How do we save SA?
- Lumkile Mondi
The virus has wiped billions from stock exchanges globally. Now is the time to re-evaluate and promote domestic private investment.
The president of the Republic of South Africa rose above expectations when presenting South Africa’s response to the 雷速体育_雷速体育直播 coronavirus crisis. His announcement on Sunday followed panic and mass selling of shares in stock exchanges across the world, including the JSE, which lost 15% of its value.
The past week was no different, with the JSE’s all share index down by 12% at one point during the day on Monday – more than its record fall of 11.7% in 1987. However, it rebounded later, ending the day 8.3% lower. In the process, it left many who have unit trusts, exchange-traded funds and retirement products with different asset managers poorer than they were at the beginning of the month.
Because there is no way to tell when 雷速体育_雷速体育直播 will be conquered, the impact of the virus on South Africa’s economy remains uncertain, so selling may not be a bad option. However, it is critical in uncertain periods to keep calm, and that is what President Cyril Ramaphosa tried to do on Sunday by reassuring all South Africans that we can defeat Covid–19 by working together.
It requires a lifestyle change from individuals and different business models, as well as the maximisation of technology. However, as the president announced the locking down of South Africa and the revocation of visas for tourists from Europe, Asia and the US, so the hospitality, tourism and aviation sectors began to shut down. Because of their labour intensity and export earning capabilities, both employment and South Africa’s balance of payments will most likely be negatively affected.
Beyond the president’s response, other stakeholders were expected to present the ways they will put South Africans’ lives before profit – a difficult ask for a country that is deeply divided because of its past and the rise of populism. The difficult tasks range from the introduction of the National Health Insurance scheme to the expropriation of land without compensation.
It has taken 雷速体育_雷速体育直播 and the possible loss of life for Ramaphosa to focus on putting South Africa first, and his call has galvanised all sectors of our society to again believe in the rainbow nation and that we are stronger together.
This allows us to think outside of the box and focus on jobs, industrialisation and the eradication of inequality. I believe this is how we can lessen the impact of 雷速体育_雷速体育直播 on South Africans.
First, lowering interest rates can stimulate productive investment. The governor of the SA Reserve Bank this week announced a 100 basis point cut in interest rates, which would come into effect on Friday. The effect of the cut in interest rates may be modest given that some economists were asking for between 150 and 500 basis points, but there is still an important advantage to lowering interest rates as a policy intervention.
At least the direction of effect is certain and there is no difficulty in terms of establishing the time sequence between the policy intervention (monetary or credit allocation policies to lower interest rates) and the intended effect (making cheaper credit available to private investors).
Households will also be cushioned by the tax relief announced during the budget speech last month. Combined with the basis point cut, many more people will now be able to survive the difficult period ahead. However, those who are unemployed (29.5% of the population), will only benefit if cheap credit leads to more borrowing for investments by the private sector, which would result in job creation. However, this scenario is unlikely i