Hopes for faster economic recovery dashed as lockdown to remain in place

Date: Aug 16, 2021

Hopes for faster economic activity were dashed on Friday when the Department of Health gave a strong indication that lockdown restrictions would remain in place for much longer.

Health Minister Dr Joe Phaahla said he would not recommend the relaxation of lockdown to a lower level in spite of declining Covid-19 infections.

Phaahla said this was not the time for South Africa to lower its guard against the pandemic, encouraging more people to vaccinate as the fourth wave was predicted later this year.

“The Department of Health will in no way recommend to the National Coronavirus Command Council to lower the restrictions. The department will recommend remaining at level 3,” he said.

More than 9.2 million people have been vaccinated, with at least 4 million people fully vaccinated with either the single-dose Johnson & Johnson or the double-dose Pfizer vaccine.

The national positivity rate had declined from a high of 35 percent in mid-July to an average over the last seven days of 19 to 20%.

However, Phaahla said this was still four times more than the 5 percent rate recommended by the World Health Organization.

“Our situation therefore remains precarious. We will be recommending remaining at Level 3,” he said.

Lockdown curbs were ramped up to alert level 4 for four weeks last month after a spike in infections during the third wave driven by the Delta variant.

Gross domestic production (GDP) indicators have all shown depressed activity in July due to protracted restrictions and the week-long disruption of supply chains from civil unrest.

Chief executive of corporate advisory firm, Deal Leaders International, Andrew Bahlmann said on Friday that extended level 3 curbs would have economic consequences that reach far beyond the immediate impact.

He said that the impact had been extremely uneven with certain industries at breaking point while many essential services were almost untouched.

“Any extension of the lockdown will clearly come at a great cost to the economy, exacerbated by the third Covid-19 wave and the associated restrictions, which will all be a big drag on third quarter GDP,” he said.

“Policy options are becoming increasingly limited with few alternatives to the rapid institution of reforms to drive faster economic growth, and in particular bolster business confidence.

Persistent load-shedding, the impact of the unrest last month, and the projected fourth wave of Covid-19 infections before the year end are all downward risks cited to disrupt overall economic activity this year.

Investec chief economist Annabel Bishop said the excessively harsh lockdown on the economy, as well as the riots, had exacerbated the country's weak base.

 “South Africa urgently needs to implement growth enhancing reforms and expectations are high that the new finance Minister will be instrumental in speeding up the pace,” Bishop said.

“The government has dragged its feet so long on the implementation of some economic reforms that many have lost confidence, and GDP will also suffer from the loss of business confidence following the recent riots, with equality needed in state support to all businesses damaged,” she said.



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