Reopening South Africa’s economy may be especially painful

South Africa’s coronavirus-induced shutdown threatens to send its already rampant unemployment soaring.

South Africa
People line up to get food in South Africa, where the lockdown has caused severe economic hardships, looting and kilometres-long lines for basic supplies [Siphiwe Sibeko/Reuters]

South Africa took its first shaky steps on Friday towards rolling back one of the world’s strictest COVID-19 lockdowns, seeking a balance between containing the disease and providing much-needed relief for the economy

But Africa’s most advanced economy was in a recession even before the pandemic, and the shutdown has threatened to send already rampant unemployment soaring.

Reopening the economy is proving harder than closing it down.

New regulations were finalised only on Wednesday and led to some confusion. Under the first phase of easing, only some sectors may restart operations, and with limited staff.

Restaurants, for example, can now resume business, but just for food deliveries.

Many businesses are weighing whether it is worth it to reopen at all.

“Opening for delivery only will lose Nando’s and our franchise partners more money than being closed,” said Mike Cathie, CEO of the spicy chicken chain, which has remained shut.

McDonald’s South Africa is partially reopening. Famous Brands said its Steers, Wimpy, Debonairs Pizza, Fishaways and Mugg & Bean chains would trial delivery-only service.

In the Soweto township outside Johannesburg, Sakhumzi Maqubela said he did not know if his popular sit-down restaurant would survive with just deliveries.

“I have 110 staff. I have paid them with my savings till now. I don’t think I can pay them any more,” he said.

Severe damage

South Africa has recorded 5,647 coronavirus cases and 103 deaths out of a population of 58 million, relatively low numbers compared with COVID-19 hotspots in Europe or the United States.

But the economic hardship has been severe. There has been looting in some areas during the lockdown. Images of kilometres-long queues for charity food aid have beamed around the world.

The National Treasury forecasts the economy will contract 5.8 percent this year.

The authorities’ new five-level system allows lockdown restrictions to be eased or reintroduced based on the disease’s progression.

Trade Minister Ebrahim Patel told a parliamentary briefing that if infection levels remain steady and testing is expanded, more easing could come soon.

Lost businesses and houses 

The new rules initially allow industries including mining, steel production and some clothing retail stores to gradually ramp up to 50 percent employment.

But employers worry the regulations will disrupt supply chains and undermine the efficiency and scale needed to turn a profit.

“We are having a serious conversation about whether we should indeed open at all,” said Ken Manners, chief executive of SP Metal Forgings, a supplier to the auto industry, which makes up about 7 percent of national output.

Car manufacturers are lobbying the government to allow their entire workforce to return over coming weeks.

Meanwhile, workers in the mining sector worry measures are not yet in place to protect them from infection.

Most sectors are being asked to await further signs the disease has been contained before resuming work.

Industry organisations say many businesses cannot hold out much longer.

“I get calls daily from workers pleading for assistance and members who have lost their businesses and houses,” said Johann Baard, executive director of the South African Apparel Association.

South Africa’s neighbours are watching it closely.

Namibia, which has recorded just 16 cases of the disease, will begin easing restrictions on Monday. Zimbabwe must decide on whether to extend its five-week lockdown, which expires on Sunday.

“These measures have brought our economy to virtual shutdown,” Zimbabwean President Emmerson Mnangagwa said during a Labour Day address on Friday. “I empathise greatly, but dread the inevitable horror of any let-up.”

Source: Reuters