Covid-19 is locking down livelihoods

Trenton Elsely

Covid-19 is locking down livelihoods

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On the 23rd of March, the President of South Africa announced that the country would go in to lockdown as of midnight 26 March 2020. South Africa is bracing itself to try and slow the spread of Covid-19.

The decision builds on a global consensus of what it takes to slow the rate of infection of Covid-19 in the population. The lockdown is intended to limit transmission of the virus, help mitigate the impact on the health system and save the lives of the most vulnerable, the elderly and those with underlying chronic conditions.

South Africa has significant numbers of people with compromised immune systems. The high prevalence of Tuberculosis, HIV and diabetic conditions in our population raises the concern that Covid-19 could result in higher mortality rates than in relatively healthier and wealthier populations. At the same time, the lockdown has serious implications for the social and economic fabric of the country.

While the government has set out a range of supportive measures to deal with the economic impact of the lockdown, my article focuses on measures that target workers and their dependents in particular.

We are concerned with measures that can be seen to reach ordinary, working class households directly, rather than relying on broader measures to trickle down to these individuals and households.

Support for the consumer

Regulations have been put in place to prohibit unjustified price hikes, to ensure shops maintain adequate stocks of basic goods and to prevent people from ‘panic buying’. The government has made the assurance that there will be a continuous supply of basic necessities. “Commercial banks have been exempted from provisions of the Competition Act to enable them to develop common approaches to debt relief and other necessary measures.” It is reported that Standard Bank will give all small businesses and students a three-month debt repayment holiday.

These measures are intended to relieve pressure on the consumer. Acting against price gouging and associated acts such as stockpiling in times of crisis has a relatively broad benefit. Credit relief appeals to consumers that have the means to access formal credit. But it is fair to say that there is a mass of our people out there who do not qualify for formal credit and on whom such measures have very little effect.

Measures that support the employed, those under threat of losing their jobs, and those who lose their jobs

In his address, the president pointed to a number of industries that will continue to operate. Foremost among these are those firms involved in the production, distribution and retail of food and other basic necessities. Firms that are not deemed to be essential to efforts to deal with Covid-19 and the lockdown itself will cease to operate. The Department of Trade and Industry said, “Essential staff in the following areas … are being looked at for inclusion in the Gazetted list:

  • those responsible for essential care of the elderly and sick persons, including home-care and old-age homes
  • essential private security services for the protection of property and persons
  • All essential back-office services to enable salary and human resource departments to work so as to ensure smooth management of wage and salary payments
  • essential animal welfare and emergency veterinary services
  • those who assist in transporting food and other essentials to people’s homes including on-line retail, as well as transport systems that support any of the essential services
  • key maintenance systems required at workplaces to avoid serious damage to economic assets, where the interruption of that service will destroy critical working areas, factories or machinery.
  • Members of Parliament, Provincial legislatures, Municipal councils and their core staff, as well as government departments and public entities’ staff responsible to assist with implementation of the measures announced by the President, as they will all need to be working to make the country safe;
  • members of the media and broadcasting services, who will serve as a vital communication between ourselves and the public.
  • Transportation of fuel, food and basic goods supply trucks between SADC countries”

You don’t have to be an economist to understand that the impact on the economy will be huge.

The president said, “Using the tax system, we will provide a tax subsidy of up to R500 per month for the next four months for those private sector employees earning below R6,500 under the Employment Tax Incentive. This will help over 4 million workers.” 

“The South African Revenue Service will also work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.” 

In 2015/2016, the Employment Tax Incentive scheme was estimated to support something like 1.1 million jobs. That is a great deal less than the stated 4 million jobs, but these two measures could assist with the retention of some relatively low paying jobs, although they are unlikely to stimulate job retention in industries where demand or supply are effectively locked down and approaching zero.

The president said, “We are in consultation on a proposal for a special dispensation for companies that are in distress because of COVID-19. Through this proposal employees will receive wage payment through the Temporary Employee Relief Scheme, which will enable companies to pay employees directly during this period and avoid retrenchment.”

“In the event that it becomes necessary, we will utilise the reserves within the UIF system to extend support to those workers in SMEs and other vulnerable firms who are faced with loss of income and whose companies are unable to provide support. Details of these will be made available within the next few days.”

The new UIF National Disaster Benefit is one such measure, though it is not clear to me how this relates to the Temporary Employee / Employer Relief Scheme (TERS) formerly known as the Training Layoff Scheme or TLS.

Under the UIF National Disaster Benefit, “the employer may decide, as a direct result from the current Coronavirus (COVID-19) pandemic to close their business for a period and send employees home. This constitutes a temporary lay-off. If the employer cannot pay his employees for this period, the employer can apply for the “National Disaster Benefit” from the UIF. This benefit will be de-linked from the UIF’s normal benefit structure and therefore the normal rules that for every 4 days worked the employee accumulated 1 credit day, and maximum credit days payable is 365 for every 4 completed years, will not apply. 

This benefit will be at a flat rate equal to the minimum wage (R3 500) per employee for the duration of the shutdown or a maximum period of three months, whichever period is the shortest. If an employee is ill, temporary lay-off or unemployed for longer than three months, the normal UIF benefits will apply. 

Reduced work time: Where a Company shuts down for a certain period or implements Reduced or Short Time. Benefits payable is the difference between what employer pays and normal UIF benefits payable should an employee lose employment.

