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The effects of COVID-19 – Economically speaking

As we all know, the COVID-19 pandemic has taken the globe by storm. As of the 14th of April, the total cases of COVID-19 is 1,925,877 with a total of 119,719 deaths across the globe, according to www.worldometers.info. Countries across the world responded to this pandemic by enforcing full-scale lockdowns to manage the spread of the virus.

It is of utmost importance to note that these lockdowns will have a long-lasting effect on the economy, worldwide. World leaders decided to shut down major cities, businesses etc. knowing very well that this will harm the economy. However, governments, all over the world, are putting plans in place to soften the financial blow as much as possible for their citizens who are unable to go to work due to the lockdown.

South Africa, on the other hand, does not have the means to put extensive financial measures in place. Also, on the 28th of March, Moody’s downgraded South Africa’s sovereign credit rating to “junk” status. This means that South Africa does not have the money, nor the creditors to put extensive financial measures in place. This is an economic problem; however, it can lead to even more problems in terms of the spread of COVID-19. South Africans in isolation, not being able to go to work or receive an income, will only be able to stay in isolation for as long as they have the money for essential items such as food and hygiene products. When the money runs out, South Africans will have to go back to work which could result in the virus spreading even more when people return to work and come in close contact with one another.

After President Cyril Ramaphosa announced the 21-day lockdown, which has now been extended until the end of April, the Department of Small Business Development launched a debt relief fund to help SMME’s mitigate the economic turmoil that this lockdown has in store. However, this fund is far too small. In the worst-case scenario, businesses will have to let staff members go to keep their businesses afloat.

However, it is not all doom and gloom. The current crisis is prompting the South African government to put measures in place that it should have put in place a long time ago. For example, Lindiwe Sisulu, Minister of Human Settlements, Water and Sanitation announced that communities will be gaining access to clean, running water.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)