Coronavirus (COVID-19) pandemic: We are on a knife-edge

Issued by North West University
North-West, Apr 16, 2020

* A realistic, optimistic plan of action is needed

"The coronavirus pandemic is a health war that has led to an economic war, so South Africa requires a multidimensional plan to survive."

Prof Danie Meyer, a development economist and director of the TRADE research focus area of the North-West University (NWU), believes drastic measures should be put in place to carry the country through these trying times.

In a previous article, Prof Meyer explained three possible scenarios concerning the lockdown.

"The extension of the lockdown to the end of April could have been expected, as to date most countries have been in lockdown for at least a two-month period.

"It now seems that my scenario 2 (middle-road) is the most likely to realise. This was not the best-case scenario, and I predicted this result would include a drastic rise in unemployment, marginal businesses closing down and the government struggling to meet all its commitments."

Prof Meyer says the global and South African economies are facing a deep recession. "The pandemic has basically 'paused' the global economy, with both consumer demand and production supply being affected."

He says that on 13 April the global status of the pandemic was a total number of 1,9 million cases, increasing by approximately 72 500 cases per day (this is a slight decrease from 76 000 cases per day on average since the start of April); 116 000 deaths (also representing a slight decline in daily figures); and 434 000 recoveries.

"The world trend is showing a limited decrease in the growth of new cases, but a second wave is still possible, as has been experienced with most pandemics. This is already evident in China. In South Africa the current data is not showing any clear and significant trends."

According to Prof Meyer, South Africa is on a knife-edge between a slowdown and a massive outbreak of new cases. "I have decided to base my plan of action on a lockdown end date of 30 April. Although we would effectively have been in lockdown for only one month, compared to the global average of two months, our environment of high-density urban areas and large numbers of poor people does not allow for longer periods of lockdown."

He says more days in total lockdown will only lead to large-scale levels of lawlessness. "News from the government is that the lockdown can only be relaxed if daily infections are substantially below 45 per day. Over the past four days up to 13 April, South Africa had on average 84 new cases per day, so we are some way from the standards for ending the lockdown. A piece of good news is that, globally, 96% of all infected people had only mild symptoms, while only 4% develop severe symptoms."

Prof Meyer says for a short-term plan, the health situation firstly needs to stabilise over the next few weeks and months, with a phased unlocking of the economy.

"It is critical that businesses in which social distancing is possible be allowed to operate to save businesses and jobs. Schools and universities should open for contact education only when the virus is totally under control, and we hope that this can be done by July." He says all efforts should be made to achieve this, including the mandatory wearing of masks. Specific regions and cities need to be identified where large-scale infections occur.

"Secondly, to support the poor and unemployed, in addition to the monthly social-welfare payments by SASSA, all people who have lost their income should immediately be paid an income from government funds such as the Unemployment Insurance Fund for a period of at least three to five months."

He says that, finally, the short-term economic plan should include the following:

1. Direct cash and not loans to businesses in need2. Tax cuts for individuals and businesses3. A further cut of at least 2% in interest rates4. The suspension of the repayment of loans for at least three months5. A halt to all bail-outs to state-owned enterprises

Obtaining financial support from the International Monetary Fund and World Bank for a significant reduction of government debt, which will make huge amounts of money available to support the economy in the long run

Prof Meyer says international travel and tourism will not resume until at least the end of 2020. However, international trade that is operational will continue, so exports are possible, although demand will remain low until year-end.

"This paused economic situation allows for an opportunity to plan and implement structural change: finalise an economic development plan to promote sustainable inclusive growth, fix the health and education systems, and change the social-welfare system to be more sustainable," Prof Meyer concludes.