Sub-Saharan Africa, the economic growth superstar of the past decade, will plunge into recession for the first time in a quarter of a century, the World Bank forecasts.

The current Covid-19 pandemic is the culprit, of course. The fallout from the coronavirus will not only test the limits of societies and economies across the globe, but African countries are likely to be hit hardest, says Hafez Ghanem, the World Bank’s vice-president for Africa.

South Africa, Nigeria and Angola, the continent’s three biggest economies, must brace themselves for sharp declines in their national growth rates. The recession prediction could not have come at a worse time for South Africa.

Here at home, it is becoming increasingly difficult to find a good economic story to tell. Fresh from a sovereign credit ratings downgrade by Moody’s Investors Service, the country could do without the gloom. But this is the new normal and more pain is coming.

Business confidence has dropped to lows last recorded 21 years ago, according to the RMB/BER Business Confidence Index. Weak government finances and the Covid-19 crisis have shaken confidence. Exporters and those in hospitality are in for a special kind of pain because of all the restrictions placed on the movement of goods and people.

For tourism, in particular, the 21-day lockdown was preceded by a wave of booking cancellations. This was especially the case for smaller-scale establishments such as B&Bs. March and April 2020 are a bumper period for guest houses because of the school holidays and school rugby festivals.

Cape Road, the palm tree-lined main road in Port Elizabeth, has been dead quiet. The road is dotted with B&Bs on either side. A week before the lockdown, calls started coming into guesthouses notifying owners that bookers would not be able to honour their bookings.

In addition, Port Elizabeth is the de facto home of the Iron Man South Africa triathlon competition and the Splash Festival. Both events have been cancelled. The probability of either taking place during 2020 is slim. That means more lost bookings. 

There is no remote work in this industry. As a result, workers in the hospitality industry are sitting at home and do not know what the end of the lockdown will bring. What is a certainty, though, is that a post-lockdown recovery is unlikely to unfold anytime soon.

The saving grace for workers in this industry is the fact that they are part of what is considered the formal economy. In most cases, they are likely registered for the Unemployment Insurance Fund and will be beneficiaries of formal relief efforts that flow from the fund, and other means. Furthermore, owners can tap into the various relief mechanisms designed to aid small businesses.

But spare a thought for those in the informal economy.

A gung-ho police force and administrative bungling have placed people working in the informal economy on the backfoot. Most individuals who derive their income from the informal economy do so on a hand-to-mouth basis. No income means no food. They also do not enjoy much of the protections which are in place for workers in the formal economy.    

Although lockdown regulations have been amended to lift restrictions on informal traders, local council offices remain closed. This is where most informal traders have been directed to go to obtain permits that will allow them to resume operating.

What makes matters worse is that the police have made it their business to brutalise people as a default and ask questions later. This bears the danger of undermining the strides made during the lockdown because citizens will lose patience. A softer touch is required.

Elements of organised business, civil society and other institutions have taken notice of the inherent disparities about how the lockdown will affect the formal and the informal economy. In collaboration with some key government departments, the organisations are working on a suite of relief packages to mitigate disaster.

The main concern is the level of food insecurity that will be visited upon scores of disadvantaged South Africans, which might spark rebellion. The World Bank’s economic downturn prediction, the Moody’s downgrade, the low business confidence and the lockdown confirm what has long been the reality for millions of South Africans: An economic reality coloured by uncertainty.

The World Bank has urged policymakers on the continent to focus on protecting livelihoods and minimising disruptions in food supply chains. In addition, the World Bank has recommended social protection programmes, such as cash transfers and food distribution, to support citizens, especially those in the informal sector.

It is heartening to know the government, business and civil society are working on similar measures. The success of the lockdown, as well as South Africa being able to stabilise its Covid-19 curve, hinges on the human touch and a humane handling of the disadvantaged – who make up the majority. BM