South Africa’s nationwide lockdown in its fifth-straight week threatens to cripple the economy as companies file for voluntary liquidation and business rescue. South Africa, one of the top emerging markets, has been hard hit by the COVID19 pandemic.
The country has performed 197,127 covid-19 tests and reported 5350 positive cases, and 103 deaths as of 29th April 2020.
Data from Statistics South Africa in April shows that almost half of all businesses surveyed do not have enough money to continue with their operations beyond the five-week lockdown.
To add salt into the wound, ratings agency, S&P Global Ratings on 30th April downgraded the country’s long-term foreign-currency credit rating to BB- (junk), three notches below investment-grade, from BB. Also, the long-term local-currency rating was lowered to ‘BB’ from ‘BB+’. With the rand having slumped 23% in 2020, S&P forecasts that this year the South African economy will shrink by 4.5%.
Businesses filing for distress
State-owned airline South African Airways (SAA) is now just days away from being wound down. The largest non-food retailer in S.Africa, Edcon, announced it had applied for voluntary business rescue impacting it’s 14,000 permanent employees, 25,000 temporary staff, and 750 suppliers.
South Africa’s Associated Media Publishing (AMP) announced that it will cease trading and publishing its magazine titles, from Friday, 1 May 2020. The media house published Cosmopolitan, House & Leisure, Good Housekeeping, and Women on Wheels since launching in 1982.
In a statement, AMP blamed the unexpected and devastating impact of COVID19 for its downfall.
Government Stimulus plan
President Cyril Ramaphosa announced the government’s commitment to rescue distressed businesses with a R500-billion ($27 billion) stimulus plan. Out of this, R200 billion will be extended to businesses with a turnover of less than R300-million a year to help pay salaries thereby supporting 700,000 firms and more than 3 million employees.
A further R20-billion will be given to municipalities to tackle emergency water supplies, food and shelter for the homeless. R100-billion will be allocated to job protection and job creation.
From May 1, there will be easing on lockdown measures that will see South Africa move from ‘hard’ lockdown to level 4 lockdown. This implies that about 1 million workers may return to their workstations. In addition, restaurants will reopen to cater to the delivery customers only with the expansion of public transport to cater to growing demand.