Enterprises, unlike bears, don’t hibernate: lockdown will cause the death of firms and people

Johannes Wessels
@johannesEOSA1

Government’s decision for a stringent lockdown has put at least 100,000 formal enterprises – incorporated and sole proprietorships – on death row by effectively freezing the economy. Unlike bears, firms do not hibernate well: without customers and clients buying their goods and services, they starve and die.

Business relief measures by the government and the funds established by the Ruperts, Oppenheimers, Motsepes and others may enable some enterprises to pull through. But a substantial percentage of formal SMEs will not. Not with an economy that is likely to retract by between 6 and 10%.

Enterprises are already in a predicament and have run up more losses than profits since 2014. SARS data shows that the assessed losses exceed the assessed taxable income for the period 2014 to 2018 by R830 billion (Figure 1).

An economy already damaged by anti-growth policies has now been dealt a vicious blow. The damage is systemic and a systemic approach is required to restore a healthy business environment.

Figure 1: The pre-Covid 19 situation of SA firms was dire

The economy doesn’t resemble Eskom’s electricity supply. Load-shedding means no electricity during the power lockdown, but when the switch is thrown on again with the transmission lines conveying electrical current, the lights burn, the fridges cool, the stoves cook and TVs entertain just like before. 

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