'SA not going to have a recession, but a fundamental depression'
Moody’s downgrade of South Africa to full sub-investment grade rating together with the impact on the economy of the Covid-19 lockdown will have dire consequences for South Africa.
Bruce Whitfield speaks to Busa deputy president Martin Kingston about the country heading for what he told Business Maverick in a recent interview, is a structural depression.
Things are very bad both from a societal view, but also from an economic point of view.Martin Kingston, Vice President - Business Unity SA
Kingston says from health care to assisting the most vulnerable, South Africa faces a crisis.
We're particularly concerned about the townships and informal settlements and the stress it is going to place on the health care system.Martin Kingston, Vice President - Business Unity SA
The need to contain movement and observe social distancing is crucial, he says.
The more we do that the more hopeful we are that we will come out of this as quickly as possible.Martin Kingston, Vice President - Business Unity SA
The reality is we were already in a recession and that was before Covid-19 descended on South Africa. Not just domestic impact but against an appalling global background with appalling catastrophic ramifications for Africa and potentially South Africa.Martin Kingston, Vice President - Business Unity SA
Even though there has been preparation for this inevitable downgrade, he says the short-term and medium-term outlook is bleak and together with the impact of the virus, it will take a long time to rebuild the economy, he says.
Certainly, we anticipate there is not going to be a recession. There is going to be a fundamental depression.Martin Kingston, Vice President - Business Unity SA
We are going to have a stepdown in economic activity obviously exacerbated by the lockdown which was a necessary step, and it is going to take time to recover.Martin Kingston, Vice President - Business Unity SA
In doing so we are going to have to be much more flexible about the structural reform that we implement and the speed and agility with which we do so.Martin Kingston, Vice President - Business Unity SA
He believes we are heading into a deep structural depression.
I believe we are now looking at negative numbers.Martin Kingston, Vice President - Business Unity SA
He says many people will lose jobs and join the already enormous number of unemployed.
We don't see a U-shaped or V-shaped recovery but a more L-shaped recovery which is going to take an extended period of time.Martin Kingston, Vice President - Business Unity SA
Group Chief Economist at Standard Bank Goolim Ballim agrees but says it will occur with relative brevity.
The economy will bottom and then in a grinding way will begin to recover. So it might have the makings of an L-shaped profile and may have the makings of a U-shaped profileGoolam Ballim, Group Chief Economist - Standard Bank
This is unprecedented.Goolam Ballim, Group Chief Economist - Standard Bank
Ballim says it will surpass even the previous economic recessions of 2008 and 2009.
South Africa's rebuilding and recalibration episode will have two installments to it.Goolam Ballim, Group Chief Economist - Standard Bank
One is institutional reform which has begun to happen over the past two years but the second is macroeconomic reforms.
There the Presidency has been much more guarded with seemingly holy cows which are untouchable.Goolam Ballim, Group Chief Economist - Standard Bank
There is a need for collective sacrifice and I think we are going to see salary sacrifices among a big swathe of white-collar workers.Goolam Ballim, Group Chief Economist - Standard Bank
The public sector just cannot be clinging to the type of contractual agreements in terms of wage settlements that have been familiar with.Goolam Ballim, Group Chief Economist - Standard Bank
He says there will be strategies and tactics borrowed from the 2009 and 2009 economic crisis to develop a raft of measures to assist.
The South African financial system is so much more fortified than it was 10 years ago.Goolam Ballim, Group Chief Economist - Standard Bank
Rand Merchant Bank market strategist John Cairns says local market reaction has not been that bad.
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