'Govt must rethink infrastructure nodes, give affected KZN businesses tax cuts'
South Africa has just experienced a "supply-side shock" says Dr Martyn Davies, Managing Director of Emerging Markets & Africa at Deloitte and Dean of the Deloitte Alchemy School.
The last week's social unrest caused huge damage to economic infrastructure.
This will have a short-term inflationary impact and a long-term impact on the economic competitiveness of KwaZulu-Natal and the national economy, Davies notes.
Davies draws parallels with supply shocks and their economic impact in other parts of the world.
They are: the city of New Orleans after Hurricane Katrina (August 2005), the Arab Spring in Tunisia (December 2010), the tsunami that destroyed the Fukushima nuclear power station in Japan (March 2011) and the more recent port explosion in Lebanon’s capital city Beirut (August 2020).Dr Martyn Davies, MD of Emerging Markets & Africa - Deloitte
What lessons can we learn from these international examples?
The short-term is humanitarian relief... People need to eat and food security must be stabilised first and foremost.Dr Martyn Davies, MD of Emerging Markets & Africa - Deloitte
In the absence of Covid relief, which is minimal, government should respond with tax cuts for impacted businesses in the KZN region with special dispensation particularly for small and medium enterprises.Dr Martyn Davies, MD of Emerging Markets & Africa - Deloitte
In the absence of direct fiscal support, let's have some some tax relief at least to allow these businesses some breathing space...Dr Martyn Davies, MD of Emerging Markets & Africa - Deloitte
Davies also discusses the urgent need to secure and restart essential infrastructure like the Durban port.
Long-term, the government also needs to address the vulnerability of key infrastructure nodes, he says.
"Roughly 80% of freight between Durban and Gauteng is carried on the N3 highway. The unrest has revealed the stark vulnerability and over-dependence of not just the local economy but of the wider region (SADC) on the N3 transport corridor."
There's been a total lack of strategic thinking around logistics and national securityDr Martyn Davies, MD of Emerging Markets & Africa - Deloitte
I see how other countries de-risk the supply chain to national security nodes by diversifying and protecting. We have done the opposite.Dr Martyn Davies, MD of Emerging Markets & Africa - Deloitte
Listen to Davies' argument in the audio below:
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