76 economists say the government can do more to mitigate the economic harm of COVID-19

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Leading South African economists have written to President Ramaphosa with proposals to alleviate the economic burden of the Covid-19 pandemic. Photo: Ashraf Hendricks

GroundUp:  Open letter to President Ramaphosa and the Cabinet from South African economists, economic and business analysts

Dear President Cyril Ramaphosa,

We commend you and your government for the bold and decisive public health measures that you have taken in response to the crisis precipitated by the COVID-19 pandemic. We welcome measures to stem the spread of the virus.

We are writing to you to suggest other measures that are urgently required to support and stabilise the economy and assist those hardest hit by the crisis. As you have noted, these public-health interventions will have significant adverse economic effects, compounding the persistence of inequalities in living conditions, wealth, income, and access to health and other services.

It is widely predicted that the virus will trigger a global recession, due to collapsing demand and the supply shocks this crisis will entail. It is estimated that South Africa’s GDP could contract by between 1.8 and 7%, with devastating impacts on jobs and livelihoods. This looming crisis requires large-scale economic interventions. For example, the United Kingdom, France and the United States have injected resources totalling 18.9%, 13.6% and 10.7% of GDP into their economies respectively. To date, the measures announced by the South African government, although welcome, do not match the scale of the challenge.

In the face of this looming crisis, we believe more significant action is required. These interventions must protect the most vulnerable.

This response is different from previous attempts to resuscitate ailing economies. We must both acknowledge that physical distancing and a lockdown will slow economic activity and that extraordinary measures are needed to cushion the resultant hardship and avoid long-term social and economic harm.

There is a significant risk that millions in poverty will fall into destitution; millions more, currently in work, will be driven into poverty and become unable to meet their basic needs; and thousands of businesses will be forced to close due to falling demand as a result of the lockdown, falling incomes and a contraction of economic activity.

The self-employed, atypically employed, informal workers, and small businesses are particularly vulnerable, but none will be exempt from its effects. Traditional social support networks will be disrupted.

The long-term impact on business capacity, and physical, financial, and human capital, could be devastating to our already ailing economy. In any already deeply unequal society, we know that the hardship will fall hardest on black people, and especially black women and children.

Economic interventions must, therefore, aim to: 1. support households and communities, 2. protect workers, 3. sustain businesses, 4. strengthen public health interventions, and 5. strengthen the economy.

While we appreciate efforts already undertaken in each of these areas, we are concerned that they are not comprehensive enough, and are not being implemented sufficiently rapidly or on a large enough scale to prevent real hardship for millions of South Africans.

While we recognise that the stringent social isolation measures are unavoidable, we need to commit as a society to ensure they do not cause unnecessary hardship to our people, and especially to the working poor and other vulnerable groups.

The following measures indicate the kinds of opportunities that are available.

Support households and communities:

  1. Income transfers to lower-income and affected households, in the form of a special COVID-19 grant, a top-up to existing grants, and/or a universal basic income grant. Creativity is needed to speed up delivery, including income transfers via digital payment mechanisms. We appreciate the practical difficulties involved.
  2. Targeted, temporary and compulsory payment holidays from municipal taxes, rent and mortgages, and other debts owed, and a ban on evictions from houses, including on farms.
  3. Undertake measures to relieve women of the burden of care, in and outside the home, for example, by the provision of childcare for essential workers and additional income support.
  4. Ensure food security and food sovereignty through a coordinated and safe roll-out of food packages in food-stressed neighbourhoods, working with community groups to build collective action and solidarity. Children require special attention.

Protect workers:

  1. Guarantee wage payments so that monthly wages of all workers are secured for the full duration of the lockdown; the expansion in UIF payments is both welcome and critical in this regard.
  2. Rigorous implementation of leave requirements so that workers are not forced to use annual leave during the furlough period, and ensuring temporary workers as sufficiently accommodated.
  3. Extend unemployment benefits to casual and informal-economy workers, including the provision of temporary unemployment payouts for lost income during periods of lockdown.
  4. Ensure additional health and safety provisions are in place for essential workers and for when workers return to work.

Sustain businesses:

  1. Significantly expand access to low-rate emergency loans, including through low-cost liquidity provision by the South African Reserve Bank. The current amount of funds available, and the voluntary nature of the “solidarity fund”, fall well short of the expected need. Moreover, there is some evidence that the solidarity fund has diverted donors from other charities that play a vital role in supporting the most vulnerable.
  2. Targeted, temporary and compulsory payment holidays from municipal taxes, rent and mortgages, and other debts owed.
  3. Other forms of targeted and temporary tax relief if low-cost loans and payment holidays are insufficient.

