TIPS Tracker: The economy and the pandemic Week 8-14 June 2020

This TIPS tracker highlights important trends in the COVID-19 pandemic in South Africa, and how they affect the economy. It analyses publically available data, research and media reports to identify current developments and reflect on the prognosis for the contagion, the economy, and policy responses.


On the pandemic

  • The move from Level 5 to Level 4 saw a sharp increase in cases, with Gauteng, the Eastern Cape and the North West now seeing exponential growth. In contrast, after an initial spike,
    KwaZulu-Natal has brought the rate of growth down sharply, and the contagion has also slowed in the Western Cape. The question remains whether government, business and civil society interventions to promote behavioural change could still rein in the pandemic and hold down the number of cases through to the end of the year.
  • In the past week, it became increasingly clear that while South Africa could increase the number of hospital beds, it would struggle to get enough health professionals to care for patients in them.
  • Lobbying by industries with a high risk of transmitting infections – especially personal services and entertainment – escalated. They contended it was unfair that they could not open up with the rest of the economy in Level 3. Yet the risk-adjusted approach explicitly differentiates between high-risk activities based on their perceived social benefits. To bolster their arguments, industry advocacy groups typically overstated their sector’s contribution to the GDP. For instance, the Tourism Business Council told Parliament last week that it contributed 9% of the GDP. According to Statistics South Africa, however, in 2017 the figure was under 3%.

On the economy

  • The available data show an initial rebound in the economy following the move to Level 3 flattened out last week. A survey of business by TIPS, BUSA and the Manufacturing Circle found that, when UIF funds run out next month, many companies anticipate retrenchments due to low demand.
  • The government plans a R500-billion stimulus package centred on guaranteed loans for small and medium business; the UIF COVID-19 TERS fund; and investment in infrastructure. As of 6 June, however, only around R500 million had been lent under the R200-billion loan guarantee scheme, which accounts for the lion’s share of the proposed stimulus package.
  • Virtually any effort to mobilise funding on the scale proposed for the stimulus package will affect the power as well as profits of different social groups, and consequently run into heated debates and intense lobbying. In the past week, debates swirled around the reprioritisation of the national budget, the use of UIF funding, the role of impact investments, and borrowing from the IMF and the World Bank. The government approached the IMF for a loan of US$4,2 billion, or R70 billion.

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