Opening Remarks by the MEC for Economic Development, Tourism and Environmental Affairs Nomsa Dube-Ncube KZN Economic Council Meeting held at the: Marine Building in Durban
Co-Chairs
Members of the KZN Economic Council
CEO of Chambers
Captains of industry;
South African Economic Climate
We have convened this meeting to share ideas and strategies on what we should do collectively to help the people of this province navigate through this difficult period.
There are two challenges we are facing – namely technical recession and the outbreak of Coronavirus.
For the purpose of this meeting, let me give a background on the impact of recession.
Statistics South Africa have indicated that in South Africa, poverty rates have increased from 21, 5% to 28%
The country’s Gross Domestic Product have contracted by 1, 4% in the fourth quarter of 2019. This followed a revised 0.8 % contraction in the third quarter.
Some economists have predicted a contraction of 0.1% in quarter-on-quarter and seasonally adjusted terms in the final three months of last year.
In the past, the greatest impact of recession was in closure of industries - especially the clothing and textile sector including manufacturing. These are specific sectors of the economy which I believe should receive our special attention.
Job losses in these sectors resulted into spiraling levels of poverty as many people were retrenched and condemned to rural villages and peri-urban informal settlements with no means of survival.
Global impact of Coronavirus
Let me turn my focus on Coronavirus.
The world is grappling with the economic impact caused by coronavirus.
As you all know, early in March, the National Minister of Health Dr Zweli Mkhize confirmed the first case of coronavirus in this country. Unfortunately it was from this province.
Italy has became an epicentre of this virus with thousands of people dying everyday. The country’s financial and manufacturing heartland has been on a lockdown resulting in the collapse of the economy.
Oil price plummeted one-third as Saudi Arabia and Russia increased output. Share values tumbled in Europe and US.
The U.S. economy faced a slowdown as the coronavirus prompted quarantines, disrupted supply-chains and took a bite out of consumer spending.
China is the world’s second-largest economy and leading trading nation. So it is not suprizing that the economic fallout from coronavirus is threatening global growth. China’s Quarter 1 growth was at 4.5% - lowest since financial crisis
Economists expect China’s economic growth to slump to 4.5% in the first quarter of 2020, down from 6% in the previous quarter – the slowest pace since the financial crisis.
The International Energy Agency (IEA) has predicted the first drop in global oil demand in a decade. Demand is now expected to fall by 435,000 barrels year-on-year in the first quarter of 2020, the first quarterly contraction in more than 10 years.
Coronavirus is also taking a toll on the airline industry, with the International Air Transport Association (IATA) predicting the outbreak could cost airlines $113 billion in lost revenue as fewer people take flights.
The shortage of products and parts from China is affecting companies around the world as factories shut down. KwaZulu-Natal based companies have suffered a great loss.
In South Africa, a number of stock prices have plummeted and investors lost billions of Rands of the JSE.
The Rand has depreciated from R14.50 to the current R16.17 due to the global market disequilibrium brought about by the coronavirus. Central banks across the world have responded swiftly and aggressively with sweeping emergency interest rate cuts.
Here in KZN we have calculated losses of over R 1 billion due to the cancellation of international events. We will make the list available to the members.
We have requested Trade & Investment KwaZulu-Natal to undertake a survey to assess the impact of Coronavirus on different sectors of the economy.
Coronavirus: We are optimistic about the future
Ladies and Gentlemen, despite challenges posed by coronavirus, we remain optimistic about the future. We must despair as the leadership. The people of this province are looking up to us to provide solution.
This country and this province in particular has over the years survived through challenges as a result of strong public-private partnership.
We have a responsibility to strengthen this partnership in order to ensure that together, we tide over the storm.
What lessons can we learn from the outbreak?
It various countries affected, the private sector has made a significant contribution as part of the management of the outbreak and during the recovery process.
Here in KwaZulu-Natal, we have no doubt that captains of industry will once again come forward and work with government. The economic council has a special role to play in terms of mobilizing big business and other stakeholders.
Ladies and Gentlemen, regarding the future, there are few observations we wish to highlight.
It is very important to point out that outbreak has accelerated the application of new technologies.
Social communication has greatly diversified, making room for efficient and online measures of interaction. This trying time is also shaping the entrepreneurship of the private sector.
New business models are emerging, especially in sectors such as health, logistics, automation, online office, entertainment, retail, and education.
A big lesson to be learned from the outbreak is that new generation smart cities are key to the future public agenda.
Besides certain urban functions, a new generation smart city will systematically enhance public management by integrating supply chains, traffic, emergency and disaster warning.
More importantly, big data will be more widely used for public wellbeing, especially for tracking, analysing, and supporting timely public decision-making.
