In our quest to recover from the obvious economic mayhem caused by the coronavirus pandemic, we should not lose sight of how we got here in the first place. It so happened that both our local and global lockdowns including travel bans, reduced working hours and border closures to fight the pandemic – which we euphemistically called extreme social distancing –suppressed the demand for goods and services.
Consequently, many businesses started to operate with excess capacity and some even shut down their doors for ever. The government might have issued an edict barring businesses from laying off staff during the state of emergency but that is neither here nor there if at the end of the day, these same businesses do not make money.
Business, for those who may care to know, is fundamentally different from government in the way it makes money to stay alive. Unlike government, a business does not tax us to generate income to stay afloat. Instead, it has to trade and offer us goods and services that we are willing and able to pay for. That, if you like, that is how they tax us. So their “tax” is in return for a service they would have provided instead of government which has the first call on your money and then turns around to lord over you and makes you beg for services funded by your own money. If you shut down economic activity irrespective of the prevailing circumstances, you must realise that businesses are going to stop trading and once they do, they cannot keep carrying the same staff numbers. Therefore the edict on layoffs would only make sense in tax funded organisations and not the real world.
So it was with some trepidation tinged with cynicism, when I saw that government is getting ready to pump over half a billion Pula to be loaned to business via the National Development Bank (NDB). Curiously, although not surprising, the condition precedent for such loans – which by the way are also unsecured- is an undertaking by borrowers not to reduce head count. The unsecured part of the deal will be obviously attractive. However the idea that during the loan period, borrowers will have no room to restructure their business with respect to staff costs and thereby adapt to changing trading conditions, is likely to have a chilling effect on uptake. After all, a key aspect of running a good business is the ability to make decisions in the interest of the company. If that option is taken away, then it is like going to battle with one hand tied behind your back.
So instead of pumping money – the bulk of which is going to be squandered anyway rather than repaid – to “stimulate” economic recovery , the powers that be must avoid the mass hysteria about coronavirus and begin to shift their focus towards a safe opening of the economy which would involve lifting as many restrictions as possible. After all, some of the restrictions have no scientific or medical basis and seem arbitrary. Public transport for example has no such restrictions. So as they say, our freedoms cannot stop where fear starts!
By the way, we already saw with the Khama era Economic Stimulus (ESP) package that such Keynesian measures don’t work but just delay economic recovery and expansion. After wasting millions on the ESP no one can point to the economic and social benefits.
The most viable and affordable policy options we have are safe reopening of the economy by lifting restrictions, lower taxation and removing harmful regulations.
