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SOUTH AFRICA: Get ready for metro-level lockdowns in South Africa: analyst

May 2020 BusinessTech; Mixed messaging from government is confusing South Africans about what is coming next regarding the country-wide lockdown – but Intellidex analyst, Peter Attard Montalto, believes that people should prepare for a roller-coaster of level changes for at least the next 12 months.

In an investor note published on Sunday (10 May), Attard Montalto said that messaging around the lockdown has come from two opposite ends in government – with Trade and Industry minister Ebrahim Patel talking up a move to level 3 lockdown, while the health minister Dr Zweli Mkhize warning of a move back to level 5.

“Overall there is still no clear strategy from government on how and when – based on either medical or economic drivers – the country or metros should be moved between levels,” he said.

Because of the pressures from businesses, which are eager to get back to economic activity, and the reality of the pandemic – being that the peak of infections is yet to hit, and a second peak is expected to follow as more relaxed restrictions take root – Attard Montalto expects a baseline scenario of many ups and downs in the coming months.

“The national lockdown may be reduced to level 3 for a month or so, and then back to level 4, and then into level 5 for the peak through July and August,” he said.

“This, before a return slowly back to level 2 by the end of the year, and level 1 in the first quarter of next year – before a ramp back up on a second wave in the middle of 2021.”

The analyst said that a reduction to level 3 could happen as early as this week, or more likely next week – but warned that markets are likely to get overexcited about this, not realising that this position is simply not sustainable, given the health risks.

He said that South Africans should also prepare for a “metro-level system”, which is likely to be launched shortly.

While this would ostensibly be done as a way to open up the economy in less-affected areas – as has long been requested – Attard Montalto warned that the system will also be put in place to fight political battles which are already well underway.

“This is reflective of the fact that the Western Cape outbreak is increasingly being used as a political football,” he said.

“The ANC national government is now openly saying that Cape Town may well have to move back to level 5 – even though its much higher case and death numbers are down to better reporting and better testing and it has a better health system to cope with the situation than say the Eastern Cape.

“Originally, metro and province level decisions were meant to be made by governments at those levels – but we now think they my be centrally imposed for political reasons around the ANC/DA conflict there.”

However, outside of the politicking, Attard Montalto said the biggest economic problem remains the philosophy of how the levels are devised.

Currently, government is drawing up positive lists of ‘what is allowed to occur’ as opposed to negative lists of ‘what should not occur’, dictating on a very granular level what can and cannot be done in all industries.

“Economic micromanagement remains evident, and this is leading to very slow shifts in what is allowed, and when, to correct erroneous regulations.

“The uphill battle remains problematic for business as the Department of Trade and Industry’s conception remains that it can dictate social distancing through restricting employment numbers rather than placing the emphasis (with inspections) on businesses themselves,” he said.

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