One of the iconic books of the 2008 Lglobal financial crisis was This Time Is Different, in which economists Carmen Reinhart and Kenneth Rogoff argued that it really wasn't, reflecting on a long history of financial crises. But as the pandemic continued to wreak global havoc this week, Reinhart wrote that "this time it truly is different" - a "whatever it takes" moment for large-scale, outside-the-box fiscal and monetary policies.
As SA went into lockdown people focused on how to survive the 21 days. Except it may not be just 21. When the lockdown ends, the economy will not be back at full steam. And once the pandemic is brought under control, the damage to SA's already ailing economy could be catastrophic. Leaders in the public and private sectors are just starting to get their heads around what this pandemic might mean here. It is, as Absa economist Peter Worthington puts it, a health shock that has mutated into a supply shock, demand shock and financial shock.
At the peak of the global financial crisis, SA's economy contracted by 1.5%. We just don't know how many Covid-19 infections there are in SA, and economic forecasting is hardly more than guesswork. Economists are pencilling in contractions of anything from 2%-5% this year. But it could be much worse (minus 20% anyone?) and the damage enduring. While the government has acted swiftly to try to contain the health shock, policymakers are not nearly at the "whatever it takes" moment. They will have to get there. Reinhart talks about "out of the box" monetary and fiscal policies. The Reserve Bank this week opened the door to unconventional monetary policy, even if it hasn't walked through it yet. Whether it's being wisely incremental or stupidly slow is a hot debate in the markets.
Likewise fiscal policy, which hasn't really done anything yet. With tax collections and growth crashing, the budget deficit could be anything from 10% upwards. The Treasury is relying on lockdown-related underspending to fund the relatively inexpensive initiatives President Cyril Ramaphosa has announced, but as the crisis unfolds there will be greater calls on the money the government doesn't have. And even if the Reserve Bank helps to keep markets orderly, the cost and availability of government borrowing could be a challenge, adding to the fiscal disaster. A Moody's downgrade seems almost irrelevant in that context. SA does have significant lines of credit from the IMF, New Development Bank and World Bank, which it's always been reluctant to use, and still is, with the Treasury apparently keeping them for a rainy day. But we will surely have to get there. Ramaphosa this week urged the G20 to make funds available to Africa.
More immediately, however, it's a "whatever it takes" moment that the government will seize to drive long-promised economic reforms, as well as - crucially - to work more closely with business, which has swiftly organised to respond collectively to the crisis and offer its resources to help. Under a new Business for SA banner, organised business has set up a project management office of 40-50 people, working full time and for free, seconded from the big consulting, accountancy, law, and communications firms as well as the banks and multinationals. It's interfacing with government ministers and co-ordinating resources and responses in health care, labour and economy. A who's who of experts and retired CEOs from listed companies is looking at short- and long- term economic measures.
The crisis has prompted a spirit of co-operation, even if it's not as rosy and collaborative as both sides make out. Nor is the government coherent or consistent; there are mixed messages from ministers. But with the economy effectively on war-time footing, a cash- and capacity-strapped government will have to work with, not against, business to mitigate the damage. If this moment forces a business-friendlier government and a more actively public-spirited business community, this time may indeed be different.
• Joffe is contributing editor
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