Mike Schussler says ‘It’s lives vs lives’ – IRR
21 April 2020
It’s not a question of the economy against people’s lives, but lives versus lives. So said renowned economist Mike Schussler in a virtual briefing hosted by the Institute of Race Relations (IRR) this morning.
Schussler said South Africa had to find a way to exit a hard lockdown as a matter of urgency, as a continuation would be ‘unsustainable madness’. He said the lockdown had starkly illustrated the ‘digital divide’ in South Africa between white-collar workers who could generally carry on with their activities, working from home, and blue-collar workers, ranging from cashiers and waiters to factory workers, hotel staff and hairdressers, who had no way of earning a living during the lockdown. Schussler estimated that for every white-collar job lost to the lockdown, up to ten blue-collar jobs could be lost. The expanded unemployment rate could leap from its current level of just below 40% to closer to 50%.
He noted that the economic decline due to lockdown was exacerbated by a number of factors, including high-interest rates, high levels of unemployment, and policy uncertainty, especially on such issues as the expropriation of property without compensation.
Analysing activity such as card payments showed that, in March, economic activity was about 55% of normal levels, while electricity consumption matched levels last seen over a decade ago. The service industry would be particularly hard hit by this decline in economic activity, Schussler said.
Schussler recommended that for South Africa to sustainably escape the crisis, the government had to begin engaging business as a partner rather than as an adversary. Schussler said that if private businesses had confidence in the economy, it was likely that much capital could be unlocked which would help stimulate the economy. However, business confidence is at its lowest in over two decades. Currently business did not perceive someone like the minister of trade and industry Ebrahim Patel as being on their side, Schussler said.
He also noted that South Africa was the only major emerging market with negative foreign direct investment – meaning South African companies invested more money outside of the country than foreign companies invested inside this country.
He also said that the government should scrap BEE as a policy, sell state assets such as power stations and radio frequencies, fix Eskom, allow corporates to work together to develop an export strategy and support young people entering the labour market.
But, as a matter of urgency, Schussler said, South Africa must transition to a soft lockdown. Factories and shops must be opened while enforcing social distancing. Restaurants should be allowed to offer takeaways if not opened fully and people should be encouraged to wear masks in public. Schussler also argued that there should be a public transport subsidy which would mean that taxis could afford to transport fewer passengers than they ordinarily would.
Schussler concluded by saying that extending a hard lockdown would see more South Africans pushed into poverty, with all the health consequences that that would have, on top of the broader health consequences of a major economic downturn.
Issued by Nicholas Babaya, IRR Analyst, 21 April 2020