SARS commissioner Edward Kieswetter’s biggest headache is not the gaping R300 billion crater in tax income this financial year or the growing Everest of assessed losses for companies that will impact negatively on CIT for years to come. His biggest problem is how to convince taxpayers to sustain a government that under the pretext of “a better life for all” has served up a toxic mix of corruption, wastage, mismanagement and anti-growth policies.
In addition, the very same government has doggedly pursued a lockdown strategy not underpinned by much logic that could yield any outcome other than a severe economic disaster with long term humanitarian effects. These effects include shortened lifespans, poverty related deaths, and deaths from medical conditions the government deemed non-essential. The toll of this inept strategy will in all likelihood dwarf the real Covid 19 death toll.
Lockdown has mowed down millions of jobs and several hundred thousand businesses. Those that survived have been severely crippled: they have a radically reduced income, have run up losses or have achieved less than half their previous taxable income.
One recalls the words of Saint Augustine, bishop of Hippo Regius in North Africa, whose theology and philosophy influenced ancient as well as modern thought: “Without justice, what are kingdoms but great bands of robbers?”
A tumult about a shampoo advertisement diverted attention from the biggest economic decline under the ANC government to date. A quarterly GDP figure that confirmed the country is plunging into poverty got less attention than a Clicks advertisement. The deteriorating economy will entrench the country in the bottom half of the Economic Complexity Index (ECI), making it less and less attractive as a destiny for both skills and capital.
Splitting “frizzy and dull” hairs from “fine and flat”, however, is apparently for South Africans far more important than worrying about an additional three million unemployed or thousands of businesses pushed into the abyss of loss and debt. Reading Figure 1 (ECI data) reminds of the typical good-news, bad-news joke: the bad news is that SA has slipped from the top third of countries to the middle third. The good news is that this ranking is far better than where the country is heading for. The ECI, developed by Ricardo Hausmann of Harvard and Cesar Hidalgo of MIT, measures the productive capabilities of large economic systems, whether cities, regions, or countries and is based on the knowledge accumulated in a population that gives expression to the diversity and complexity of economic activities.
Almost simultaneously with the DA’s embrace of non-racialism as a pillar of their redress strategy that will not use race as a yardstick to address inequality, the 2020 Q2 GDP demolition figure was released. The throttling of the economy by the government’s lockdown strategy made far less ripples than what TREsemmé claims to smoothen out in frizzy hair.
The commentariat treated the DA like TREsemme
It was not only the Twitterati that underplayed the economic news: the same sentiments dominated in serious opinion pieces and radio and TV talk shows. And the commentariat effectively placed the DA in the same box as TREsemmé:
Carol Paton, editor at large of Business Live, reckons race will matter forever and lamented the DA’s policy removal of race-based redress “since that will affirm suspicions that the DA is a party whose real agenda is to defend white privilege by denying that such privilege exists at all”.
Stephen Grootes, radio presenter and Maverick columnist, echoed that “firm evidence and the lived experience of South Africans” indicate whites are rich and blacks are poor.
A Coalition of the Offended encompassing inter alia Julius Malema, the Daily Maverick, Justice Malala and Twitters’ @BiancavanWyk16 emerged: all deeply shocked and emotionally wounded, found Clicks’ sacking of an executive and suspension of selling TREsemmé insufficient.
Some called for “attacks” on Clicks stores and the malls that provide rental space for Clicks. Others demanded a sort of #BlackHairMatters kneeling, some were just happy to find something to be unhappy about and some considered the actions of others in the coalition either overboard or underwhelming.
Whilst one can understand that the EFF, the ANC and a plethora of beneficiaries or wannabe-beneficiaries of BEE, are obsessed with affirmative action, expropriation without compensation and preferential procurement mechanisms enabling hiked prices, it remains amazing that leading commentators such as Paton and Grootes ignore the hard evidence that race is not the best proxy for measuring inequality and that the application of race fails to target those really at the bottom of the pit.
Way back, Census 2011 already provided evidence that education is a far more reliable marker.
Race as a marker for household income inequality weighed and found wanting
The prolonged lock-down has been a roaring success: not in enabling the public health system with “sufficient beds, ventilators and staff” for the inevitable “Covid-peak”, but in empowering organised crime syndicates.
Not only did the ban on the transportation and sale of liquor and cigarettes provide an unprecedented window of opportunity for already existing smuggling networks to strengthen their production and supply chain networks, they were wholeheartedly supported by the government to expand their client base exponentially.
