Get back to work to stave off economic meltdown, business leaders urge

JORDAN MOSHE

If the economic prognosis of respected banker Colin Coleman is any indication, the road ahead for South Africa is going to be long and bumpy. The former chief executive of Goldman Sachs was one of five South African experts who on Sunday night unpacked the financial reality faced by our country in the wake of COVID-19.

He was joined by Stephen Koseff, the former chief executive of Investec Group; Sandile Zungu, the president of the Black Business Council; Andile Mazwai, the governor of the National Stokvel Association of South Africa; former chief executive of Standard Bank, Jacko Maree; and Nazmeera Moola, the head of SA investments at Ninety One (formerly Investec Asset Management).

Moderated by Howard Sackstein, the chairperson of the SA Jewish Report, the panel addressed the financial implications of the virus, and devised ways to kickstart the South African economy. Thousands of viewers tuned in to watch the discussion on Zoom and YouTube, including Finance Minister Tito Mboweni.

Said Coleman, “The global economy is expected to experience a 3% contraction in 2020. The United States shed 30 million jobs in six weeks, and is facing a 6% contraction. The speculation is that South Africa’s economy will shrink between 6% to 8%.

“That type of scenario is a massive shock to the global economy and South Africa. We need to plan for a significant range of negative shocks, some of them worse than others.”

Moola said that under level-five lockdown, only 33% of the economy which generates revenue for the fiscus was functioning. “Under level four, we think it opens up only another 5%-8%,” she said. “Forty-two percent of the economy is closed. Just on our arithmetic, that means minus 42% growth for the period it stays closed.”

She continued, “We need to figure out how to open the economy in a responsible way because we can’t function [like this] for a prolonged period. We need to balance health risks with economic risks. That’s how we move forward.”

Koseff agreed, saying it was hard to predict what the situation would be in six months’ time.

“We don’t know what kind of economy we’re going to have,” he said. “One is grateful that there was a lot of support from the central bank and more recently the fiscus to make sure we don’t kill off capital formation in the country. It’s a question of how we get out of lockdown while considering health issues and economic damage.”

The major financial issue in six months’ time will be the reality of more than a million people who will be out of work, said Zungu. “It’s not difficult to comprehend,” he said. “The hospitality industry, where the bulk of small, medium, and micro enterprises are located, is practically non-operational. If you add it all up, it talks to a gloomy situation.”

He also emphasised the deepening issue of inequality which the situation had exposed.

“We’ve always spoken about the triple challenges of inequality, unemployment, and poverty. It has become clear in the past five weeks how deeply inequality runs in South Africa. It’s going to deepen, and [the situation] is also turning into a socio-political crisis. People are queueing for stipends and rations daily, and an empty stomach forces people to see nothing to lose.”

In spite of their desperation, however, many seem to understand the need to increase economic activity gradually rather than all at once. Mazwai said that people understood why they needed to remain at home and hold back on going out to earn a livelihood, challenging though it may be. Similarly, Zungu believes that civil unrest shouldn’t be a concern, and in spite of flare-ups of tension, sense will prevail.

Pre-recorded messages from numerous business icons were shared. They suggested various ways in which President Cyril Ramaphosa might approach the problem. These included Geoff Rothschild, the former chairperson of the Johannesburg Stock Exchange; Cape Union Mart founder Philip Krawitz; Mike Abel, the co-founder and chief executive of the M&C Saatchi Group, and others.

“We need the country to get back to work, and we need to protect, as far as possible, the immunocompromised and elderly,” said Abel. “But the rest of the nation needs to get back to work if we want to stave off growing poverty. We went into COVID-19 economically crippled, we’ve suffered a downgrade, and have no money. The only way out is to get people working again.”

The panel agreed that government should chart a course that balances economic priorities with health concerns, taking into account inequality and supporting vulnerable sectors

“We have to trust that government will have the data on which to make the calculations,” said Coleman. “There is a trust factor between the population and government that’s at play.

“We will have outbreaks [of infection] in South Africa as the opening takes place, and there will be a significant increase in infection at level four. There is a dynamic interplay between opening up and health consequences that we need to be aware of.”

To date, more than 17 000 people have watched the discussion, either live or recorded. Sackstein said the public response had been astounding, and the panel was treated seriously by those who watched it.

“The panel highlighted that government will need to ramp up its efforts as poverty is clearly a pressing issue,” he said. “It was also clear that additional measures will have to be taken in the sectors hardest hit, including the hospitality and restaurant industry.”

He has no doubt that the opinions shared will be heard by government, not least because the Presidential Economic Advisory Council requested a copy of the recording moments after the discussion ended.

“Government listens to what people are saying,” Coleman said. “It’s hard to get a message through, though, which is why we provided a platform for almost direct contact with those in charge. There are many possible solutions, and they need to be considered.”