Minister on Government’s response to potential negative impact of COVID-19 on economy & measures to mitigate against this
01 May 2020
Audio: Minister on Government’s response to potential negative impact of COVID-19 on economy & measures to mitigate against this
A joint committee on trade and industry was briefed by the Minister of Trade and Industry on government’s response to the potential negative impact of the coronavirus on the economy and the measures considered to mitigate against it. The Minister appreciated the accommodation shown by the joint committee in acceding to his request to reschedule the briefing. He explained that the overall approach was to “flatten the curve” of infection, preventing an uncontrolled outbreak that overwhelms the healthcare system, while taking steps to responsibly re-open the economy in phases.
South Africa’s gross domestic product (GDP) was expected to fall by around six percent in 2020. The re-opening of the economy would involve three systems: 1) a risk assessment (from level 1 to level 5), 2) a classification of industries according to risk of transmission, impact of continued lockdown, broad value and linkage of the sector and promotion of community wellbeing, and 3) enhanced public health protocols and social distancing measures.
The re-opening of the economy would involve three systems: 1) a risk assessment (from level 1 to level 5), 2) a classification of industries according to risk of transmission, impact of continued lockdown, broad value and linkage of the sector and promotion of community wellbeing, and 3) enhanced public health protocols and social distancing measures. Minister Patel gave a general outline of the implications of lowering the risk assessment to level 4 on different economic sectors. In particular, he noted some e-commerce would be allowed, but the regulations had not been completed in time and consultations were taking place. Further lowering the risk assessment to level 3 was conditional on avoiding a spike in infections under level 4. It was absolutely critical to increase the rate of testing for Covid-19. Finally, he said that there would be opportunities as well as problems in the new post-Covid-19 economic landscape.
Members of the joint committee asked a broad range of questions related to the Department’s response to the virus and the lifting of restrictions on the economy. Members were interested in the measures taken to protect businesses and consumers, broad-based black economic empowerment, the conditions for moving to different risk levels, the provision of personal protective equipment and opportunities that might emerge from the crisis.
Briefing by the Minister
Mr Ebrahim Patel, Minister of Trade, Industry and Competition, appreciated the accommodation shown by the joint committee in acceding to his request to reschedule the briefing. He had been attending a meeting of the National Coronavirus Command Council (NCCC). He acknowledged that the executive was accountable to Parliament and that the committee was an integral part of its oversight mechanism. He observed that the whole world was adjusting to a new reality. There had been challenges but also solidarity, in South Africa and around the world. Covid-19 was the worst pandemic since the 1918 Spanish flu, and the impact of inaction would be devastating. Dealing with the pandemic was a social and economic imperative.
Minister Patel gave a global and local overview of infections and deaths due to Covid-19, noting an alarming increase in the number of cases in the Western Cape and the additional risk factors present in South Africa compared to developed countries, such as poverty, crowded living conditions, co-morbidity and healthcare capacity. The government’s first priority was to protect lives, particularly by preventing rapid spread of the virus in vulnerable communities. The overall approach was to “flatten the curve” of infection, preventing an uncontrolled outbreak that overwhelms the healthcare system, while taking steps to responsibly re-open the economy in phases.
Minister Patel highlighted eight broad areas of economic action that the government had been engaged in:
-Impact assessment and mitigation measures
-Support for health measures
-Food and hygiene supply lines
-Solidarity and social protection
-Global co-ordination and engagement
-Re-opening the economy
Minister Patel discussed each of these eight areas in some detail. South Africa’s gross domestic product (GDP) was expected to fall by around six percent in 2020. The re-opening of the economy would involve three systems: 1) a risk assessment (from level 1 to level 5), 2) a classification of industries according to risk of transmission, impact of continued lockdown, broad value and linkage of the sector and promotion of community wellbeing, and 3) enhanced public health protocols and social distancing measures.
Minister Patel gave a general outline of the implications of lowering the risk assessment to level 4 on different economic sectors. In particular, he noted some e-commerce would be allowed, but the regulations had not been completed in time and consultations were taking place. Further lowering the risk assessment to level 3 was conditional on avoiding a spike in infections under level 4. It was absolutely critical to increase the rate of testing for Covid-19. Finally, he said that there would be opportunities as well as problems in the new post-Covid-19 economic landscape.
The Chairperson said that the joint committee would be looking to have regular meetings going forward.
