The reality of Covid-19 on South Africa’s weak economy is devastating. So says Abdul Aziz Davids, head of research at Kagiso Asset Management, commenting on the financial pinch being felt on small and medium businesses in the wake of the coronavirus.
Currently, South Africa has 402 confirmed cases of Covid-19 – an increase of 128 since yesterday. President Cyril Ramaphosa is set to address the nation later today on measures to be undertaken to curb the impact of Covid-19.
However, Davids said the real economic impact will only show one month or even two months down the line.
“The reality is, if we’re all going to be at home nobody is going to do any shopping, nobody is going to do any buying,” said Davids.
He continued by saying that small businesses are losing the most revenue.
“Unfortunately for smaller businesses what happens is, you have your daily takings and from that money you need to cover cost and many of those businesses still have a lot of those costs that are fixed in the short term,” explained Davids.
Davids suggested that the Minister of Economic Affairs, Ebrahim Patel needed to introduce an economic package that can be used as monetary cushioning from the blows felt by the widespread chaos of Covid-19.
“We are stuck between a rock and a hard place, The second half of last year we already experienced a technical recession, we are starting with a really weak base already,” said Davids.
Davids said that overall small businesses are the most affected.
“The one good thing about our mining industry is that they tend to have very good infrastructure for their workers, those sort of industries tend to be a lot more structured and a lot more proactive in anticipating emergencies like this,” stated Davids.
Davids detailed that because the state has deemed the coronavirus pandemic, the state would be compelled to place more stricter measures to curb social distancing.
“The great opportunity that we have now, is that we are in a state of national disaster as it’s called so that does give the president sweeping powers in what he can do, he can for example commandeer industries or nationalize certain services,” suggested Davids.
“Small businesses are bleeding, we need an immediate rescue package,” said Davids.
To reestablish faith in the government, and hope in the minds of citizens the state needs to introduce a stimulus package.
Meanwhile, Nedbank announced it will be lenient with customers who are stuck with their instalments due to the coronavirus pandemic. This comes shortly after Standard Bank made a similar announcement the day before.
Davids advised the City of Cape Town to take drastic action because this is a unique situation.
“The immediate need is to help the South African consumer, we can always count the costs later,” ended Davids.
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