Firstly, the Durban Chamber of Commerce and Industry applauds President Cyril Ramaphosa, his cabinet and the government, as a whole, for the manner in which they have dealt with this unprecedented crisis and the bold steps taken to combat the coronavirus disease (COVID-19) pandemic. All leaders, in the private and public sector, have acknowledged that dealing with the COVID-19 outbreak is an unenviable task and we have to recognise the leadership and difficult decisions that have been taken in order to secure the country’s socio-economic future. The proactive action taken has gone a long way in preventing the crippling impact that large scale loss of life would have had on our society and economy, and the socio-economic strain it would have put on critical infrastructure in the healthcare sector.
Reopening the Economy
The Durban Chamber supports the President’s “risk-adjusted approach” to reopen the economy. Reopening the economy during this phase of the pandemic is a complex process with different implications for regional communities and our various industry sectors. Managing this process will be critical as we have to monitor our daily rate of infection and balance that against the different requirements and needs of each industry sector. The Durban Chamber, on behalf of the business community, is engaging with the details of this plan that have been provided in order to determine how organised business can work with the government to ensure the successful implementation of a smooth transition back into economic activity and productivity that will help secure social stability. The one positive that has come out of this crisis is that it has proven that the public and private sector can work together quickly and with a singular vision in the best interests of our country. We hope that this trend continues well after this crisis has ended.
Economic Stimulus Package
The COVID-19 pandemic and the resultant lockdown have placed South Africa’s economy under tremendous pressure. Our economy and businesses will not be immune to the adverse exogenous and endogenous effects of COVID-19. As a result, the Durban Chamber welcomes the government’s R500 billion socio-economic relief package to fight the COVID-19 pandemic. We are optimistic that this relief will aid our ailing economy. We applaud the R 50 billion allocated to social grants, which will be a significant help on the most vulnerable in our local communities, and we urge organised business to supplement this through their own or jointly coordinated corporate social responsibility programmes.
The Durban Chamber acknowledges that this funding is not new money and has been reallocated and redistributed from the existing national budget. The Durban Chamber has the following concerns:
- Reprioritised funding from other areas will alleviate the immediate stress but will mean that critical infrastructure and other development activities will be placed on hold.
- Overall, established businesses will benefit. We remain concerned about how funding will reach the informal sector.
- The R 200 billion in loan guarantees will not go directly into the businesses but will be administered by the banks. Sadly, the lending practices of most banks and financial institutions have not transformed over the years or been adjusted to match the social reality of South Africa which has a staggering number of informal businesses that operate outside of the formal sector, very profitably in many cases. We are anxious to hear how the banks will cater to small businesses and micro-businesses that desperately need access to this relief offered by the government. We will appreciate some detail on how the credit committees of the banks will unlock the R 200 billion, broaden their horizons and restructure their lending mechanisms as well as culture and approach to financing micro-businesses.
- Existing defaults and arrears that happened for many businesses in the economic crisis that preceded COVID-19 mean that certain businesses will be excluded from accessing the funding.
- Those who will benefit from the R 70 billion allocated to tax relief are those who are currently tax compliant. Those who need help are most likely those who are in trouble and presently non-compliant. There is an opportunity here to look and the big picture and structure relief in a way that will grow and encourage future compliance.
Insights from the OECD outlined that as the disease spreads across the world, global GDP growth could plummet this year to as low as 1.5 percent, almost half the 2.9 percent forecasted prior to the outbreak. South Africa is highly dependent on the global market in terms of trade of goods and services; hence, we believe these losses will indeed find their way into South Africa’s bottom line.
- The announcement of the nationwide lockdown has brought many businesses in the tourism sector to a complete halt, translating into huge losses in terms of revenue, coinciding, as it does, with a traditionally busy Easter season. It has also threatened job security on a large scale. Travel bans and the cancellation of events have contributed to further losses for allied businesses.
- A recent article published by the World Economic Forum outlined that the emergence of COVID-19 is accelerating the change of global value delivery models with unprecedented consequences for both manufacturers and supply chains. We encourage manufacturers to be innovative during these challenging times.
- The Durban Chamber of Commerce and Industry believes SMMEs, spaza shops and informal businesses will be the worst affected by COVID-19 given the fact that many are reliant on monthly income to sustain operations, with no access to additional capital to ride out the current outbreak.
While COVID-19 has already impacted businesses across most sectors, the Durban Chamber believes that the full economic impact of COVID-19 will only become clear post-COVID-19.