Two weeks ago, I asked my colleagues to turn the considerable policy and advisory capacity of the Institute of Race Relations (IRR) to the question of how best lives and livelihoods can be saved during the Covid-19 pandemic.
Two products have subsequently been produced.
The first is a set of scenarios that identify how the pandemic is likely to evolve in South Africa and what the healthcare and economic consequences will be.
That model continues to be updated with new data, but we are confident in its conclusions and in being able to provide policymakers both in business and in government, as well as ordinary people and families, with a good sense of what will happen over the coming weeks and months so that they can prepare themselves and introduce appropriate mitigation strategies.
Right policy decisions
Our scenario model demonstrates that if the right policy decisions are taken now, it is perfectly feasible that South Africa might weather the Covid-19 storm relatively well (the term ‘relative’ being all important) from both an economic and healthcare perspective, and that the number of jobs, businesses and lives lost can be greatly minimised.
For this to occur, sensible isolation protocols are essential – but these should be implemented in a manner that enables the greatest possible extent of economic activity to occur within the limitations posed by those sensible isolation efforts.
Our model demonstrates that should this not occur, and should isolation and shutdown efforts trigger a devastating economic contraction together with millions of job losses and the closure of tens of thousands of businesses, then the ensuing economic desperation of South Africa’s people will see those important isolation protocols themselves failing, raising the spectre of the very health catastrophe that isolation efforts are intended to prevent.
South Africa could face an apocalyptic socio-economic reversal amidst rapidly deteriorating internal policy stability
In that case the model shows that South Africa could face an apocalyptic socio-economic reversal amidst rapidly deteriorating internal policy stability, and we would go as far as to say that the consequences may trigger a domestic political realignment on a scale last seen in South Africa in the 1980s and 1990s.
The second product is a nearly 100-page set of policy proposals drafted by the IRR to prevent this apocalyptic result, and I want to thank my colleagues for their very hard work and dedication in producing the most coherent set of Covid-19 policy proposals to date – proposals that will save lives and livelihoods if they are introduced.
The proposals include funding mechanisms to support people who lose their jobs; encouraging financial services institutions to work with families and businesses to head off bankruptcies (as many to their credit are now doing); tax proposals that don’t penalise people who choose now to access pension savings; the urgent need to convert suitable structures into high-quality isolation facilities for vulnerable people from poorer communities, along with vouchers to finance their access to such facilities; and the introduction of a citizen volunteer force to work with the military to distribute badly needed food and related supplies to vulnerable people in poor communities – negating their need to travel.
Save lives and livelihoods
These are all proposals that will save lives and the livelihoods of the millions of people who now face the prospects of losing their incomes and assets.
But what our work in producing both products has starkly revealed is the very weak economic state in which South Africa entered the Covid-19 crisis.
When it entered the global financial crisis just more than a decade ago, South Africa did so in a context in which the economy had grown at rates in excess of 5% of GDP for a number of years, the number of people with jobs had grown strongly for a decade, living standards had increased very quickly, government debt levels were less than half of what they are today and the country demonstrated a fiscal surplus. It therefore had the resources to help it weather the financial crisis better than might otherwise have been the case.
Decimated the economy
But the position from which it has entered the Covid-19 crisis is very different. The corruption and state-capture efforts of the past decade matched with the populist nature of policy in areas from mining to healthcare, education, labour and, most prominently, expropriation without compensation, have decimated the economy.
South Africa entered the Covid-19 crisis with rising rates of unemployment, already a multiple of emerging market norms, and worsening living standards indicators. In February, Minister of Finance Tito Mboweni forecast a deficit of -6.8% against an economic growth rate of just 0.9% – itself a disastrous position and one much worse than that from which many countries will exit the Covid-19 crisis. Government debt levels have more than doubled since 2009 and scarce financial resources continue to be wasted in bailing out failing state-owned companies and sustaining cadre deployment networks – often via effectively corrupt empowerment schemes.
As a consequence, South Africa does not possesses the fiscal and financial-rescue resources of more successfully and pragmatically governed emerging markets and developed economies alike.
South Africa faces a near unique degree of Covid-19 vulnerability should its economy buckle early under shutdown pressure
Yet what our scenarios demonstrate is that such resources will be essential in mitigating the harm caused by shutdown efforts and long-term isolation protocols.
Hence South Africa faces a near unique degree of Covid-19 vulnerability should its economy buckle early under shutdown pressure.
Put plainly, South Africa’s government has wasted so much money and chased so much investment out of the country over the past several years that its fiscal cupboard is virtually bare when it comes to helping those people and communities who now face losing their assets and livelihoods to the effects of the pandemic.
To that end – both from a short- and long-term perspective – preventing a humanitarian catastrophe now will require ensuring that the greatest possible degree of economic activity is maintained within the limitations imposed by sensible isolation policy.
Not by conjecture
The distinction between essential and other economic activity must be done away with and any business that can operate without posing a serious danger to public health should be allowed to do so – the extent of that threat byeing determined not by conjecture but by fact-based epidemiological data analysis. (Our isolation centre and citizen volunteer force proposals to deliver desperately needed resources to poor people will greatly aid the safe reopening of many businesses by insulating vulnerable people against unnecessary exposure.)
But we warn that even these measures may fall short of preventing a collapse in living standards, especially for everyone from the middle classes to the most poor and vulnerable of South Africans.
Critical now to avoid that is removing as a matter of great urgency every policy threat to South Africa’s standing as a competitive investment destination
This risks becoming not just a temporary or short-term collapse, but, given the weak position in which South Africa entered the Covid-19 crisis, a collapse that could condemn the great majority of South Africans to a long era of ever-deepening impoverishment.
Critical now to avoid that is removing as a matter of great urgency every policy threat to South Africa’s standing as a competitive investment destination.
If that is not done forthwith then literally millions of people now stand to lose their livelihoods, not just for the duration of the Covid-19 pandemic but for many years after it has abated.
What is quite clear from our analysis is that South Africa will not have the resources to withstand the present pandemic, let alone rebuild the society thereafter, if it does not now do everything in its power to ensure that the country is positioned as one of the world’s most attractive investment destinations.
Repeal race-based policy
In practice, what that means is that the urgency to repeal all race-based policy and legislation – the longest-running IRR policy position on South Africa – and replace it with something akin to the Economic Empowerment for the Disadvantaged empowerment model devised by the IRR, has never been greater.
Now is the time to ensure that the poor and the vulnerable stand to benefit from empowerment policy.
Likewise, the government needs to come to the firm decision that all threats to property rights will be reversed, the relevant parliamentary and other committees working on EWC disbanded, and the move to EWC abandoned permanently.
Long-term recession
If this is not done, then, even should the world pull out of the Covid-19 crisis, South Africa is assured of remaining trapped in a long-term recession.
Covid-19 is an opportunity to deepen democracy and, more than ever, South Africans need to be granted much greater powers over the running of the schools, police stations, and clinics in their communities – for the simple reason that people care more for what happens within their communities than bureaucrats do.
And, finally, the labour policy environment needs to be dramatically amended to price far greater numbers of people into jobs so that they might use their access to a job as the means to receive the education that so many South Africans have been denied in the country’s failing school system, while earning the living their families will need to recover strongly out of Covid-19.
What the IRR will do over the duration of the pandemic crisis is this: my colleagues will over the difficult weeks ahead exert all the influence they can muster to ensure that politicians and business leaders take sensible and pragmatic decisions along the lines of the many proposals we have developed.
Saving the lives and livelihoods of ordinary people must be prioritised above every other consideration for the duration of the pandemic so that the country is positioned to recover quickly and strongly from the Covid-19 crisis.
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