Payment holidays help for now, but won’t be around for long

That is the view of economists following President Cyril Ramaphosa’s prediction that the coronavirus could continue to be a threat for up to two years.

The situation could not be worse for consumers struggling to survive under the current restrictions.

Debt counselling firm Debt Rescue chief executive Neil Roets said: “None of the pipe dreams of debt forgiveness or payment holidays are going to offer any meaningful debt relief, leaving debt counselling as the only legally binding means of offering real relief to South Africans.”

That debt review remained an essential legal service through all stages of the lockdown clearly showed the government’s commitment to the process.

“The processes and procedures around debt counselling have been in place for more than a decade now and are a tried-and-tested method of helping consumers to hold on to their possessions,” Roets said.

The payment holidays are not supported as a solution to the current situation by several other experts.

Cape Town-based political economy analyst Daniel Silke said: “Payment holidays will be unsustainable. While many employees had been retained in their jobs, many will lose their employments if the virus drags on.”

There was still goodwill by some employers to continue paying employees, but time was running out and even those jobs might be lost.

“Companies cannot afford to pay workers when they are not producing. [So] the government has got to be smarter about opening industries. Time is running out,” Silke said.

Every country in the world was grappling with whether to trust citizens to be responsible. South Africa was entering a phase where frustration over civil liberties could boil and burst.

“We need to shift to a more flexible and less controlling approach, otherwise people will be disgruntled. People can rebel against the goodwill of the president, especially if the authorities are over-regulating and punitive.

“If they continue to restrict the sale of certain goods, it could cause a political backlash and, over time, dilute the social compact the government has with the people,” Silke said.

Dawie Roodt, chief economist at Efficient Group, expected the number of unemployed to rise from 1 to 2 million by the end of the year.

He cited a survey recently conducted by the Human Sciences Research Council with almost 20,000 respondents, which found that almost a quarter had no money to buy food.

According to Roodt, the situation was likely to be worsened by the combination of an expected multibillion-rand revenue collection shortfall and the Covid-19 economic meltdown.

He said this spelt trouble for the state’s ability to sustain society and should be seen as a ticking time bomb that could lead to widespread social unrest.

The unemployment rate could go as high as 50%.

This meant a smaller tax pool and less revenue for government to spend on development and social programmes such as education, health and social grants, Roodt said.

The SA Chamber of Commerce and Industry’s business confidence index slumped to 77.8 in April from 89.9 in March.

“This is the lowest level since its inception in 1985 and the second-sharpest month-on-month decline,” the group reported.

Roets said it was imperative to get the economy back to work in a safe and healthy environment.

• Payment holidays are simply a freeze on commitments such as loans and bonds for a certain period.
• Customers who may be in a tight financial spot can opt in, or just simply carry on paying their debts as usual.
• Economic Freedom Fighters spokeswoman Delisile Ngwenya last month called on all banks to initiate a payment holiday on home loans, vehicle finance loans, credit card and overdraft repayments, as well as “loans such as personal, student and business loans. Banks should also not be allowed to retrench workers during the payment holiday initiative and all payment initiatives should be for a minimum of four months,” she said.

– ericn@citizen.co.za

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