Strengthen public health interventions:

  1. Increase the additional resources that are being directed to the health system, including for testing, treatment, medicines, community health care, and COVID-19 scientific research.
  2. Strengthen the requirement for resources to be pooled between private and public healthcare providers, particularly for free testing and treatment of COVID affected patients.
  3. Rapidly scale up government’s attempts at the local production of critically needed health products, medicine and equipment.
  4. Scale-up efforts to ensure greater access to water and sanitation, through the provision of water access points, safe ablution facilities, and removing restrictions on homes with water meters. The provision of soap and/or sanitiser is important.
  5. Ensure free mobile data and public internet access, to keep the public informed and curb the spread of fake news.

Strengthen the economy:

  1. Monetary policy measures to guard against capital flight and manage the exchange rate, ensure access to affordable credit, and ensure sustainable government bond rates. A “helicopter drop” of funds to households – for example, R1000 for each individual for a period of four months – could complement the grants discussed above.
  2. Reviewing the current Medium-Term Expenditure Framework which requires considerable budget cuts, including in wages and healthcare.

We appreciate the Temporary Employment Relief Scheme, which aims to prevent retrenchments while maintaining standards. In the past, however, ensuring rapid and effective scaling up of the scheme has proven difficult. It is crucial that implementation is prioritised in the current crisis.

These measures will require additional government financing. We appreciate the effort to mobilise funds outside the fiscus – such as the Industrial Development Corporation (IDC), Public Investment Corporation (PIC), Unemployment Insurance Fund (UIF).

However, the scale of interventions required will necessitate additional fiscal and monetary expansion by the Treasury and SARB respectively, as has been the case worldwide. A concrete plan for responsibly managing this must be tabled, a number of signatories are working on proposals in this regard. In addition, we support your call for global transfers and action on the international level.

Commitment, implementation and responsiveness remain a major challenge. While swift action has been taken on health responses, economic interventions have been subject to delay, confusion and incoherence. We need to accept that as with health policy, some risks will need to be taken in this unprecedented situation.

While the Presidency must direct interventions, as far as possible the economic interventions should seek to empower communities, promote their mobilisation, and build social solidarity, as has been noted by a wide number of civil society organisations.

The Presidency must reassure the most vulnerable people and businesses that they will be protected.

This moment calls for all South Africans to contribute. We are willing to support in advancing these shared objectives. We would welcome the opportunity to put these proposals before yourself and the appropriate forums and provide additional technical support as needed.

