Presentation reveals the actual cost of the lockdown: defaults on debt among SME businesses could rise to 20%

2 September 2020

The lockdown in South Africa is medically futile, costing lives, wiping out savings and destroying the economy. In fact, the lockdown in South Africa appears to be one of the most harmful in the world.

These are some of the points made in a new presentation by Pandemics Data & Analytics (PANDA) and experts at TransUnion and ETM Macro Advisors, called the Definite Lockdown Presentation: How lockdown is not helping, costing lives, wiping out savings, and destroying the economy.

The presentation is an important output of Business for Ending Lockdown (B4EL), a campaign by large business organisations aimed at ending the lockdown immediately. 

PANDA

Nick Hudson, actuary and coordinator at PANDA, pointed out that the initial estimate of deaths due to Covid-19 was dramatically overestimated. Furthermore, a distorted picture about the course of the virus has been presented by institutions such as the World Health Organisation (WHO). 

In South Africa, initial models predicted an expected worst case of 350 000 deaths. In contrast, PANDA, with data analyses taken from the Diamond Princess cruise ship case, pointed out early on that deaths in South Africa would probably be around 20 000. 

Yet, policymakers did not pay attention to new information and failed to end restrictions faster. The effect now is that the lockdown, measured by probable losses of life years, is causing severe medical harm. PANDA maintains that years of life lost due to the lockdown could be at least 30 times worse than due to Covid-19 itself.  

TransUnion 

Hans Zachar, Head of Emerging Markets and TransUnion Africa, pointed out that the risk of default for SME businesses has increased dramatically, while the impact, so far, on large businesses and public institutions have been less severe. It is, however,  SME businesses that have been hit the hardest by the restrictions. These businesses play a particularly important role in economic growth and progress. 

According to TransUnion, business debt defaults rose from 4.5% in June 2020 to 6.4% in August 2020. As emergency relief and payment holidays are now coming to an end, Zachar predicts that defaults could increase to between 10% and 20% by December this year. 

ETM 

Russell Lamberti, member of PANDA and strategist at ETM Macro Advisors, pointed out that the economy itself is a life support system. According to Lamberti, South Africa’s strict and drawn out lockdown period holds devastating consequences for South Africa’s economic reality. However, the lockdown is causing the South African government to accumulate enormous debt.  Lamberti predicts that GDP could shrink by between 20% and 30% in the second quarter. This could cause SA’s economy to shrink in real terms by as much as 13% for 2020 as a whole, almost double than the 7% estimated by the SARB. 

The presentation is available at the following links: On Youtube and Facebook 

Issued by Piet le Roux on behalf of Business for Ending Lockdown, 2 September 2020