Support for those on the margins of the labour market

Casual workers, contract workers, domestic workers, farm workers, private security workers and many others in precarious forms of employment are on the margins of the labour market . Depending on the form of employment, these workers are often ring-fenced from existing workplace regulation, labour law and the rights embedded in those mechanisms.

So, you will find that domestic workers are not covered by COIDA and I can’t think of a good reason why they shouldn’t be. You will find that some firms contract workers, rather than employ them, and in this way, avoid certain legislation. You will find that some firms simply do not comply with legislation.

It is likely that there will be significant slippage between a mechanism like the UIF National Disaster Benefit and the benefit to workers on the margins of the labour market. The measures outlined so far are unlikely to provide income support for these workers.

For those who were unemployed already

It has long been understood that in South Africa, if you are able bodied and of working age, there are no social security transfers for you outside of the child support grant, the value of which is set at R420 per month per child.

Really, there is nothing, and there is nothing new.

So, you are dependent on hustling and extended networks of people who have jobs and the people who draw social grants. That network of support is under renewed pressure. Jobs will be lost, let us not pretend.

Support for those in self-employment

“A safety net is being developed to support persons in the informal sector.” 

There are some very large question marks here. This is the kind of statement you make when you want to signal that you are thinking about the sector, but you don’t really know what to do. What will be the possibilities for the self-employed (most of whom are usually classified as being in the informal sector) on Friday 26th of March?

Is there any difference between a supermarket and a side of the road trader of fruits of vegetables and other consumables? Not really. Will they be allowed to trade? Why should Shoprite, Pick n Pay and Woolworths have a monopoly on trade? I am not convinced they should. I would be swayed by epidemiological evidence that supported this form of trading over that, but I am not aware of any such evidence. This is an important, but challenging question in the context of a lockdown which aims to limit the spread of a virus in the population.

Many of the proposed support measures show that formal businesses are not expected to figure it out for themselves. Are we going to kill informal trading and not provide support? The winding down of the informal sector adds to the pressure on the livelihoods of the poor. The cumulative weight of job losses in the formal sector and especially at its margins is then topped up by the death of informal trade.

The department of Trade and Industry issued a statement on the 24th of March saying that Grocery stores, supermarkets, and spaza shops will remain open during the “lockdown”.

The inclusion of spaza shops appears to open a space for informal trading during the lockdown.

Support for poorer, working class households

The elderly, especially those that are 70 years of age and older, are at very high risk of presenting acute symptoms should they contract Covid-19. What if significant numbers of old age pensioners were to die in the coming months? Apart from the human tragedy, there is a socio-economic dimension of great importance. The elderly are central to many poorer households, as a source of income but also as a caregiver, a real anchor in the family network. What does it mean for poorer households if significant numbers of these men and women die?

It means that the cumulative weight on poor households of job losses in the formal sector and especially at its margins is then topped up by the death of informal trade as well as the loss of the grant income and unpaid care work of the elderly.

Something has to be done.

The ground for a basic income grant seems fertile. The fiscus may be stressed, but our understanding of value is being forcibly shifted by this pandemic. The work that is being classified as essential under the national disaster includes many occupations that have historically been devalued and made invisible – the retail worker, the security guard, the truck driver, the carer. How will we support them? How will we support those that will be ejected from whatever precarious form of work they might have been in before? How will we support those that have always fallen outside of the system, such as the self-employed or the unemployed not receiving any grants? How will we support them when their survival strategies and networks of support collapse under an extended lockdown?

The Southern Africa Social Policy Research Institute estimates that if everyone who is not receiving a benefit were to be given R561 per month for three months (R561 is the food poverty line, in 2019 Rands) then this would cost about R56 billion. Is this more costly than leaving millions of people to isolate without income?

There are several possibilities for responding to this challenge. One would be to top up existing grants. This would be easy and immediate, because the beneficiaries are already on the system and it will help a lot of people very quickly.

A complementary approach would be to bring in a new opt-in grant. Wealthy people won’t bother to opt in, but poor people will. It will, however, be a huge challenge to determine how to get newcomers onto a system and in a way that doesn’t require people to apply in person. There are travel costs and the risk of exposure to the virus and to others. For those workers that are on SARS’ radar (both above and below the tax threshold) a tax rebate would be technically and logistically fairly straightforward.

Then for the many who fall between those two categories, we will have to imagine something new. It could involve an online or phone opt-in scheme promoted on radio, television and other media that uses identity numbers and adds people to SASSA’s radar. SASSA reportedly has the most comprehensive spatial registration infrastructure in the country. The zero-rating of some or all internet access would assist such a process greatly. It would also provide channels for networking and psychological and emotional support. People with no internet access, phone or bank account could only be registered through personal visits, which is a huge undertaking. It is a difficult situation. It is also untenable to be required to live on air.

The president, on behalf of government, said, “We can make sure money flows to firms and households.” 

Controlling the spread of a highly infectious virus while maintaining the production and distribution of basic goods and other essential services, in addition to providing support to firms and households under duress as a result of a complete lockdown of socio-economic activity, is a complex task that involves competing imperatives.

However, it is essential that there are measures that target working class households within and without formal employment as directly as possible. Government has moved swiftly and with remarkable decisiveness in its efforts to contain the spread of Covid-19. Will government move with the same swiftness and decisiveness to support poorer, working class households that have no protection against the socio-economic costs of a lockdown? We cannot starve the people to protect the people.

Acknowledgements: Dr Shane Godfrey (UCT) and Dr Gemma Wright (SASPRI).

Picture credit: Mail & Guardian

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