Offline-driven businesses are beginning to shift online, especially in education, entertainment, and retail.
Social media is changing from being the channel between not only individuals and business, but also public and the government.
Self-Isolation and digital infrastructure
It has been confirmed by the World Health Organisation that self-isolation is one of the effective ways of combating the spread. Clearly, digitization is the future.
Therefore this outbreak has presented an opportunity to reshape and implement digital strategies.
It is for these reasons we have met with some mayors to discuss the roll-out of digital infrastructure to ensure that communities are connected to Wifi.
Importantly with regards to self-isolation, as government we are relying on the KZN Economic Council to guide businesses to ensure that workers work effectively from home if there is a need to do so.
We also need to look at our Ports to ensure that goods continue without any interruption. We need to ensure the safety of workers in our ports and other service points.
This council meeting must therefore discuss strategies must to guide us on how to better deal with impact of the virus using the digital infrastructure.
Clear interventions
In conclusion, there are few issues I wish to highlight.
Travel Ban – Tourism Industry
Firstly, in order to limit the spread of COVID 19 we have written letters to the stakeholders in the tourism industry informing them about the travel ban as announced by our President Cyril Ramaphosa. He declared a national disaster as guided by the Disaster Management Act.
We have issued a directive to our hotels, lodges, Bread and Breakfast establishments and others to compile a database of travellers from 10 high-risk countries.
This will be handed over to the national government and once all logistics have been worked out through Embassies, the tourists will be evacuated.
Importantly, they are to remain in the places where they are booked for health screening. This is part of curbing the spread of the virus.
It is unfortunate that some of the tourists from High Risk Areas that tested positive moved from Limpopo Province through KwaZulu-Natal to the Eastern Cape.
We remain concerned that some of the establishments were taking new bookings as far back as last night.
We have received calls from tour guides and some workers complaining that they are exposed as have not been afforded safety products.
After this meeting of the council we will be meeting with the tourism in order to ensure that there is compliance.
Sanitizers, Building leased for commercial use, panic buying
We are requesting owners of buildings that are leased for commercial use to step up cleaning efforts by making sanitizer available. In this regard we are appealing to the South African Property Owners Association
We are encouraging the cleaning of hard surfaces and elevators as this is crucial in curbing the spread.
We has welcomed discussions and an agreement reached by the Minister of Trade, Industry and Competition Mr Ebrahim Patel and retailers, especially those who are members of the Consumer Goods Council of South Africa (CGSA). These retailers include Massmart, Pick n Pay, Shoprite, Checkers, Spar and Woolworths.
It has been agreed that moving forward, retailers will put up notices in their stores advising customers of purchasing limits to prevent panic buying. The parties have also agreed that suppliers will ensure consistent availability of products.
We welcome the fact that both government and retailers have agreed on the measures that include applying customer purchasing limits on in-demand products. The National Consumer Commission and the Competition Commission will ensure close price monitoring to protect consumers during this period.
SMMEs and Debt Relief Fund
Ladies and Gentlemen, I remain hopeful that after this meeting we will have a roadmap articulating how this province should move forward.
I am resisting the attempt to create the impression that as government we came to this meeting with a basket full of interventions.
Instead, I want us to discuss, on an equal footing, what we all believe should be the best interventions.
We reiterate our commitment to get this province to be the leading economy in South Africa with the largest contribution to the nation’s GDP.
We understand that for this to happen there are a few necessary pre-conditions we have.
- Government investment in the economy;
- Mobilisation of private sector investment to transform the provincial economy and make it participatory and inclusive;
- Build relevant skills that will support a technologically advanced economy;
- A labour absorptive business sector which directs its efforts to halving unemployment
We acknowledge that the government cannot achieve any of the above objectives alone.
We must together discuss a series of interventions including how to access or augment the Debt Relief Fund has announced by the Minister of Small Business Development Khumbudzo Ntshavheni.
This fund will help mitigate the impact of the economic shutdown caused by the coronavirus SMMEs.
She indicated that for SMMEs to be eligible for assistance under the debt relief fund, the applicant must demonstrate the direct link of the impact or the potential impact of Covid-19 on business operations.
She also emphasized that this facility will also assist entities to acquire raw material, pay labour and operational costs. All these interventions will be structured to match the patterns of the SMMEs cash flows, as well as the extent of the impact suffered.
To strengthen monitoring and avoid abuse, businesses requiring assistance will be required to enrol on the SMME South Africa platform.
The department issued a statement stating that this platform will go live on Tuesday, 24 March 2020.
In conclusion, I believe that on the other side of the coin, I believe that COVID 19, presents an opportunity for us to develop our own products and stop relying on goods that are imported.
We have an opportunity to strengthen our own manufacturing sector and other sectors of the local economies.
I thank you.
