The Minister of Economic Development, Mr Ebrahim Patel, has told the joint virtual meeting of the Committees of Trade and Industry, that there are deep fears that the post-Covid-19 era may result in a global depression if it is not managed well.
“There was an immediate impact on global growth when the pandemic hit, and massive rapid shocks to the economy were realised. The pandemic led to challenges on demand and supply sides of the economies,” Mr Patel said.
He said the pandemic has led to reduction in demand for consumer goods but also that there had been disruptions to the supply lines globally. “We could no longer get the critical components that we need for the economy. The shock is being felt throughout. The impact on the GDP (gross domestic product) will be significant, and serious contractions to the economy are being projected.”
He said job losses are projected in 2021 and that all estimates are expecting a fall in the GDP. There were social measures to support vulnerable people, including the R500 billion stimulus package that was announced by the President, and the South African Reserve Bank cutting the repo rate by 200 basis points. He also detailed the economic interventions and support meant for the industry.
Mr Patel said the response included integrated plans to limit the impact of the pandemic on health during the lockdown, as health and economic activity are related. “A rapid spread of the virus would have had a serious impact on the economy. Many firms are in distress, and may be opened in circumstances that are considered to be reckless trading,” he said.
Members sought clarity on various issues, including how banks were regulated during this time, the sale of property, prohibition of sale of lottery tickets, triggers that will cause movement back to a higher level, provision of PPE (personal protective equipment) stock, builders returning to work, micro lenders category and their return to work, and the sale of cigarettes.
Committee member, Frederick Mulder, said we should recognise the situation that South Africa is in, and that the economy entered this period in a weak state, and downgraded by credit ratings. “We are not in an ideal situation in comparison to other economies. We have to relook the whole situation as it opens new opportunities, we need to engage broadly,” he said.
He sought clarity on whether the government will engage all stakeholders in creating the new dispensation.
Reopening the economy will be a phased-in process done according to the levels of the lockdown in relation to how the spread of the virus is. “It won’t be business as usual when the pandemic is over,” Mr Patel said.
By Sibongile Maputi
1 May 2020
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