South Africa Orders Three-Week Lockdown to Curb Virus Spread

(Bloomberg) --

South African authorities ordered a three-week lockdown to curb the spread of the coronavirus as infections continue to surge and threaten to spiral out of control.

Grocers, pharmacies, banks and filling stations will be allowed to remain open, while the Johannesburg Stock Exchange and other essential services can continue operating, President Cyril Ramaphosa said Monday in a televised address to the nation. Some mines and furnaces will have to shut and arrangements will have to be made to place them under care and maintenance to avoid damage.

The army will help the police enforce the lockdown, which comes into effect at midnight on March 26. The restrictions on movement will be particularly hard to enforce in South Africa’s sprawling townships, where tens of thousands of people live in cramped shacks.

“Immediate, swift and extraordinary action is required if we are to prevent a human catastrophe of enormous proportions,” Ramaphosa said. “While this measure will have a considerable impact on people’s livelihoods, on the life of our society and our economy, the human cost of delaying this action would be far greater.”

South Africa has confirmed 402 Covid-19 infections -- the most in Africa. The first one was detected on March 5. Health Minister Zweli Mkhize has warned as much as 70% of the population could contract the illness over time. While Ramaphosa declared a national disaster a week ago and instituted travel bans, shut schools and banned large gatherings, those measures have failed to slow the pandemic’s spread.

New Infections

The rand was 1% stronger against the dollar as of 7:12 a.m. after weakening to a record closing level of 17.8369 on Monday. South Africa’s currency has slumped 11% in March.

There were 128 new infections reported on Monday, with cases confirmed in all nine provinces. Gauteng, the economic hub, which has 207 cases, and the Western Cape, which has 100, have been hardest hit. There have been no fatalities so far.

The health system was already strained before the pandemic hit, and the government fears it will buckle under the weight of a flood of new infections. The virus has dealt a body blow to the struggling economy and the new restrictions will exacerbate the fallout, but the government has said it has to prioritize the safety of the country’s citizens.

“The next few days are crucial,” Ramaphosa said. “Without decisive action the number of people infected will rapidly increase from a few hundred to tens of thousands, and within a few weeks to hundreds of thousands. This is extremely dangerous for a population like ours which has a large number of people with suppressed immunity.”

‘Big Hit’

The economy is likely to contract more than 2% this year as result of the restrictions, with services industries set to take “a big, big hit,” said Citibank South Africa economist Gina Schoeman.

“Shutdowns like this just mean that some things will never be able to return to how they were,” she said. “Base effects will help in the second half of the year, but this assumes we will go back to normal after three weeks.”

The president announced several measures to help shore up the economy and mitigate the pandemic’s impact. They include a four-month tax subsidy for low-income workers, and the establishment of a solidarity fund that will enable businesses, organizations and individuals to contribute to efforts to combat the spread of the virus, care for the ill and support those whose lives are disrupted.

Two of South Africa’s richest families -- the Oppenheimers and the Ruperts -- each pledged 1 billion rand ($57 million) to help support small businesses and save jobs, according to Ramaphosa.

South African banks will be exempted from competition rules so that they can meet to discuss a common approach to debt relief for embattled customers, and are expected to announce measures within days.

Other key measures:

• Regulations have been put in place to prohibit unjustified price hikes and ensure shops maintain adequate stocks of basic goods.
• A safety net is being developed to support those who work in informal jobs.
• The government is working on a plan to temporarily subsidize wages for employees of distressed companies to try and minimize job losses.
• The Unemployment Insurance Fund’s reserves will be utilized to support workers who lose their jobs.
• Tax-compliant businesses with a turnover of less than 50 million rand will be allowed to delay paying over a portion of their taxes for six months.
• The government is considering temporarily reducing employer and employee contributions to the Unemployment Insurance Fund and the Skills Development Fund.
• The Department of Small Business Development has allocated more than 500 million rand to assist distressed small and medium-sized companies.
• The Industrial Development Corp. and the Department of Trade and Industry will allocated more than 3 billion rand to assist vulnerable firms and provide funding to companies critical to efforts to fight the virus.
• The Department of Tourism has allocated 200 million rand to assist small and medium-sized tourism and hospitality businesses sector who are suffering because of travel restrictions.

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