Some of the conditions in which the July unrest occurred have abated but others, such as the spiralling cost of living, have worsened
Next week will mark a year since rioters tore through parts of KwaZulu-Natal and Gauteng, looting and vandalising stores and rattling business confidence in their wake. More than 300 people died and about R50-billion was wiped off the country’s economy.
Some of the conditions that surrounded the July unrest seem to have receded over the past 12 months.
The last of the pandemic-related restrictions, which dealt a heavy blow to economic activity, have been lifted. The country’s GDP has rebounded to pre-Covid levels and unemployment, although still high, has finally shown signs of retreat from the record levels endured during the pandemic.
But, with other pressures threatening to boil over, such as the rising cost of living and political jostling in the run-up to the ANC’s December conference, economic conditions remain strained, leaving business confidence on shaky ground.
The report of the expert panel into the riots pointed to poor economic conditions as being fertile ground for the unrest.
“The violence that broke out in July 2021 can be viewed in the context of multiple crises and challenges facing South Africa,” the report read. These crises included high levels of unemployment, poverty and deep inequality.
Multiple crises
In May, Statistics South Africa’s quarterly labour force survey showed the country’s unemployment rate retreated for the first time in two years. This coincided with the GDP’s return to pre-pandemic levels in the first quarter of 2022.
South Africa’s credit ratings also reflect the country’s improved economic position, with Moody’s upgrading its outlook from negative to stable in April. In S&P’s ratings upgrade, in which it revised South Africa’s credit outlook from stable to positive, the agency said “social pressure will remain high, given growing public discontent over high unemployment and inequality and weak delivery of basic services”.
Mervyn Abrahams, the programme coordinator for the Pietermaritzburg Economic Justice & Dignity Group, suggested that the public’s enduring discontent is a tinderbox waiting to be ignited.
The organisation tracks monthly price increases in household essentials. As evidence of how strained monthly finances have become, its data shows that the average cost of their food baskets increased by R551.38 between last July and June 2022.
Out of the five areas that the organisation monitors, Durban’s household food basket has risen the most — increasing by R655.87 in that period. Pietermaritzburg recorded the second-highest jump in its food basket price.
Between July last year and today, KwaZulu-Natal’s economy was dealt yet another blow when heavy rains devastated parts of the province. The floods, which affected key port and rail infrastructure, rippled through the country’s economy. The government-backed recovery programme is expected to cost upwards of R25-billion.
The country’s rosier economic outlook has been overshadowed by the spiralling cost of living, laid bare in the organisation’s figures. Living costs will balloon this July, as taxi fares are also set to increase.
Bad conditions replaced
Producer inflation, the measure of rising costs being absorbed at the factory gate, has accelerated to its highest rate on record. This is after consumer inflation soared above consensus expectations to 6.5% year-on-year in May. May inflation was driven by higher food prices, which threaten to climb as the cost of petrol continues its ascent.
Analysts are forecasting that consumer inflation will remain above the South African Reserve Bank’s 6% upper limit at least until October, which may prompt its monetary policy committee to hike interest rates more aggressively.
While Abrahams acknowledged that some of the conditions that contributed to last July’s violence had abated, he said that they had been replaced by ones that are just as harsh.
“The economy has opened up since the pandemic first hit. There is more movement than there was a year ago.
“But then, since a year ago, we have seen the floods, which had a massive impact. And we have seen now the spiralling cost of living, which has gone totally above what households can afford.
“There are a lot of new drivers that are making life incredibly difficult. So the risk factor, for us, remains high,” Abrahams said.
One of these is food security. “In some ways, for us, the risk factor has actually increased, because the level of food security has actually decreased,” he cautioned. “And there is a direct correlation between those two factors, household food security and social stability.”
(John McCann/M&G)Taken for granted
Abrahams noted that there currently does not seem to be the same trigger for the social upheaval that the country experienced last July, which coincided with former president Jacob Zuma’s arrest.
“If there is a trigger, then the situation could change very quickly.”
Abrahams pointed out that prior to last year’s unrest the R350 social relief of distress grant had also been taken off the table — a fact which may have helped sow discontent. The July riots served as impetus to reinstate the grant, which then finance minister Tito Mboweni did at the end of that month.
In February this year, President Cyril Ramaphosa extended the grant to March 2023, pending work “to identify the best options to replace this grant”.
The expert panel report on the July unrest said that, “to avert the indignity that had led to people resorting to looting, no one in society should be without an income and the introduction of a basic income grant could provide a platform for people to seek opportunities for employment”.
Recent developments regarding the payment of the social relief of distress grant have put its viability as a stop-gap measure in jeopardy.
Civil society organisations are challenging the government’s decision to exclude people with more than a R350 monthly income, even if that money is support from a family member, from claiming the grant. As a result of the means test, fewer than 10-million people made applications for social assistance in April, when previously an estimated 15.5-million people were applying for the grant. The process of paying out the grant has also been beset with delays.
(John McCann/M&G)Uncertainty
Alan Mukoki, the chief executive of the South African Chamber of Commerce and Industry, said the conditions affecting businesses have also shifted since last July. Russia’s invasion of Ukraine, which has thrown the energy market out of whack with rising fuel prices, is now weighing on business confidence.
The chamber’s business confidence index showed that “a more negative sentiment in the business climate set in since April and May 2022”.
In May, the index declined to its lowest level since September 2020.
Mukoki said the charged political environment — including ANC power struggles and the issues relating to the release of the Zondo commission’s reports on state capture — as well as socioeconomic pressures have added to uncertainty.
“All of these things add to the negative mood, because they create uncertainty. Uncertainty creates volatility and volatility creates complexity. Complexity creates ambiguity.”
On whether businesses are factoring in another bout of social upheaval, Mukoki said: “We cannot factor in things that we do not know. We can only be uncertain. And uncertainty by its very nature creates doubts. You can’t manage yourself out of uncertainty. All you can do is doubt and wait. So what it does is causes people to have doubts about the sustainability of any project that they would want to put on the ground, in terms of future investment, in terms of expansion, in terms of creating more jobs, because you don’t know what will happen.
“Will our security forces have the capability to deal with it and will the government have the wherewithal to deal with the root causes?”
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