South Africa’s Response to COVID-19: Economically, Between Rock and a Hard Place

Economic Consulting | Healthcare & Life Sciences

April 21, 2020

Money Stack on Surgical Mask

What makes responding to COVID-19 so difficult is that the “correct” response from a medical, clinical perspective and the “correct” response from an economic perspective require different, even opposite, approaches.

From a clinical perspective, we need to do everything that we can to stop transmission of the virus. In practice, this means confining people to their homes and putting the country under lockdown. Effectively, this means shutting down economic activity outside of essential services. From an economic perspective, and from a South African economic perspective, we want to ensure that economic activity keeps ticking over and even growing at a time when the economy is already on its knees.

The President and his Cabinet announced a national lockdown which is in place from 27 March until 16 April - 21 days. On 9 April, the lockdown was extended by a further 14 days until 30 April. This 5-week hiatus will have devastating consequences for the economy and, for small businesses, which simply don’t have the capital to see them through the break in activity. Small businesses are also important drivers of employment in an economy with employment (narrowly defined) approaching 30% and, including discouraged workers, in the region of 40%.

The impact of this lockdown on the South African economy (and the global economy) will be significant and lasting. It’s a long road back, and there’s no clarity on what the future holds.

Despite the economic consequences, the question remains: is this enough? Should the lockdown be extended? Does South Africa’s healthcare system have the capacity to meet the surge in demand of the pandemic?

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