The Rippling Effects of the COVID-19 Pandemic on the South African Economy

By Corné Broodryk, Cotney Construction Law.

South Africa’s Economy has been impacted greatly by the COVID-19 Pandemic.

With no end in sight and research that shows that the vaccines may have lower than expected efficacy against a new strain of the coronavirus coming from South Africa, the outbreak will have long lasting and unforeseen consequences throughout the country.

During March 2020, South Africa’s President, Cyril Ramaphosa, announced a nationwide level 5 lockdown, which basically confined South Africans to their homes. People were not even allowed to go to work. For many South Africans, no work means no income.

As part of the Government’s attempts to help ease the financial burden on individuals and consequently their families, certain forms of grants and allowances were made available. Banks offered customers a 3-month COVID-19 relief fund, which was nothing more than a loan that the customer had to eventually start paying back.

When these allowances, loans, payment holidays and so forth were offered, no one imagined that the pandemic and its effects would be so extreme and long lasting. Many people returned to work, but due to the losses the companies suffered as a result of the lockdown, many companies had to close. The companies that were lucky enough to survive had to downscale to ensure its continued existence.

The funds that were made available to small and medium business enterprises were, to say the least, underutilized and left unallocated. If and when companies received the assistance, it was too little too late. Subsequently, many companies that could survive during the initial lockdown and the following few months also had to close their doors.

Many employees that were not retrenched had to endure salary cuts. Many households that had two or more breadwinners now only had one with a reduced salary and more debt than what they had before the lockdown. Payment holidays came to an end. The time for repaying loans received as a form of relief became due.

When the second wave of the pandemic hit in early 2021 and the Government started imposing more severe regulations, no additional consideration was given to new or continued relief to help assist the already crippled economy and rising unemployment population.

What makes the situation even worse is the uncertainty of what is yet to come. All company budgets and plans for 2021 are ultimately postponed as no one knows what to expect. No company is willing to spend money to help rebuild its business and subsequently the economy, just to be confronted with another level 5 lockdown. Prospective investments are either cancelled or inevitably postponed.

Many of the decisions announced by Government are challenged in court by the parties mostly affected by it. Even though this process is desirable for any country governed by a Constitution, it’s a lengthy and time-consuming process that has proven to be very unsatisfactory. As an example, the Government imposed a ban on tobacco products in May of 2020. Even though the ban was lifted in August 2020, it has taken the courts almost seven months to determine that this ban was unconstitutional. Even though the Constitutional Court is still to consider the matter, the state has to date, not yet had to endure any form of responsibility for this premature and irrational decision. This one premature and irrational decision alone, has resulted in billions of Rands of taxes being lost in a time when the country is in dire need of funds.

Most countries agree that the number one priority of any government should have been the securing of enough vaccines as early as they could. When the time came for South Africa to source and secure the vaccines, the country’s finances were proclaimed to be the reason for delay.

To date, only 1.5 million doses of the vaccine have been sourced. This is not even enough for our frontline healthcare workers. The private sector companies such as medical aids have been recruited to help fulfil the responsibilities of the Government to ensure the sourcing and distribution of the vaccine.

However, the supply of vaccines is not the only source of concern for the country. New studies have shown that the existing vaccines are less effective against a new variant of COVID-19 emerging from South Africa. Although some of the pharmaceuticals have already stated that they will create a new vaccine to combat the variants, it will take a few weeks at the least. With this strain that is thought to be more infectious, the South African Economy may have trouble recovering anytime soon.

South Africa has shown enthusiasm, commitment, and cooperation to help ensure the future and prosperity of this country and is crying out to its Government to finally start doing what they were appointed for, which is to serve the people.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Corné Broodryk is an attorney at Cotney Construction Law, based in South Africa, and has over 13 years of experience in the construction industry. She focuses her practice on construction law, labour law, commercial law, and property law. For more information, please visit www.cotneycl.com or call 866.303.5868.

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