Macro Review

The Centre For Risk Analysis produces regular research reports and alerts on political and economic risks in South Africa and the world.

The latest edition of the Macro Review provides an overview of the political, economic and social implications of the extended nationwide lockdown in South Africa. The report highlights the devastating impact of the lockdown on the economy and the urgent need for re-opening.

The report is divided into five sections:

The first section deals with policy interventions and the risks attached to them, as well as public opinion on various Covid-19 related issues. Some policy interventions have been flagged as arbitrary, counterproductive and impeding basic civil liberties.

In this section we also note that there is already a high degree of voluntary compliance with health and safety protocols. A survey by Statistics South Africa (Stats SA) shows that the vast majority of South Africans exercise effective social distancing and sanitary measures, with 98% of people avoiding large crowds and regularly washing their hands.

The survey also reveals that some rules have damaging unintended consequences. For example, 25.5% of respondents do not go to the hospital out of fear of getting arrested or fined for being outside their homes.

The second section looks at the impact the lockdown is having on the economy. According to RMB global markets data, the consolidated budget deficit as a proportion of GDP will widen to 13.6% in 2020/21. The National Treasury is also scheduled to table a revised fiscal framework on 24 June 2020 ‘to account for substantial revenue losses emanating from the economic shock of the pandemic and subsequent lockdown.’

According to the highest estimates for 2020, GDP growth is expected to decline by 9.5%, while gross fixed capital formation is expected to fall by 19.5%.

The third section deals with the impact on businesses and employment. According to Stats SA data, 36.4% of businesses plan to lay off staff in the short term. The proportion of those with no income increased from 5.2% before the lockdown to 15.4% during the lockdown. Nearly 68% of people surveyed are concerned about the long-term impact of Covid-19 on their financial situation.

The fourth section provides an overview of financial relief measures for businesses and employees which have been adversely affected by the lockdown. Various Covid-19 relief schemes by the government and private sector have been established. So far R15 billion has been paid out by the Unemployment Insurance Fund (UIF) to support nearly 3 million employees. The report shows that the volume of approved loans from the South African Future Trust (SAFT) and the number of applications received for grants from the Sukuma Relief Programme, for example, exceed the value of donated capital for both relief schemes.

This is indicative of a huge demand for financial support.

The fifth section analyses the social implications of the lockdown for South Africa. Here, we focus specifically on crime trends and the dependence on social grants. All contact crimes and “trio” crimes (carjacking, residential robbery and non-residential robbery) have seen a major drop since the lockdown was implemented. In terms of welfare grants, more than 3.5 million people have applied for the Relief of Distress grant valued at R350.

Support for the lockdown has largely collapsed in society and the move to Level 3 will see a significant re-opening of the economy. Some sectors will remain closed and the delayed re-opening of the economy will cause severe socio-economic damage characterised by a sharp rise in unemployment and business closures. Any form of recovery depends on the medium to long-term desire for structural reform in the government.

— Gerbrandt van Heerden and Bheki Mahlobo