The more things change; the more they stay the same
COVID-19: Like a strong wind blowing against South Africa’s ‘house of cards’ economy
A quick scan of the news headlines on local websites ewn.co.za, fin24.com, and moneyweb.co.za shows why comedians like Trevor Noah and cartoonists like Dr Jack and Zapiro never run out of material. Stare disconsolately at the drivel behind these headlines and you will learn why columnists and opinion writers will never be short of topics either.
After considering the headlines dated 8 May 2020 two thoughts entered my mind: the first was whether to ingrain the facepalm emoji as a permanent overlay for life; and the second to ponder the adage: The more things change; the more they stay the same.
Setting the scene
Late in December 2019 the World Health Organisation (WHO) confirmed that a cluster of pneumonia-like deaths in Wuhan, China, were caused by a novel coronavirus, identified as SARS-COV-2. This coronavirus, which is the causative virus of the disease we call COVID19, has since morphed into a pandemic, claiming countless lives and decimating the global economy.
By 8 May 2020, COVID19 had infected more than 3,9 million global citizens and claimed more than 270 000 lives, per covidvisualizer.com. South Africa has thus far escaped the brunt of the mortality impact, with fewer than 10 000 confirmed cases; but the jury is out on whether to credit this feat to government’s early and aggressive national lockdown, or the paltry number of tests carried out to date. What is known is that the national lockdown, aimed at ‘flattening the curve’ of COVID19, is destroying South Africa Inc. But do not take my word for it.
A 30 April 2020 briefing by National Treasury to the Joint Standing Committee and Select Committee on Financing and Appropriations contained some jaw-dropping estimates. They considered three lockdown scenarios – listed here from best to worst and labelled ‘quick’, ‘slow’, and ‘long’ – and concluded that 2020 GDP would contract by 5,4%, 12,1%, or 16,1% respectively. Another estimate was for a ‘best case’ decline in tax revenues of 27% from pre-crisis levels. Treasury has finally admitted what many small and medium enterprises (SMEs) already knew. The economy may have been struggling heading into 2020; but it will be obliterated over the following three quarters.
Shocking vehicle sales statistic
Readers will agree that the ‘change’ component of this article’s headline is met. If not, consider the following extras. Since the State of Disaster (announced 15 March) and the subsequent nationwide lockdown (effective 26 March) most sectors of the economy have ground to a screeching halt. There are plenty of published results to support this; but none is more shocking than the April 2020 new vehicle sales figure of just 574 units.
This compares to the 33 500 units sold in March, a number that was already 30% lower than that achieved for the same period in 2019. A second foil for the opening part of our headline is that global air traffic has plummeted by as much as 70% measured by the number of flights. And we have not even considered the impact of lockdown on the local hospitality and tourism sectors.
Government’s response through the nationwide lockdown validates the second part of our title: The more things stay the same. The following examples, plucked randomly from a growing set of perplexing recent developments, illustrate the point.
The more things stay the same, 1
First on the list is the incomprehensible ban on cigarette sales. We set aside the background noise about Nkosazana Dlamini-Zuma’s 2018 ANC election campaign funding and various allegations of political involvement in illicit tobacco trade to focus on purely economic constructs. Cigarettes are the type of commodity that will find their way to market regardless of the legislation, which means the ban will shift sales of a regulated and taxed product underground.
Government would best serve the interests of its people by allowing cigarette sales; protecting the integrity of the regulated tobacco market; and maximising its lockdown tax revenues. Things stay the same; government remains slavishly committed to absurd policies that create confusion; perpetuate uncertainty; and cause real economic damage.
The more things stay the same, 2
The second point on what is increasingly looking like an insanity matrix is the handling of the terminally ill (aka Schabir Shaik) national airline. After decades of mismanagement taxpayers were celebrating the demise of the behemoth SAA, most famous for its ability to ‘disappear’ tax revenues. But government is incapable of letting go.
It seems that minister Pravin Gordhan, with support from the usual alliance partners, is bamboozling the media insofar government’s true intentions. And the media is content to bamboozle the public in return. On the one hand Gordhan laments how business rescue practitioners have failed to address the airline’s woes, despite receiving an additional R5,5 billion in funding; on the other he refuses to allow the airline the swift death it deserves.
Things stay the same; after decades of thumb-twiddling government is still unable to call an end to the SAA charade. Forget the dancing Ghanaians for now; there will be no funeral because government’s real ambition is for a new flagship carrier to rise like a phoenix from SAA’s ashes.
The more things stay the same, 3
The third and final piece in today’s ‘craziness puzzle’ is the sudden resurgence of nuclear as a solution for South Africa’s energy crisis, assuming we still have one following the 2020 economic Armageddon. We initially thought the moneyweb.co.za article titled ‘SA to develop plan for new 2 500 MW nuclear plant’ was fake news; but it still appeared on the website when we re-checked later in the day. Reader comments accompanying the article were none too friendly; bar the usual praise for the Pebble Bed Molecular Reactor (PBMR) project, that was mostly shelved a decade or so ago, after extracting the usual penalties from long-suffering taxpayers.
Things stay the same: After the part-implementation of Medupi and Kusile – old tech, coal fired power plants that ran multiples over budget; were delivered close to a decade behind schedule; only work at part of their planned capacity; and create a ‘dirty air’ legacy that may never be addressed – government wants more taxpayer money to repeat the cycle.
Economist Dawie Roodt recently commented on Fin24.com: “We need to acknowledge that our economy was on the way to the ICU long before the coronavirus came along, no thanks to a dysfunctional and destructive government”. And this already ailing economy will soon be afflicted with upwards of 1,6 million SME insolvencies (per the SA Reserve Bank) and as many as three million more jobless.
A ‘house of cards’ economy
Lockdown is an opportune time to reflect on the long-term impact of irrational economic and political decisions on future generations. As much as our politicians will try to blame COVID19 for the coming economic hardships, know this: COVID19 is akin to a strong wind blowing against the ‘house of cards’ economy that the ruling party has delivered to end-2019. South Africa needs to veer off the path travelled this past decade to achieve positive change. We need real, positive change to create jobs; rebuild the economy; and restore hope. For us to walk the same path, and for things to ‘stay the same’, meets most definitions of insanity.