PSG Group warned the government that the continuation of the lockdown could have a negative impact on the struggling economy.
PSG Group warned the government that the continuation of the lockdown could have a negative impact on the struggling economy.

Continued lockdown to decimate ailing economy, PSG Group warns

By Sandile Mchunu Time of article published Apr 24, 2020

Share this article:

DURBAN - JSE-listed investment holding company, PSG Group, yesterday warned the government that the continuation of the lockdown could have a negative impact on the struggling economy, which could lead to more job losses and closure of some businesses.

Chief executive Piet Mouton said the longer it took to come out of the lockdown, the worse it would be going forward for every South African citizen. “However, this is not to undermine the good work done by the government. The lockdown has had a positive impact in slowing down the Covid-19 infections, and the president has done extremely well. But the lockdown, and especially the potential extension or failure to adequately relax restrictions, are causing severe damage to what is left of our fragile economy,” Mouton said.

Mouton was speaking after the group released its results for the year to end February, and just a few hours before President Cyril Ramaphosa addressed the nation last night.

Mouton added that if the country applied a system of moving in and out of the lockdown period, depending on the number of infections, it would also have similar disastrous effects.

“The only option is a continued lockdown of the elderly and frail, until the virus is contained or a vaccine becomes available while the economy operates as close to normal as possible,” he said.

The PSG Group has a diverse range of underlying investments, including companies like Capitec Bank, Zeder Investments, Curro Holdings, PSG Konsult, and PSG Alpha.

Mouton said it was important for businesses to operate at full capacity again, as the South African economy was struggling and running at a significant Budget deficit with already worrying levels of debt, high unemployment and struggling parastatals.

“The government’s primary source of income to address the pandemic, drive relief and provide stimuli for economic growth is one of the things that is under attack, namely tax collection. More than 80percent of tax revenue is derived from personal tax, corporate tax and VAT. Many businesses earn no revenue at the moment, while others earn very little,” he said.

In the PSG results for the year to February, the group reported an 18percent increase in recurring earnings per share to 1281cents a share, while headline earnings per share increased by 17 percent to 1184c.

The group declared a total dividend of 239c a share, down from 456c last year. Mouton said the lower dividend follows a decision by Capitec to support the SA Reserve Bank’s guidance note that directed banks not to declare ordinary dividends at the moment.

Looking ahead, Mouton said a strenuous time lies ahead and it was virtually impossible at this stage to quantify the impact of Covid-19 on the economy, businesses and people.

“However, our businesses are all adequately capitalised with acceptable levels of gearing to weather the storm. All of PSG Group’s investees have assessed the immediate impact of Covid-19 on their respective businesses and put contingency and remedial plans in place where possible,” Mouton said.

PSG's share price closed 12.63percent higher at R158.21 on the JSE yesterday.

BUSINESS REPORT 

Share this article:

Related Articles