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South Africa’s tourism, aviation and creative arts industries will only be able to pay 5% of their staff at the end of May if the national blockade is extended, according to a draft discussion paper prepared by the presidential office.
Confirming the document’s validity, presidential spokesman Khusela Diko said it was prepared as an early entry into the development of a risk-adjusted approach to resume economic activity. She said she has changed “substantially” and would therefore warn anyone who trusts her to obtain accurate information.
The risk-adjusted approach is being finalized and will be developed by President Cyril Ramaphosa on Thursday night. The Treasury did not comment on questions about the document and directed queries to the Presidency.
In the 27-page document describing the impact of lifting restrictions on economic activity, Ramaphosa is warned that if economic activity is allowed to resume incessantly, there is a risk of a resurgence of Covid-19 infections. . At the same time, some sectors remain vulnerable to business downsizing and closings.
The Treasury has already projected a deep recession during 2020, with a modest rebound in 2021. Meanwhile, the Reserve Bank has revised SA’s growth prospects and is now expecting a 6.1% contraction this year. In comparison, the IMF projects a contraction of 5.8% and Moody’s a fall of 2.5%.
Ramaphosa announced a historic R500 billion coronavirus support package on Tuesday night in an effort to mitigate the virus’s impact on the economy and provide social relief.
The discussion paper presented projections of how different sectors of the economy would be affected by what he called a “continuous blockade.” He did not specify how long the lock used in his modeling would last.
The national shutdown, in which only companies consider essential, as food retailers and pharmacies have been allowed to continue to operate, is slated to end in late April.
Extension
According to the predictions included in the document, if the blockade were to extend, the creative (arts and music), tourism, mining and oceans sectors could only pay 5% of employees at the end of May. The construction industry is also in dangerous territory, with 15% of its workforce likely paid. The aviation industry will be able to pay just over a third of its workforce.
The film and tourism sectors will reduce just over half (55%) of their workforce, followed by aviation with less than half (45%) of employees to cope with job losses, according to the document’s projections.
The tourism sector will have commercial closings in all areas, and it is expected that three quarters of small and medium-sized companies will be eliminated. The aviation sector is not far away, 45% of the largest companies are expected to fail and 65% of small companies follow the same fate. More than half (55%) of small businesses in the clothing retail sector will also close, and 65% of small businesses in the arts and music industries are projected to collapse.
The discussion paper proposed adjusting restrictions on the movement of people and economic activity, based on data on virus control. Ideally, the government would adjust the restrictions based on five alert levels, which will be informed by the risk of transmission. “At each level, the restrictions would be more or less severe, and sectors and companies would know what activity is allowed depending on the level imposed at any time,” the statement read. Alert systems can be applied at the national level, but the document proposes that they be applied at the provincial level. Prime ministers, with the approval of the health minister, can apply alert systems to districts.
According to the recommendations of the alert system:
- Level 5: only essential services can operate.
- Tier 4: This allows retail food stores to sell a full line of their products, open pit mines to operate at full capacity and other mines at only 50% capacity, formal waste recycling, and fiber optic and IT services between those who can operate.
- Tier 3: At this stage, more companies can operate, including clothing sales. Domestic air travel is introduced with restricted flights, the passenger railway can operate, but with a restricted level of passengers. Liquor retail is allowed within restricted time frames and take-out and online food delivery are allowed.
- Level 2: Fully restored national air transport, including car rental. Movement between provinces with level 1 and level 2 restrictions is allowed. All mines can operate at 100% of their capacity.
- Level 1: All sectors are fully operational, movement is allowed in all provinces, international travel is limited.
When it comes to lifting restrictions in different sectors of the economy, the document states that this will be determined by the risk of transmission within the sector, the impact of the blockade in terms of reductions, company failures and loss of market shares. international, as well as its contribution to the economy.
“Sectors with a high risk of transmission should not be allowed to resume activity until this risk is reduced, regardless of the potential impact on their sector or its value to the economy,” he said.
Based on its evaluations, the document shows that there is an increased risk of transmission in the aviation industry, recreational, cultural and sports activities and hotels and restaurants.
The chief economist at the Bureau of Economic Research, Hugo Pienaar, previously said that, according to Ramaphosa’s announcement of Covid-19’s aid measures, it appeared that the government might be thinking of a slow process of opening up the economy. The sectors that could be “the last to open on the list” would be mainly those that require large gatherings, such as sporting events, bars or theaters, he said.
Their comments were in line with the document’s proposal that whether or not to impose a continuous national blockade, restrictions on sitting hotels and restaurants, bars and shebeens, conference and convention centers, sporting events, cinemas, theaters and concerts, as well as Religious and social gatherings will remain in place somehow.
Work from home
The discussion paper advised that, in the meantime, industries adopt a work-from-home strategy whenever possible. Workers over the age of 60 and those with one or more medical conditions identified by the health department should also be allowed to work from home, or remain on leave with full pay.
Employers will also have to establish new protocols in the workplace to screen employees daily for Covid-19 symptoms. Strict measures of social distancing must be observed and, when this is not possible, facial masks must be worn. Employers must also provide hand sanitizer and soap washing facilities.
Each sector should agree a Covid-19 prevention and mitigation plan with the minister of employment and labor, and the minister of health and any other relevant minister.
– With additional reports from Kyle Cowan
