South Africa’s government won praise for taking swift action to contain the coronavirus outbreak. It’s said little on how it plans to protect the economy.

With just 61 infections on 15 March, President Cyril Ramaphosa imposed travel bans, instructed schools to close and outlawed large gatherings.

He followed up with restrictions on restaurants and effectively closed bars, beating many worse-afflicted countries to the move. The central bank cut interest rates by the most in more than a decade at its scheduled policy meeting and boosted liquidity in local markets.

The National Treasury is yet to announce whether the government will support affected businesses and households.

Ramaphosa was “firm, clear and decisive,” Fani Titi, the chief executive officer of Investec Ltd., said in an interview. “Where we have been slower has been in trying to support the economy.”

Usually packed malls have emptied and many restaurants and bars leave apology signs on shut doors after dark. City streets and highways flow freely in “rush hour” as firms send their staff home, while hotels and lodges are struggling to fill rooms.

The rand slid to a record low against the dollar and bond yields surged amid a global rout. The central bank forecast the first annual economic contraction since 2009, and small companies now face a uncertain future in a country where unemployment is already 29%.

South Africa’s Treasury is severely constrained. Finance Minister Tito Mboweni last month proposed sweeping spending cuts to trim a fiscal deficit projected to widen to an almost three-decade high.

Bailouts to rescue collapsing state companies has seen debt surge and put the nation’s last investment-grade rating in jeopardy.

Dry Powder

“The budget has been fundamentally undermined,” said Martin Kingston, vice chairman of Business Unity South Africa, the biggest corporate lobby group. “They can’t reset until they know what the trajectory” of the outbreak is likely to be, he said.

“There is an argument for keeping one’s powder dry,” Kingston said.

In a series of tweets on 19 March, the Treasury said provincial budgets will be refocused toward tackling the pandemic and that it will put together an economic response package.

“We are unable to give you a date, but shortly,” the Treasury said in response to questions on when the plan would be released. A tweet on Saturday showed officials from the Treasury and central bank meeting to discuss the response to the outbreak, and Ramaphosa’s spokeswoman Khusela Diko said the National Command Council on the virus planned to meet Sunday.

Talks between banks and Treasury need to get going, said Titi.

“We will have to get together to come out with coordinated action to support the economy,” he said. Those discussions “will take a few days to a week or two,” he said.

South Africa could take its cue for what has been done in countries such as the UK, where the authorities have agreed to guarantee some loans made to companies under pressure, said the CEO of Investec, a lender with operations in South Africa and the UK.

Deferred Payments

The Congress of South African Trade Unions, the nation’s biggest labour federation, called for commercial banks to defer loan payments by up to three months. It also wants lenders to cut interest rates on mortgages by more than the one percentage point the Reserve Bank reduced its rate by.

Cosatu also wants state lenders, such as the Industrial Development Corp. and the Development Bank of Southern Africa, to work with the government worker pension fund manager and private retirement funds to pay for stimulus for vulnerable sectors, said Matthew Parks, the group’s parliamentary coordinator.

The state could offer guarantees as “the easiest way to support banks doing the heavy lifting,” said Peter Attard Montalto, head of capital markets research at Intellidex. “In reality, we see National Treasury offering very little support.”

For now, the banks are not even able to meet as they are prohibited from doing so by competition laws, according to Cas Coovadia, managing director of the Banking Association of South Africa.

“Until I get the exemption notice, unfortunately, I can’t bring people around the table,” he said. “There has been progress. The notice has been drafted and the minister spoke to me. I am hoping that by Monday we get the notice and we can get going.”

So, as the government has won praise for the measures it has put in place to contain the pandemic, fears are rising about the economic pain to come.

“Other countries are putting out huge economic stimulus packages,” said Rian le Roux, an independent economist and former chief economist for Old Mutual Ltd. “This place is going to bleed to death. There are literally businesses that have shut down. I don’t think we are thinking out the box.”

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