Yours sincerely,

  1. Professor Vishnu Padayachee – Distinguished Professor and Derek Schrier and Cecily Cameron Chair in Development Economics, School of Economics and Finance, University of the Witwatersrand
  2. Dr Gilad Isaacs – Co-Director, Institute for Economic Justice and School of Economics and Finance, University of the Witwatersrand
  3. Dr Basani Baloyi – Economist, Oxfam South Africa
  4. Lumkile Mondi – Senior Lecturer, School of Economics and Finance, University of the Witwatersrand
  5. Professor Imraan Valodia – Dean of Faculty of Commerce, Law and Management, University of the Witwatersrand
  6. Professor David Everatt – Head of School, Wits School of Governance, University of the Witwatersrand
  7. Dr Pali Lehohla – Pan African Institute for Evidence and the former Statistician-General
  8. Professor Uma Kollamparambil – Head of School, School of Economics and Finance, University of the Witwatersrand
  9. Dr Grové Steyn – Director, Meridian Economics
  10. Professor Matthew Ocran – Professor and Deputy Dean, Faculty of Economic and Management Sciences, University of the Western Cape
  11. Professor Pundy Pillay – Professor of Economics, School of Governance, University of the Witwatersrand
  12. Professor Mark Swilling – Distinguished Professor of Sustainable Development, School of Public Leadership, Stellenbosch University, Stellenbosch University
  13. Dr Vimal Ranchhod – Chief Research Officer, School of Economics, University of Cape Town
  14. Dr Katherine Eyal – Senior Lecturer, School of Economics, University of Cape Town
  15. Ayabonga Cawe – Managing Director, Xesibe Holdings
  16. Siviwe Mhlana – Researcher, Neil Aggett Labour Studies Unit, Rhodes University
  17. Lebohang Liepollo Pheko – Managing Director, Four Rivers
  18. Dr Laura Rossouw – Senior Lecturer, School of Economics and Finance, University of the Witwatersrand
  19. Nicole Vellios – Researcher, School of Economics, University of Cape Town
  20. Lerato Nkosi – Junior Lecturer, School of Economic and Financial Sciences, University of South Africa
  21. Professor Justine Burns – Director and Associate Professor, School of Economics, University of Cape Town
  22. Dr Seeraj Mohamed – Macroeconomist
  23. Sonia Phalatse – Researcher, Institute for Economic Justice
  24. Dr Asghar Adelzadeh – Director and Chief Economic Modeler, Applied Development Research Solutions (ADRS)
  25. David Fryer – Senior Lecturer, Department of Economics and Economic History, Rhodes University, Rhodes University.
  26. Professor Samantha Ashman – Associate Professor, School of Economics, University of Johannesburg
  27. Professor Bill Freund – Visiting Professor in the School of Advanced Human Research, University of Kwazulu-Natal
  28. Phelisa Nkomo – South African Women in Dialogue (SAWID) and Black Women’s Caucus
  29. Professor Mills Soko – Professor of International Business and Strategy, Wits Business School, University of the Witwatersrand
  30. Professor Rasigan Maharajh – Chief Director, Institute for Economic Research on Innovation, Tshwane University of Technology
  31. Professor Anthony Black – School of Economics, University of Cape Town
  32. Funzani Mtembu – Investment analyst
  33. Saliem Fakir – Independent Economist
  34. Kirsten Pearson – Independent Economist
  35. Bradley Bordiss – Economist, Bordiss Properties Close Corporation
  36. Busi Sibeko – Researcher, Institute for Economic Justice
  37. Professor Jeremy Seekings – Director, Centre for Social Science Research, University of Cape Town
  38. Professor Nicoli Nattrass – Professor of Economics and Director of AIDS and Society Research Unit, Center for Social Science Research, University of Cape Town
  39. Redge Nkosi – First Source Money
  40. Michael Smith – Economist, York University
  41. Dr John Reynolds – Neil Aggett Labour Studies Unit, Rhodes University
  42. Professor Ben Fine – Visiting Professor of Economics, University of the Witwatersrand, and Emeritus SOAS
  43. Carilee Osborne – Researcher, Institute for Economic Justice
  44. Neil Coleman – Co-Director, Institute for Economic Justice
  45. Lindokuhle Njozela – Lecturer, School of Economics, University of Cape Town
  46. Bandile Ngidi – Researcher, Institute for Economic Justice
  47. Dr Jeff Rudin – Political Economist, Alternative Information and Development Centre
  48. Ilan Strauss – Lecturer, Jones Graduate School of Business, Rice University
  49. Dr Dick Forslund – Senior Economist, Alternative Information and Development Centre
  50. Mthokozisi Mlilo – Lecturer, School of Economics and Finance, University of Witwatersrand
  51. Dr John Khumalo – Senior Lecturer, Wits School of Governance, University of the Witwatersrand
  52. Halfdan Lynge-Mangueira – Senior Lecturer, Wits School of Governance, University of the Witwatersrand
  53. Dr Nicolas Pons-Vignon – Senior Lecturer, School of Economics and Finance, University of the Witwatersrand
  54. Professor Michael Rogan – Associate Professor in the Neil Aggett Labour Studies Unit (NALSU), Rhodes University
  55. Cheryl-Lyn Selman – School of Economics and Finance, University of the Witwatersrand
  56. Niki Cattaneo – Senior Lecturer, Department of Economics and Economic History, Rhodes University
  57. Sibulele Nkunzi – Lecturer, School of Economics and Finance, University of the Witwatersrand
  58. David Francis – Deputy Director, Southern Centre for Inequality Studies, University of the Witwatersrand
  59. Thabo Dikobe – Lecturer, Wits Business School
  60. Ayanda Magida – Researcher, Wits Business School
  61. Gaylor Montmasson-Clair – Senior Economist, Trade & Industrial Policy Strategies
  62. Stephanie Craig – Economic Analyst
  63. Marius Oosthuizen – Programme Coordinator, Gordon Institute of Business Science, University of Pretoria
  64. Professor Rod Crompton – Adjunct Professor, Wits Business School, University of the Witwatersrand
  65. Michelle Groenewald – Lecturer, School of Economic Sciences, North West University
  66. Dominic Brown – Head of Economic Justice Programme, Alternative Information Development Centre
  67. John Matisonn – Economic Analyst, Executive Director, Ideas for Africa
  68. Rubina Jogee – Lecturer, School of Economics and Finance, University of the Witwatersrand
  69. Mark Everett – Executive Manager CLEAR-AA, University of the Witwatersrand
  70. Professor Nick Binedell – Professor, Gordon Institute of Business Science, University of Pretoria
  71. Dr Zavareh Rustomjee – Independent Economist
  72. Dr. Mulatu F. Zerihun – Acting Head of Department & Senior Lecturer of Economics, Department of Economics, Tshwane University of Technology
  73. Aroop Chatterjee – Southern Centre for Inequality Studies, University of Witwatersrand
  74. Kamal Ramburuth-Hurt – Rethinking Economics for Africa
  75. Munacinga Simatele – University of Fort Hare
  76. Professor Lucien van der Walt – Director, Neil Aggett Labour Studies Unit (NALSU), Rhodes University

