Business / Business News

Potchefstroom Herald
3 minute read
7 Apr 2020
9:57 am

When will lockdown end? Economist says these are three possible futures for SA

Potchefstroom Herald

If the current lockdown is extended to the middle of the year or, worst of all, the end of it, the negative impact on the country will become unimaginably worse.

President Cyril Ramaphosa takes precautions against Covid-19. Picture: GCIS

A North-West University (NWU) development economist believes that to survive the current coronavirus pandemic, the current state of containment must be a success and the virus should be under control by the end of April.

Prof Danie Meyer, director of the TRADE research focus area at the NWU, told Potchefstroom Herald it was of the utmost importance that leading countries in Asia and Europe, as well as the US, win their fight against the virus and find a vaccine in the second half of 2020.

He said that South Africa should hope the International Monetary Fund (IMF) and the World Bank would help us with a very large rescue effort to ease public debt.

UPDATE: Ramaphosa still to decide if lockdown should be extended

Structural changes required may include changes to the health system, a smaller dependence on China for trade, and a new economic development strategy.

The impact of an unforeseen state of restriction

Prof Meyer says that with the financial crisis, world leaders could identify the economic problem and make plans to limit the impact on the economy.

“They could create certainty in uncertain conditions. It is assumed that uncertainty is the main destroyer of economic development and growth. ”

Virus creates uncertainty

“With this virus, there is no certainty. We do not know when the pandemic will come to an end or how to treat it, and we are not sure of the extent of the economic impact,” said Meyer.

South Africa faces the following scenarios:

Best scenario (pandemic under control when the state of restriction ends on April 16):

Everything returns to normal on April 17, with schools and universities reopening, all workers returning and a resumption of business.

Most of our major trading partners are still in a state of containment, although international shipping is taking place. Local businesses can trade at least locally. Businesses and the industry can meet local needs with “buy local” campaigns.

The first, as well as second quarter, will show negative growth, in other words, a deep recession, with unemployment rising above the 30% mark and a number of businesses closing.

A moderate scenario (pandemic only under control by mid-2020):

The state of containment extends into May 2020 and society and businesses are only open to everyone from June 2020. Worldwide, the pandemic is not over yet, but under control. No international trips, but freight delivery is under way. By now, the recession in South Africa will have advanced to the third quarter. Unemployment rises to 40%, with many marginal businesses closing. The government is struggling to meet all its obligations and is asking for assistance from the IMF.

The worst-case scenario (pandemic only under control by the end of 2020):

The virus is not yet under control after a second state of containment in South Africa and things are only returning to normal by the end of the year.

International travel only resumes at the beginning of 2021. The South African recession is now a deep depression and the academic year of the schools and universities is lost. The government is struggling to meet its debt obligations and salary payments. The IMF provides a lifeline with conditions linked to structural changes, including the reduction of the government’s wage bill.

Unemployment is at more than 45% by the end of 2020, and large numbers of businesses have closed.

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