The government by decree stopped the legal trade in liquor and cigarettes, effectively providing a protected oligopoly for the smuggling networks. Since there was no competition, they hiked their prices. That saw:
cigarette cartons that would cost around R450 before lock-down selling at anything between R1 500 to R2 000;
Gordons Gin selling at four times the pre-lockdown price, and
A litre red Robertson box-wine fetching R1 400, easily beating some of the prices achieved by top wines at the Nederburg Auction.
Patel hounded Dischem, but the smugglers, spazas & tenderpreneurs were the price hikers
Johannes Wessels (@johannesEOSA1) & Mike Schüssler (@mikeschussler)
At the end of the initial 3 weeks lock-down a GDP decline of about 5% was considered as quite a catastrophic outcome. Even at that level, it was considered worth the price since delaying the spread of the Covid 19 virus would give a window of opportunity for the health sector to get beds, ventilators and care protocols in place for the spike that would inevitably come.
The minister of trade and industry (dti), Ebrahim Patel, however dismissed the negative projections of economic shrinkage as mere “thumb-sucking”.
After prolonging the hard lock-down with just a gradual easing to level 4 to end May, the growing queues of the hungry waiting for food parcels, the increase in the claims from the unemployment insurance fund and the drastic shrinking of the state’s purse, would make a 5% decline in GDP a dream outcome.
The GDP figures for Q1 2020 will only be known end June. Data from other countries indicate that those whose governments had opted for a hard lock-down are in for excessive economic damage.
Change in GDP trend is the difference between growth in 2019 and 2020 1st quarters, implying that the Philippines that experienced a change of -6% went from 5.9% GDP growth in Q1 2019 to -0.1% in Q1 2020. This chart reveals the following:
Countries with a hard lock-down that kept only essential services and providers open, saw an average decline of 5,2% in GDP trend.
Just just now (and not “long, long ago!”) there was a man who ordered his people to shut their doors and refrain from going to their places of work. His name: Cyril Matemela Ramaphosa. He told the people of South Africa that there was a way to ensure that the reputedly voracious beast called corona virus would not create havoc in the land.
All his people had to do was to follow the advice of Nongquase as recorded in writing by William Wellington Gqoba who, as teenager, had lived through the infamous cattle killings and the resulting famine amongst the Xhosa:
“Shut yourselves in your huts… In order to survive, you are to use many doors to close each hut, fasten every door tightly, and abstain from witchcraft.”
Substitute the words “abstain from witchcraft” with the phrase “abstain from going out to work and buy only what we allow you to buy”, and one has the contemporary equivalent of a decision that had decimated the livelihoods of tens of thousands of the Xhosa in the mid 19th C with a spiralling death peak caused by the resulting famine.
This is how it is happening in real time now. Cyril called together the many-too-many chiefs that form his cabinet. They talked and they talked and they talked. And they consulted with themselves and they consulted among themselves and they consulted again for themselves.
The following is EOSA’s position concerning the lockdown as a measure to combat the spread of the Covid 19 virus:
It is false to be locked into the binary notion that it is either about saving lives or about growing the economy. That dichotomy is based on the incorrect assumptions that:
lock-down will not cause the death of thousands of enterprises and jobs, or that should that happen,
such a decline will not have any impact on the well-being of people and that it would pose no threat to the wellbeing and livelihoods of the population.
The well-being of our democracy is at stake
EOSA is committed to the guaranteed constitutional right to freedom of movement and choice. The lock-down regulations that nullify these rights are dangerous to more than the lives and dignity of people (think about the abuses by members of the police and the defence force) and the livelihoods of people (the damage to the economy, businesses and the government’s budget deficit). The regulations are in fact dangerous for the well-being of our democracy.
A balance should therefore be sought: regulations should promote and protect both lives and livelihoods and all these should be tested against the constitutional guarantees.
As and when the constitutional freedoms are impacted upon by regulations (as is currently the case) full disclosure is required so that the premises on which the measures to combat the perceived threat can be evaluated and tested in the court of public opinion. In addition, parliament and its committees should be seen to be able to exercise oversight on all administrative actions based on decrees issued under the state of disaster.
During full lock-down, the government had not – based on information in the public domain – paid sufficient consideration for the implications of the regulations on the economic well-being of society.