the economy, on implementing initiatives to rescue small business, and on regaining the trust and support of big business so mass retrenchments can be avoided?

We are not all children and do not need to be mollycoddled by government.

It would make far more sense for government to open up the economy entirely, and by working closely with business, to restrict items and practices that pose the highest risks.

It makes absolutely no sense to try to define which items may be bought and which not.  How would buying a T-shirt affect the spread of the virus while buying a jersey does not?

Restrictions on specific items are reaching nonsensical levels, and only serve to increase uncertainty and frustration.

If trust is to be restored between business and government, the restrictions imposed on the private sector should also hold true for the public sector.

There is absolutely no logical reason why public sector construction projects are allowed while private sector construction is prohibited. This only leads to further speculation and distrust around suspect government procurement practice and tenderpreneurship.

The astounding lack of urgency around salvaging our economy is cause for considerable alarm, if not flat out panic.
Ryan Ravens

All South African airlines are also in a severe state of distress.

An extension of the lockdown until September will decimate the air transportation system.

The air transportation value chain presents a lower risk - with more intense risk mitigation protocols and higher compliance than other modes of transport such as taxis, buses and trains - and therefore should not be precluded from activity where other modes are not.

Air access is a key economic enabler as people need to commute to and from work, businesses need to deploy personnel between their offices and their remote sites, and all forms of tourism (including business and leisure) depend almost entirely on accessibility by air.

This industry will be fundamental to rebuilding our economy after this crisis, but the current uncertainty about when air travel will resume presents an extremely high risk of a total collapse of air transportation in South Africa.

While these onerous and illogical regulations are apparently intended to save lives, economic destruction and poverty will cost lives, not only during this crisis but also for many years after.

The most effective way to lift people out of poverty and improve quality of life is through education and economic growth, but both of those are being destroyed by the severity of the lockdown.

Our government’s lockdown approach, and the subsequent economic hardship inflicted on our people, will cost more lives than it can save.

Government urgently needs to consider the economic costs of their decisions as the vast majority of job losses and suffering we will need to endure are the consequence of a tragically flawed lockdown strategy. 

- Ravens is CEO of the business leadership organisation Accelerate Cape Town