Minister Patel said that there was no textbook example of the correct response to a pandemic in a modern integrated economy. Even though the Department could not always respond directly to it, feedback from Members of Parliament was tremendously valuable, especially where it gave information on how the Department’s programmes were working at local level. Members of Parliament were the eyes and ears of the public.
Mr M Dangor (ANC, Gauteng) asked whether banks were being regulated to have cash on hand to respond to a possible run on the banks.
Minister Patel replied that the banks would be allowed to share ATMs and bank notes if this became necessary.
Mr Dangor asked whether the property sector would be re-opened.
Minister Patel replied that the deeds office would open at risk level 4, but not completely.
Mr Dangor observed that in Johannesburg, Sandton was the epicentre of the outbreak, whereas Region G, which was the poorest part of the city, had the lowest number of deaths and infections. What was the reason for this? Were some people more prone to abide by the restrictions?
Minister Patel explained that it was not known whether this was the result of different levels of testing or real differences in the levels of infection and death. Mass testing was so important for this reason.
Mr Dangor said that parliamentarians had an important role in promoting the unity of South Africans. Members of Parliament should not be giving out negative messages to investors.
Minister Patel agreed that the crisis should not be turned into a public relations opportunity. He appealed for leadership across society to focus on limiting the spread of the virus.
Mr S Mbuyane (ANC) asked what was being done to ensure adherence to food safety standards and the safety of consumers during the lockdown.
Minister Patel explained that normal food safety measures were in place and problems that had arisen earlier in the lockdown were being resolved.
Mr Mbuyane asked what measures were in place to enforce copyright laws and protect artists.
Minister Patel replied that he would look into this with Minister of Sports, Arts and Culture Mr Nathi Mthethwa.
Mr Mbuyane asked about the Department’s approach to online learning.
Minister Patel replied that it was looking to expand online learning.
Mr M Cuthbert (DA) asked why lottery tickets were not being sold. The lottery provided much-needed revenue to non-governmental and non-profit organisations that were providing many helpful services.
Ms Y Yako (EFF) added that the sale of physical lottery tickets was banned but they could still be bought online. This was a problem, as some were able to buy tickets and others could not.
Minister Patel replied that in the initial lockdown period, only the most basic services were allowed.
Mr Cuthbert asked what was being done to assist sole proprietors, specifically relating to their registration on the Bizportal platform, which currently required a company name to register for essential service status.
Mr T Brauteseth (DA, Kwazulu-Natal) also wanted to know about this. He had received many inquiries about this, and sole proprietorships were often not in a position to register their businesses.
Minister Patel replied that this could be looked at. However, it was not a matter of simply creating a database, as registration submissions would need to be verified.
Mr Cuthbert asked whether he agreed with the Minister of Tourism and the Minister of Small Business Development that financial relief should follow the guidelines of broad-based black economic empowerment (BBBEE). This was a moral and not just a legal question. All citizens should be able to rely on the support of government in this difficult time.
Minister Patel said that working together as a nation would be absolutely critical. He called for social solidarity. This meant that everyone should feel as if they are in the same boat. Nations were forged in moments of difficulty. But this required people to reach out to each other. Circumstances such as living in shacks without running water were unsustainable.
Mr J Mulder (FF+) welcomed the calm and detailed presentation. He observed that the economy was already in trouble before the pandemic began, and predicted that the changes would be even more drastic than the end of apartheid.
Minister Patel agreed that the virus would reshape the future of the country, adding that everyone could help shape it.
Mr Mulder asked whether government would engage all stakeholders and all political parties in the rebuilding process. In particular, he wanted to know if BBBEE, which he described as unsustainable, would continue as the threat of the virus receded.
Ms J Hermans (ANC) asked how compliance with BBBEE laws in the procurement of essential services were being enforced, noting that citizens of South Africa were not yet on a level playing field.
Minister Patel explained that the Department’s approach was to try and work as inclusively as possible, trying not to polarise the country, and reaching out to vulnerable businesses. He invited Mr Mulder, in a spirit of cooperation, to accompany him and see for himself the deep levels of poverty in some parts of the country and the positive effects that BBBEE was having in some of these areas.
Mr D Macpherson (DA) was disappointed that Minister Patel had not engaged him on 13 communications he had sent to the Minister’s office.
Mr Mulder was also frustrated at the Ministry’s lack of response to emails.
