‘We need level 2, fast’

South Africa's new private-sector umbrella group formed to fight Covid-19 has been in daily talks with the government over re-opening the economy and is urging it to move quickly to lockdown level 2.

Business for SA (B4SA) is proposing that companies, in partnership with labour, can take charge of implementing stringent health and safety controls and monitoring in the workplace to ensure the spread of the virus is controlled.

It has told the government that the current approach is economically impractical and hard to regulate, and that this could have dire socio-economic and health consequences.

This comes as April data start to show the devastating impact of the first full month of the lockdown, during which many sectors of the economy ground to a halt, a growing number of jobs and businesses teetered on the brink and tax collections plummeted.

In a media briefing last week B4SA – which has brought organised business bodies together to work with the government to tackle the crisis – urged the cabinet to accelerate the risk-adjusted easing of the lockdown.

It said this “would enable a successful return to work while saving lives and livelihoods and reinvigorating full economic activity in a co-ordinated and integrated way”.

B4SA's modelling indicates that the move to level 4 will not materially improve economic outcomes because even in the best-case scenario the proportion of the workforce returning to work will no more than double from the 27% active under level 5.

And if level 4 continued for a month, with a gradual move to lower levels, the economy would contract 14.5% in 2020.

However, a quick move to level 2 would reduce the contraction to 10% and cut the number of formal sector jobs at risk from 2-million to below half that number. At level 2, 97% of the workforce would be allowed to work.

The faster trajectory, which B4SA said could be achieved if business and the government worked together to implement workplace safety practices to minimise transmission, would reduce the budget deficit to 10%. The deficit is projected at 16% if level 4 is prolonged.

SA Revenue Service commissioner Edward Kieswetter this week said government revenue could fall R285bn short of budget targets this year. April's figures showed year-on-year drops of 55% for corporate taxes, nearly 20% for import tax, 5.2% for PAYE and 4.3% for domestic VAT.

B4SA's modelling, which found that in a worst-case scenario the economy could contract 17% despite the government's stimulus package, reflects similar figures to those in a Treasury study by UNU-Wider, which found the economy could contract 16% in a “long” shutdown scenario.

Where the government's approach is essentially to ban all economic activity except that which is specifically exempted, business organisations and others have argued for an approach in which any activity is permitted, with strict safety controls, unless it is too high-risk in terms of disease transmission.

That would still keep sectors such as tourism, sit-down restaurants and many personal services closed but would allow much of the economy to reopen.

The frequent and sometimes heated meetings between ministers and business representatives have served to clarify interpretation of some of the level 4 regulations, with business encouraged by the government's positive response to suggestions such as opening up e-commerce.

But there has been significant criticism and concern from many companies across all sectors about the application of the regulations, which are highly bureaucratic and complex and dislocate supply chains.

As a result some companies that theoretically could restart under level 4 have been unable to do so, while some that should still be closed are open.

At the same time there are growing concerns that the shutdown, which has seen large numbers of workers lose income and jobs, will result in people dying from malnutrition and will generally reduce life expectancy for many South Africans. It is seen as potentially hindering the treatment of other diseases, such as HIV and diabetes.

Many businesses are likely to go under, if they haven't done so already — in one survey, 54% of businesses reported they could not survive even three months without revenue.

Neva Makgetla, an economist at the non-profit group Trade & Industrial Policy Strategies, said in a briefing hosted by the Centre for Development & Enterprise on Friday the countries that have successfully opened up their economies from lockdown — such as South Korea and New Zealand — have distinguished between industries based on the extent of public interaction, whereas in SA they have been categorised as they are in official government statistics.

She urged that all nonpublic-facing activities be allowed to reopen if they could observe existing health and safety rules and transport risks could be addressed.

“Being at work should not be such a big risk unless there is contact,” she said. “If the economy were to open up in this way 4-million more people would be able to work – so 75% of the workforce would be back at work, including working from home.”