The government’s strained financial position faces fresh demands in the wake of the past week’s looting, with business calling for immediate recovery and cash flow assistance, and labour putting the demand for a basic income grant back on
the agenda.
Business and labour met the government in a special executive meeting of the National Economic Development and Labour Council (Nedlac) on Wednesday after five days of unprecedented social unrest.
More than 800 formal shops have been destroyed, 100 of them burnt to the ground; ATMs have been destroyed; factories and warehouses looted and damaged; trucks hijacked and destroyed; and the N3 from Durban to Gauteng has been closed to traffic since Sunday.
The cost of the damage is unclear, with rough estimates of at least R10bn. However, it is anticipated that the economic impact, particularly on investment and confidence, will last years into the future.
On Wednesday evening, Business Unity SA told the government that assistance was needed to rebuild infrastructure and that businesses would need access to immediate liquidity, as insurance claims through special risk insurer Sasria could take up to a year to settle.
Sasria is a state-owned insurer and provides coverage for special risks, such as social unrest or terrorism.
The Road Freight Association told Business Day it suggested that the government establish a “restoration fund” to rebuild infrastructure and get businesses back on their feet.
At the meeting, Cosatu called for a disaster relief fund package for what it said was “a national disaster that needs to be treated with a sense of urgency”.
The proposals for the package include: food parcels for communities without access to food; the reinstatement of the R350 special Covid-19 grant; relief for workers who have been left unemployed via the temporary relief scheme known as Ters; a revamped loan guarantee scheme for businesses; and loan and insurance policy payment holidays for affected workers and businesses.
It also wants the government to ramp up the R11bn presidential programme of public employment, which began during the Covid-19 crisis as a temporary measure, to at least twice its size.
These proposals, while championed by Cosatu, were also under serious discussion by significant quarters in the government on Wednesday, despite expected Treasury opposition given the constrained fiscal framework.
The latest crisis will set the stage for a renewed contestation over the adjustment budget due to be tabled in October, for which preparations have already begun.
Business is also deeply concerned about securing logistics corridors and ports in the immediate and longer term.
Gavin Kelly, CEO of the Road Freight Association, said it was imperative to secure safe passage for goods by securing routes using convoys and securing logistics key points. This has been successfully done before during previous bouts of violence against truckers.
The SA Association of Freight Forwarders (SAAFF) said it was formulating a seven-point plan to enable supply chains to continue functioning by securing the N2, N3, N4 and harbours.
“There is an urgent need to protect our commercial ports as key national areas of interest, since they are the main arteries funnelling essential goods into our country,” said Juanita Maree, the chair of the SAAFF.
While PwC said on Wednesday that it expected GDP for 2021 to take a 0.4% hit due to the week’s events, other economists were less certain because the rebuilding of infrastructure through purchases, for instance, would be reflected as positive for GDP, though this could be balanced out by variables such as lower consumer spending.
“It could be that the destruction itself won’t impact GDP because of the way GDP is calculated. The actual damage is likely to come over time, to investor confidence,” said Dawie Roodt, the chief economist of Efficient Group.
Citi SA economist and head of research Gina Schoeman said the third-quarter GDP number “was looking worse and worse” as the unrest is factored in on top of Covid-19 and the lockdown. “But what really worries me is the impact this is going to have on investor confidence, both local and international.”
Schoeman said she anticipated that a basic income grant could be introduced to replace the Covid-19 R350 grant. It would cost the Treasury about R6bn to extend the R350m Covid-19 grant, which had covered about 6-million people, for three months. Extrapolating that over a year in the form of a basic income grant would imply a cost of R24bn per annum and an additional 0.4 percentage point widening on the fiscal deficit.
“The question is how sustainable it will be and whether SA can afford it,” she said.
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