Minister Patel understood the members’ concerns about the lack of correspondence. He explained that the Department was receiving more calls in a day than it was used to receiving in a month. He asked members to be patient and to continue sending thoughts and suggestions.
Mr Macpherson asked why the government thought it was correct to pick winners and losers in the economy based on their contribution to the country’s gross domestic product (GDP). Didn’t all businesses contribute to GDP and shouldn’t they be allowed to operate as long as they met minimum health standards?
Minister Patel denied that government was picking winners and losers in the economy. There needed to be a phased return to work, but the sooner everyone could return to work the better. He was doing everything in his power to achieve this.
Ms Yako asked whether the Department had considered the danger of loss of life accompanying the re-opening of the economy.
Minister Patel replied that the government needed to find a balance between re-opening the economy and preventing a massive second outbreak of infections. He warned that countries such as Singapore which had lifted restrictions too fast had seen a massive spike in infections.
Mr Macpherson said that he had suggested invoking section 11 of the National Credit Act on 8 April 2020. Why had nothing been done yet? What was the delay?
Mr Macpherson welcomed the change in the Minister’s position on e-commerce. This sector would be able to get goods to consumers while limiting the risk of spreading the virus. When would e-commerce be allowed?
Mr Macpherson asked how long the Minister expected the country to remain at risk level 4. What was the best case scenario?
Minister Patel replied that no-one in the world could predict how long the Covid-19 crisis would last. Governments would have to be flexible. There was no fixed date for changing to risk level 3 in any region. It depended on two principal sources of data: testing and hospital bed availability. To lower the risk level, government needed reliable data about infection rates and the capacity to deal with new infections. The main danger was a sudden spike in cases which overwhelmed hospitals.
Mr J Londt (DA, Western Cape) welcomed the reports that moving beyond risk level 4 would be based on the readiness of individual provinces and districts. Some areas did not even have a single infection, yet they were under the same restrictions as high-risk areas. What would determine when a region would be allowed to lower restrictions, and what authority would be given to provincial executives to make these decisions.
Minister Patel replied that the President had convened meetings of the Presidential Co-ordinating Council to hear from the provinces. The Department was eager to get to a stage where different districts could be at different risk levels. However, this would require much more extensive testing to ensure the reliability of the data.
Ms S Boshoff (DA, Mpumalanga) asked for assurance that schools would be provided with all necessary personal protective equipment (PPEs) when they reopened on 1 June.
Minister Patel explained that the Department was going to provide cloth masks to schools, not N95 masks. The Department was looking to the clothing industry, particularly smaller businesses, to ramp up the production of masks.
Ms Boshoff asked for the option to provide accommodation for essential service employees be included on the Bizportal application.
Ms Boshoff observed that while building materials would be on sale under risk level 4, builders were not allowed to go back to work. When would builders be allowed to return to work?
Minister Patel explained that big civil engineering projects would be restarting but small contractors would not be allowed to work at risk level 4 to reduce the number of viral transmission vectors in the country. It was heartbreaking to block companies from working but lives had to be protected.
Ms Boshoff asked which business category cash micro-lenders fell and when they would be allowed to return to work.
Minister Patel asked for details and said he would ask the Minister of Finance what the position was.
Ms R Moatshe (ANC) appreciated the work of the executive in the fight against Covid-19. She asked how the department, through the Competition Commission, would ensure good business practices by retailers during the lockdown.
Minister Patel noted that the case against Dischem was going to be heard on May 4 and he did not want to anticipate the outcome.
Ms Moatshe asked about the use of lodges and bed-and-breakfasts to isolate positive cases of Covid-19, especially in rural and township areas.
Minister Patel asked her for details and said he would pass them on to the Minister of Tourism.
Mr Brauteseth noted with concern that the Minister referred to “pledges” to the Solidarity Fund. Was the Minister spending money that had been pledged but not yet received?
Minister Patel explained that the Solidarity Fund was independently managed and audited. He did not spend any of the money. It had already received significant sums of cash, and only spent money that had been received in cash.
Mr Brauteseth asked about the reversal of the President’s announcement on lifting the restriction on the sale of tobacco after 2000 emails in support of the ban were received. How was the Cabinet split on that decision? Were 2000 emails all it took for government to change a policy? Was the Minister aware that the ban was stimulating black market sales? Did any Cabinet member or ANC leader have shares in businesses with Adriano Mazzotti?
