Extended lockdown leaves some industries on the brink of collapse
JOHANNESBURG – The government has warned that certain industries were on the brink of collapse on the extended lockdown, just hours after President Cyril Ramaphosa announced a R500 billion economic stimulus package and a coronavirus pandemic detailed recovery plan.
A confidential government document circulating ahead of Ramaphosa’s address on the phased reopening of the economy today said that the tourism, aviation and creative industries would afford to pay only 5 percent of their employees’ salaries if the lockdown was extended.
The 27-page document says although the country could face an upswing in Covid-19 infections if the lockdown was lifted rapidly, it warned that certain sectors remained vulnerable to collapses that could see millions retrenched and businesses closed.
The warning comes as the market warmed to Ramaphosa’s historic package, with the rand, which fell below R19 against the greenback on Tuesday, strengthening to R18.75 during intraday trade before closing 0.2 percent stronger at R18.94 at 5pm.
The JSE’s All Share Index recovered 1.01 percent to close at 48 108 points, while the Top40 Index inched up 1.17 percent to 44 249 points.
Ramaphosa unleashed the largest stimulus package and economic recovery plan in the country’s history to mitigate the impact of the virus on the economy and to provide social relief to the most vulnerable citizens. The package comprises a R200bn loan guarantee scheme, R130bn in redirected expenditure, R100bn for job security and R70bn from tax deferrals.
The National Treasury had approached the World Bank, the International Monetary Fund, BRICS New Development Bank and the African Development Bank for various funding transactions.
Anchor Capital’s Nolan Wapenaar said the market reacted marginally positive to Ramaphosa’s stimulus.
“Looking at the rand, we note that the local currency remains close to being the most oversold it has ever been in our history,” Wapenaar said
“We think the government’s response has been a net positive. We continue to believe the fair value of the rand is R15/$1.”
Ramaphosa is understood to be finalising a risk-adjusted approach for the reopening of the economy.
Last week, the government authorised the gradual opening of the mining industry, allowing companies to operate with 50 percent of their workforce on condition that they had testing and treatment measures to combat Covid-19 in their operations.
The mining index rose, with Anglo American gaining 1.03 percent to R314.71, Sibanye-Stillwater 8.85 percent to R32.11 and Harmony Gold 5.38 percent to R57.38.
Ramaphosa said the government would table an emergency adjustment budget soon, with fast-tracked reforms two months after the national budget in February, and at least six months before the crucial medium-term budget policy statement .
Investec’s Annabel Bishop said a unified political will for the structural reforms of the National Treasury’s growth plan was needed.
“Finance Minister Mboweni has recently stated the aim to stabilise the public debt,” Bishop said.
“Instead, the widening of government debt projections substantially further would increase the likelihood of additional credit rating downgrades.”