Essential business support

After President Cyril Ramaphosa’s announcement that there would be support for essential businesses during this unprecedented state of disaster to counter the spread of the Covid-19 coronavirus, one of the organisations that will be part of the effort to contain the economic fallout is the Industrial Development Corporation .

However, our immediate priority is to focus on sectors and businesses critical to limit the spread and immediate effect of the virus, as well as to support businesses that are necessary to maintain the supply chain. Specifically for the short-term funding of essential supplies, the interest rate will be prime +1% for the direct IDC funds and 2.5% for the MCEP funds.

What effect do you think it is going to have on South Africa’s economy in the short term and longer term, the next year or so? I have no doubt that it will, but the global economy might emerge from this shock somewhat differently.South Africa has an open economy and, therefore, developments globally are already having negative effects. South Africa’s export performance is being negatively affected as economies the world over are partially or fully shut down.

Since such lockdowns have been imposed at different times, with some being partially lifted, as in China; while others are being extended beyond their initial periods, as in a number of European countries; and some are quite recent, such as South Africa, India and a number of states in the US, the effects will be prolonged.

The effects on employment levels will be dire, harshly affecting livelihoods, particularly in the poorer segments of our society, their spending ability, domestic demand, production … and so the adverse cycle is exacerbated. The fiscus, unfortunately, finds itself in a difficult position because its space for action is quite constrained.

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