This letter reached beyond the borders of those in the field of economics and support was offered by the following:

  1. Professor Stephanie Allais – Associate Professor and Director of the Centre for Researching Education and Labour, School of Education, University of the Witwatersrand
  2. Professor Tshepo Madlingozi – Director of the Centre for Applied Legal Studies (CALS), University of the Witwatersrand
  3. Professor Jackie Dugard – Associate Professor, School of Law, University of the Witwatersrand
  4. Professor Firoz Cachalia – Adjunct Professor, School of Law, University of the Witwatersrand
  5. Professor Tracy-Lynn Humby – Professor, School of Law, University of the Witwatersrand
  6. Sonia Newton – Senior Programme Manager, Wits Business School, University of the Witwatersrand
  7. Professor Daniel Bradlow – SARChI Professor of International Development Law and African Economic Relations, Centre for Human Rights, University of Pretoria
  8. Kemantha Govender – Communications Manager, School of Governance, University of the Witwatersrand
  9. Professor Jonathan Klaaren – Professor, Wits Institute for Social and Economic Research (WiSER), University of the Witwatersrand
  10. Professor Ruth Hall – Professor, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape
  11. Professor Salim Vally – Director, Centre for Education Rights and Transformation (CERT), University of Johannesburg
  12. Emma Hosking – Umthunzi Farming Community
  13. Professor Ben Cousins – Emeritus Professor, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape
  14. Ryan Brunette – Researcher, Public Affairs Research Institute (PARI)
  15. Professor Vishwas Satgar – Associate Professor, Department of International Relations, University of the Witwatersrand
  16. Sibusisiwe Ndlovu – Exams Marking Officer, Wits School of Business, University of the Witwatersrand
  17. Professor Ian Goldman – Professor, Centre for Learning on Evaluation and Results, University of the Witwatersrand
  18. Professor Emeritus Edward Webster – Professor Emeritus, Department of Sociology, University of Witwatersrand
  19. Mary Crewe – Director, Centre for Sexualities, AIDS and Gender, University of Pretoria
  20. Professor Frans Viljoen – Professor of International Human Rights Law, University of Pretoria
  21. Professor Maxi Schoeman – Head of Department, Political Sciences, University of Pretoria
  22. Professor Mashupye H Maserumule – Chair of Public Management Department, Tshwane University of Technology
  23. Caroline Skinner – Senior Researcher, the African Centre for Cities, University of Cape Town and Urban Policies Research Director, Women in Informal Employment: Globalizing and Organizing (WIEGO).
  24. Zubeida Bagus – Business Manager, Faculty of Commerce Law and Management, University of the Witwatersrand
  25. Sky Konrad, Finance Officer – CLEAR-AA, FCLM, University of the Witwatersrand
  26. Tumelo Rasebopye – Project Manager, Centre for Sexualities, AIDS and Gender, University of Pretoria.
  27. Dr Sian Butcher – Lecturer, Geography Department, University of the Witwatersrand
  28. Professor Anthoni van Nieuwkerk – Peace and Security Studies, Wits School of Governance, University of the Witwatersrand
  29. Professor Gilton Klerck – Associate Professor, Department of Sociology, Rhodes University

An updated list of signatories can be found here:

https://docs.google.com/document/d/1jRvoDy19bXD5XF35jA1yglUl_kqPmLN3_Rx7ShU_gpQ/edit?usp=sharing

To sign: https://forms.gle/ABha3hTcrPTqpmGN8

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