Lockdown? Or is it perhaps meltdown?

Johannes Wessels
@johannesEOSA1

Halfway into a five-week lockdown it is appropriate to compile a kind of “balance sheet”. When the lockdown was announced, Pres Ramaphosa made it clear that protecting lives against Covid 19 was paramount: a position he reiterated when prolonging the lockdown.

For the ANC Government, all other considerations weigh less and may be sacrificed. Mutating from a supreme commander in military camouflage uniform rallying his troops to “kill the virus” to a pope like appearance during Easter sympathizing with the population for carrying the heavy cross, almost like Simon of Cyrene, Ramaphosa has been lauded all around as “bold” and “presidential”. The few voices that since the beginning have argued that severe restrictions that limit fundamental freedoms would fuel poverty and unemployment, were brushed aside as being both inhumane and wrong.

To date it is uncertain whether the lockdown, the wide application of Bacillus Calmette–Guérin vaccine in SA or any ther factor has contributed to the (still) low infection rate in South Africa. What is dead certain is that the economy (already in a critical condition prior to the appearance of Covid 19) has been rushed into ICU to a position close to the door where the dead are wheeled out to the morgue.

Read EOSA’s proposals on how Government can assist SMEs by cutting CIT and exempting those with a turnover below R2.5 million from VAT.

Government has, as yet, to indicate its estimates of the economic impact of the lockdown measures, e.g.:

  • the decline in VAT receipts;
  • the decline in CIT (and for sole proprietors, the decline in personal income tax);
  • the additional costs of demands on the UIF;
  • the additional costs of deploying the military and the police at the current levels;
  • the cost of measures to support the informal traders, small enterprises and other assistance measures to support businesses;
  • the support measures to assist businesses in the hospitality industry;
  • how these would impact on the budget deficit and what the implications are for government debt.

Even in lockdown, we remain a constitutional democracy and Government should avail this information to Parliament – even when not in sessions – and the public. Lockdown cannot suspend all oversight on non-transparent executive decision-making.

If Government hasn’t run scenarios on the impact of the lockdown measures for, say three weeks, 5 weeks or 3 months it hasn’t done its job and is merely playing for time, not knowing what to do. If it has done those scenarios, it is important to inform the public of these (as well as government’s underlying assumptions for them) so that businesses and individuals can make their own decisions considering such governmental scenarios.

It appears as if Government had decided on the lockdown without having thought through the consequences. Two examples suffice:

  • Mbalula’s yo-yo playing with the hours as well as the number of passengers a taxi can carry, is proof of action without thinking about consequences. (If other things are not of paramount importance, it is easy to lose sight of how the lockdown would impact on the livelihood of the hawkers and taxi drivers.)
  • The support for firms in the hospitality industry ignores the fact that a large percentage of these businesses are sole proprietorships and the measures announced favour incorporated businesses. The whole BEE ghost is also haunting the interventions in this field with opposing signals and statements.

In addition, there is little if any logic in the regulations. Social distancing (actually it is about maintaining physical distance) is one of the key strategies to fight Covid 19, with a cap of 50 shoppers per supermarket. But why on earth can a Massbuilt or Cashbuild not operate with a cap of 50, but spaza shops where no control measures can be implemented to keep people apart from one another, are allowed to operate?

Some firms more equal than other firms…

It is a clear case of Government deciding which businesses are “essential” firms and which not. Ask any hawker, any guest house owner, any plumber, any director of Cashbuild or any other small, medium or large firm, informal or informal, and the answer will be unequivocal: “The business is essential for my livelihood, my employees, my customers”.

But Government, in an Orwellian mode, decided:

  • some firms are more essential than others;
  • what one should buy, eat and drink (the closure of fast food restaurants and the ban on liquor sales as well as the restrictions to food only shelves in the supermarkets);
  • where one should shop (even instructing the poor in the townships to shop at the nearest spaza, despite soap, detergents and food being sold there at a substantial margin to the shelf price in the often-derided national chains);
  • one cannot walk on an isolated beach, take the dog to the park or windsurf on the Vaal Dam.

This blunt approach crushes freedom in an unacceptable manner. The argument that one should strictly observe the limits to freedom since it is for “the common good”, is simply naive. The soldiers and police who have residents doing push-ups or force them to roll in the streets, is indicative of this. This abuse in the townships can happen everywhere tomorrow.

EOSA therefore concur with Friedrich Hayek who put it so aptly in The Road to Serfdom:

We shall not prevent the abuse of power if we are not prepared to limit power in a way which occasionally may prevent its use for desirable purposes.

The Swedes still can buy SA wines…

And it is not as if there are no alternatives to lockdown. In Sweden (no lockdown) the percentage of corona fatalities of the people tested for the virus, is 61% lower than in France and 56% lower than in Belgium. All three countries have tested around 5 300 persons per million of the population. The Swedes can still buy South African wines at their state monopoly Systembolaget, their restaurants and discos are still operational. Their businesses still operate.

Even with partial lockdown in Switzerland, firms operate with staff rotating to do business from home and other leaner teams operating in office or on the factory floor.

As effective as bloodletting for cancer

Lockdown as a blunt instrument that cannot distinguish or differentiate in a country with both dense and sparsely populated areas is simply naive and inefficient. Just to lockdown to “flatten the curve” is as appropriate a cure as bloodletting is for cancer or pneumonia.

At this stage, the ANC Government’s approach of lockdown to delay the spread of infections, will not achieve more than, well, a delay. To try and combat the virus with a lockdown that leads to economic meltdown, is a false choice.  It boils down to an anti-business approach.

The alternative is a differentiated approach that would keep both the population and the economy healthy.  It would not be a success if a country succeeds in limiting deaths from Covid 19 just to succumb to deaths from poverty, starvation and the unrest that will for sure erupt when meltdown is reached.

Ventilator scarcity to maternity ward scarcity

There is also one curve that lockdown will fail to flatten and that will in fact increase: there may now not be sufficient ventilators, but come December the maternity wards will be flooded. Maybe the president will then, as he has professed so often since becoming president, be “surprised”.

The next two blogs will deal with alternatives that could assist enterprises in distress due to the python-like strangling of the economy by government decree. The shortcomings of the current emergency rescue measures on medium and small towns will also be dealt with.

(To receive an email alert of new blogs by Johannes Wessels, scroll down to the bottom of the page and insert your email address) 

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