Covid-19

Big steps needed to ensure economy bounces back from coronavirus outbreak

22 March 2020 - 00:05 By Sunday Times
For economic policymakers the crucial issue is not just what can be done to cushion the blow but also what action can be taken to ensure SA's economy is positioned to bounce when the crisis ends
For economic policymakers the crucial issue is not just what can be done to cushion the blow but also what action can be taken to ensure SA's economy is positioned to bounce when the crisis ends
Image: Jozef Polc/123rf.com

In many countries the coronavirus has suddenly sickened healthy economies.

In SA the sudden stop in activity could kill an economy which was already in crisis, with an unemployment rate that is already approaching 30% and a government that has no money.

Many businesses may not survive even the next few weeks; many more jobs could be lost.

For economic policymakers the crucial issue is not just what can be done to cushion the blow but also what action can be taken to ensure SA's economy is positioned to bounce when the crisis ends.

That will require agile and innovative action. In at least two areas, the government needs to act swiftly.

First, it must use the opportunity of the crisis to push through some of the structural reforms it has long promised.

Take the state-owned entities that endlessly drain our empty public purse, SAA in particular. There is never going to be a better time politically to call it quits and simply shut the airline down.

Blame the coronavirus rather than the government or business rescue, but SAA has effectively shut itself down already.

Letting it go will come at a steep cost but will now no longer cause the disruption to the aviation industry that was once feared.

This is also the moment for the government to stand firm in the face of the public sector trade unions and drive through the wage restraint that has long been essential to fix the public finances.

Amid the economic devastation of the coronavirus, the unions are going to find little support if they put their own interests ahead of SA's.

Second, if big businesses want to help — as many do — the government and the regulators must enable them to do so, without falling back on the usual prejudices.

The banks want to work together to use their collective resources to assist customers in distress, as well as to ensure that services can still be delivered even as the crisis worsens.

Competition and banking regulators need to enable this to happen instead of getting in the way.

Similarly with the big health care companies, where there are already excellent signs of co-operation between the government and the private sector. SA is going to need a lot more of that: the government clearly can't do it on its own.


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