Minister Patel replied that Minister of Co-operative Governance and Traditional Affairs Ms Nkosazana Zuma had taken the decision to extend the ban on tobacco products based on considerations related to Covid-19.
Ms Hermans saluted workers in the country and around the world, who were facing unemployment and reduced salaries. She also applauded the work of the executive thus far, and stressed that they needed to continue to put lives first. She asked how the right balance between health and the economy would be found.
Minister Patel thanked her for recognising the balancing act the government had to perform. He explained that saving lives was not counterposed with saving the economy. Rather, economic activity generated resources that were part of saving lives. The challenge was to find the right combination of health measures and economic measures. Moreover, the government wanted larger businesses to help with things like testing.
Mr W Thring (ACDP) said that the government needed to ensure that there was no complete economic collapse. He said that non-governmental and religious organisations were struggling to access relief funds, some of which employed many people.
Minister Patel asked him to provide details of the organisations he referred to so that they could be connected with the relevant departments.
Mr Thring said that the poultry sector was in disarray. One manufacturer had seen a 33% loss in sales after being asked to increase production by 15% in terms of the government’s master plan.
Minister Patel said that new protections for the poultry industry had been put in place in March 2020. It was still too early to see their impact. Many of the industry’s problems were due to dumping by other countries before these measures had been put in place. He noted that the European Union was already pushing back against the country’s measures to protect its poultry farmers.
Mr Thring said that one textile business had been prevented from trading by the police, despite having all the correct permits. He called for smoother interdepartmental communication to prevent situations like this.
Mr Thring asked what measures were in place to support local manufacturing and reduce our reliance on supply chains from heavily affected and vulnerable countries.
Minister Patel agreed that the country would need to carefully consider the source of critical resources in a post-Covid-19 economy. New value chains would emerge as a result of the crisis, opening up new long-term opportunities. The department was looking to make South Africa a leading supplier in Africa.
Mr Thring suggested that the asset register of the Department of Public Works should be looked at for possible quarantine facilities.
Ms Yako called for more frequent meetings of the joint committee with the Minister. She said that the R500bn relief package seemed elitist. It did not accommodate those without access to infrastructure such as bank accounts and information. How would the Department ensure that relief reached everyone who needed it?
Minister Patel denied that the relief package was elitist. It was aimed at some of the most vulnerable members of society. However it was important to ensure that there was broad access to its benefits, he said. Although this was not strictly part of the Department’s mandate, it would seek to assist where it could.
Ms Yako asked what companies would be producing PPEs and in which provinces would they be located.
Ms Yako asked if storage space would be built to accommodate food.
Minister Patel replied that the country had strong storage capacity, and the department would assist where necessary.
Ms P Mantashe (ANC) thanked the Minister for the presentation and applauded the government for its proactivity. While this was a challenging time for the country, there would also be opportunities. She was worried about the shortage of PPEs, especially ventilators, and called for companies producing PPEs for government to be given targets.
Minister Patel replied that the country was building capacity to produce PPEs. However some components, such as the membrane required for N95 compliant medical masks, were not available locally. Ventilator manufacturing was also being increased. The Department saw this as an opportunity to create new value chains.
Ms N Motaung (ANC) asked if the twelve month payment holiday for companies receiving National Empowerment Fund (NEF) funding had also been considered for companies receiving Industrial Development Corporation (IDC) funding. Were there any measures in place to fast-track applications for NEF and IDC funding?
Minister Patel replied that both the NEF and the IDC were looking for ways to support companies in their portfolios.
Ms Motaung asked how many cases the Competition Commission had received. What was their status of investigations?
Minister Patel replied that the Competition Commission had received around 1000 complaints from the public, and a number of these cases had been settled already through consent orders. The Consumer Commission had received over 1700 complaints, mostly about unfair pricing. Competition laws had not been written with rapid processing in mind. Regulators had been asked to speed up the processing of complaints as this was a life and death matter, but they still had to allow both sides to be heard.
Minister Patel thanked the committee for its support and said he would take the outcome of the meeting to Cabinet.
Mr Macpherson complained that his question about e-commerce and Mr Cuthbert’s question about BBBEE had not been answered.
Minister Patel explained that he had answered as many questions as he had had time to answer. He hoped that these matters could be dealt with in future meetings. He offered to answer more questions if given more time.
The joint meeting was adjourned. The portfolio committee adopted their programme for the next three weeks.
The meeting was adjourned.