South Africa takes first steps towards reopening battered economy

Johannesburg

JOHANNESBURG (Reuters) – South Africa took its first shaky steps on Friday towards rolling back one of the world’s strictest COVID-19 lockdowns as it sought to strike a balance between containing the disease and reviving its battered economy.

Five weeks ago, President Cyril Ramaphosa ordered most citizens to remain indoors and shuttered all but essential businesses as part of a response to the pandemic that has won praise from the World Health Organization.

But Africa’s most advanced economy was already in a recession before the pandemic. And with the shutdown threatening to send already rampant unemployment soaring, the government has come under intense pressure to ease restrictions.

Reopening the economy is proving harder than closing it down. Regulations only finalised on Wednesday have caused confusion and, under the first phase of easing, only some sectors may resume operations, and with limited staff.

Many businesses are weighing whether to reopen at all. These include restaurants, which can now resume food deliveries only.

“Opening for delivery only will lose Nando’s and our franchise partners more money than being closed,” said Mike Cathie, CEO of the iconic spicy chicken chain, which has decided not to reopen yet.

McDonald’s South Africa is reopening a limited number of restaurants. Famous Brands said it would trial delivery-only service at its Steers, Wimpy, Debonairs Pizza, Fishaways and Mugg & Bean restaurant chains.

Returning to work, Sizo Henna, owner of the upmarket Blaque Bistro in Johannesburg, knows he faces a new reality.

“Honest truth is, it is very difficult to sleep,” said Henna, who has decided to partner with Uber’s food delivery service Uber Eats and hired two drivers of his own to resume business.

SEVERE DAMAGE

South Africa has recorded 5,647 coronavirus cases and 103 deaths out of a population of 58 million, relatively low numbers compared with pandemic hot spots in Europe or the United States.

But the economic damage has been severe. The National Treasury forecasts a 5.8% contraction this year.

The authorities’ new five-level, flexible system allows lockdown restrictions to be eased or reintroduced based on the disease’s progression.

South Africa moved from level 5 to level 4 on Friday.

Trade Minister Ebrahim Patel told a parliamentary briefing that if infection levels remain steady and testing is expanded, more easing could come soon.

“It’s not that the economy needs to be in level 4 for a four-week period or six-week period,” he said.

The new rules allow industries including mining, steel production and some clothing retail to gradually ramp up to 50% employment. Other forms of manufacturing are limited to 30%.

But employers fear the regulations will undermine the efficiency and scale needed to turn a profit.

“We are having a serious conversation about whether we should indeed open at all,” said Ken Manners, chief executive of SP Metal Forgings, a supplier to the auto industry, which makes up around 7% of South Africa’s national output.

Car makers are lobbying the government to allow their entire workforce to return over coming weeks.

Meanwhile workers in South Africa’s important mining sector are reluctant to return underground, saying measures are not yet in place to protect them from infection.

Crucially, most of the economy must still await further signs the disease has been contained before resuming work.

Industry organisations say many businesses can’t hold out much longer.

“I get calls daily from workers pleading for assistance and members who have lost their businesses and houses,” said Johann Baard, executive director of the South African Apparel Association.