To restore and boost investor and consumer confidence in South Africa, Business for South Africa (B4SA) is requesting certainty from government that there will not be another “hard economic lockdown” – such as those of Alert Levels 3 to 5 – in South Africa in the event of a second wave of Covid-19 infection.

B4SA states that certainty that South Africa will not return to a hard lockdown, irrespective of infection rates, would stimulate economic activity by unlocking business investment projects and consumer spending plans, which are currently on hold owing to concerns about government’s response to a potential second wave of infections.

The higher levels of lockdown had an “extremely negative” impact on the economy and jobs, notes B4SA. The first hard lockdown (Alert Level 5), from April to July, which B4SA supported, caused more than two-million job losses. Gross domestic product (GDP) fell by 51% quarter-on-quarter as consumer spending collapsed as a result of the strict lockdown measures.

In addition, the lockdown resulted in small and medium-sized enterprise bankruptcies increasing from 4% in 2019, to 6.5%, and this is expected to reach over 10% as credit extensions and tax relief measures expire.

Going forward, B4SA points out that if all nine provinces remain on Alert Level 1, then the organisation estimates a 9.3% contraction in GDP for the year – a figure B4SA says already considers the positive offset of fiscal and monetary policy interventions and the Temporary Employee Relief Scheme benefit.

B4SA’s modelling suggests that a one percentage point change in real GDP growth leads to a 0.91 percentage point change in employment numbers.

As such, one downside scenario modelled by B4SA (which looks at South Africa moving back to Alert Level 3 from mid-November and December) could result in a further 200 000 job losses and a 10.6% decline in GDP for the year.

B4SA steering committee chairperson Martin Kingston says the organisation estimates that formal job losses have already reached 1.4-million to 1.6-million, with a further one-million jobs lost in the informal sector. “. . . it will take until 2024 for formal employment levels to return to the pre-Covid-19 levels, assuming that we pivot the economy onto a sustainable inclusive growth path. South Africa can ill afford additional job losses and compounded economic difficulty.”

Further, B4SA states that the impact of a return to Alert Level 3 or stricter would be worsened by the fact that the majority of measures available to counter the negative economic effect on individuals and businesses may no longer be available.

In this regard, the organisation highlights that top-up social grants are unlikely to continue after the three-month extension, and that the Unemployment Insurance Fund and value-added tax relief cannot continue indefinitely.

In addition, B4SA points out that banks that extended credit to businesses and individuals now require payment.

All things considered, B4SA proposes interventions that focus on behavioural change, but that also enable increased economic activity. This involves targeted interventions by sector rather than a hard lockdown.

“All industries should remain operational, unless specifically identified as being uniquely high risk. Universities, schools and other educational institutions should not be closed as participant risk is generally low. Restaurants, hotels and other accommodation and the broader leisure industry should be allowed to operate subject to adhering to health and safety protocols,” proposes B4SA.

Further, to reduce the spread of the virus, B4SA says government should articulate rational and aligned directives aimed at reducing or slowing the spread and protecting the most vulnerable in society, while ensuring the economy can function.

“This should include limiting the numbers of people at social and religious gatherings and, if necessary, reintroducing an extended curfew. Reintroducing cigarette or alcohol bans should be avoided due to their significant adverse economic effects.”