SA is facing four scenarios. It’s up to government to choose and refocus
Dr Bheki Mfeka
THE YEAR 2021 started in a horrible way with the loss of so many lives due to Covid-19-related illnesses that continues unabated.
This included Minister Jackson Mthembu who has been the face of Covid-19 communication, may his soul rest in peace.
Not only do we mourn lives because of Covid-19, but the diminishing livelihoods as well could be resulting in more deaths because of poverty-related conditions such as hunger, mental, and several chronic diseases. As things stand, with continued lockdown South Africa is heading for a worst-case scenario in saving lives.
The economic outlook for South Africa will rebound albeit at a lower base because of the ongoing lockdown. The IMF has reduced its forecast from 3 to 2.8 percent in 2021 to 1.4 percent in 2022. Key factors sighted by IMF is the slow pace of structural reforms, poorly managed state-owned enterprises (SOEs) and slow reforms, and late Covid-19 vaccination strategy roll-out among others.
Nevertheless, from a pure classical economic perspective, we have consistently known that the best way to improved economic health is the focus on the restructuring of the economy and SOEs reforms to reflect the current and future demands including the post-Covid-19 environment, something government and its social partners are grappling with.
On the other hand, with the ongoing lockdown, all manner of forecasting and strategies are a moving target. Forecasts of economic indicators are one aspect economists utilise to understand the future. Most of these forecasts by economists seem to point strictly to the health of the economy more than that of the quality of human conditions.
A more crucial aspect in forecasting the next two to five years is from a human development conditions perspective as reflected by unemployment, inequality, poverty, and mortality rates.
More people are expected to lose jobs, and ultimately, food on their tables. South Africa, with the highest unemployment and inequality (even before Covid-19) in the world is at a crossroad towards an unprecedented humanitarian disaster, of which indicators are not yet reflecting in our statistics publications and not reported in the media.
We are heading in that direction if refocusing on enforcement of Covid-19 prevention protocols is not paid attention to as opposed to lockdown. While we are anticipating what the government will do differently this time, when the level of confidence and trust in its abilities is at an extreme low, there is a new reality.
The World Economic Forum (WEF) calls this a Great Reset, which is not yet clearly communicated for the majority of the people who are suffering and are struggling to understand what this new future entails for them.
Most of them have already given up looking for a job, and have skills that are unlikely to be useful in the new type of economy contemplated ie digitisation and artificial intelligence, contactless environments.
The government from the first hard lockdown in March 2020, seems to have focused on the lockdown as its main strategy to reduce transmissions, and continues to do so. Understandably, with international trends and guidance from the World Health Organization (WHO), this was the best that could have been done. Although questions continued to linger on the logic of lockdown measures that were taken and regulations passed.
This was despite countless warnings that South Africa did not have the luxury or leverage to introduce lockdowns not to mention the hard lockdown (level 5) introduced at the beginning.
When lockdown started, a false dichotomy was created and relied on, that we needed to choose between lives and livelihood. Unfortunately, that dichotomy does not exist in the context of South Africa. It does make sense for developed countries with a large pool of resources to cushion economic shocks and continue to provide quality of life to citizens.
With the lack of fiscal space to cushion citizens against the Covid-19 pandemic, the choice for South Africa in real terms was about saving lives in the best way (the best-case scenario) possible with the economy opened.
Not only have we lost track of the impact of the lockdown, even at level one, on the survival of formal and informal businesses and households. Are we getting a true reporting of deaths caused by other illnesses such as malnutrition, TB, and diabetes, and HIV/Aids? Are we aware of the starvation in far-flung areas, rural, peri-urban, and congested informal settlements and townships? Are we aware of the middle-class crises as a result of over-indebtedness and failure to keep up with instalments, with resultant health conditions?
Are we having a handle on what it will take to lift out those who are heavily impacted by the pandemic and lockdowns? The basic income grants of R350 per month will not go a long way to deal with the household crises.
President Ramaphosa has hinted that the government does not have the money to further support distressed citizens and businesses. He signalled that he may need to borrow. The Reserve Bank is maintaining its conservative stance, rightly so in an environment infested by corruption, threatening the integrity of our fiscus and critical institutions.
With the lockdown still going on, no figure can be an exact estimate of the amount of support to business and households required. We can only estimate that the damage to humans and businesses has surpassed 20% of the GDP (about R1 trillion).
It is not too late for the government to refocus its strategy. The situation South Africa finds itself in boils down to four scenarios as follows, the government must constantly choose and refocus:
Scenario 1: Limited Way of Saving Lives
In this case, the government effectively introduces lockdown measures with strict enforcement of Covid-19 prevention protocols. This has been the approach government has followed. In a way, it does flatten the curve but has medium to long term severe impact as more people lose their jobs and poverty-related deaths surge.
Scenario 2: Best Way of Saving Lives
In this case, the government almost fully do away with lockdown and introduces strict enforcement of Covid-19 prevention protocols. In this case, the economy is fully functioning but the harsh consequence for breaking the rules apply at workplaces and in public spaces. This is more in tune with our dire economic conditions and prevents poverty-related deaths whilst also minimising Covid-19 transmissions. Some of the lockdown conditions could apply such as the curfew and limited times for the sale of products such as alcohol, but the economy is fully functioning.
Scenario 3: More deaths
In this case, the government fully open the economy but has no strict control measures for transmission of Covid-19. In this case, the economy is functional and cushions people against poverty and unemployment attendant deaths. More deaths are prevalent because of high rates of infections. This is not desirable.
Scenario 4: Humanitarian Disaster
A humanitarian disaster occurs when the human, physical, economic or environmental damage from an event, overwhelms a community or society’s capacity to cope. This will happen in a case where there is continued lockdown and lacklustre enforcement of Covid-19 protocols. In this case, more people die both from poverty as well as the prevalence of Covid-19.
The best case (scenario 2) in our circumstances is a fully opened economy with intense enforcement of prevention protocols. With continued lockdown and poor enforcement of prevention protocols we are observing in public, South Africa is heading for more deaths to humanitarian disaster (scenario 3 and 4).
The sooner government opens the economy and relies on enforcing stricter measures to control transmission, including a well-coordinated vaccination and nutrition campaign, as well as more education and information, the better is our ability to save lives. We have done this with TB and HIV/Aids, we have the capacity and experience. It is possible.
* Dr Bheki Mfeka, is the CEO, Economic Advisor and Strategist at SE Advisory. | Twitter: @bhekimfeka | Website: www.seadvisory.co.za | Email: [email protected]
** The views expressed here are not necessarily those of Independent Media.