South Africa’s economy has taken a hit during the Covid-19 pandemic. The pronouncement by Statistics SA that South Africa’s Gross Domestic Product (GDP) plummeted by 51% in the second quarter of 2020 sent shock waves across the country, leaving many South Africans fearful and frustrated because the future looks increasingly grim.
The pandemic has deepened our economic woes, but the economy was already in a fragile position with many deep-rooted, continuous issues plaguing the country for some time, these include the following:
A healthcare system in tatters;
One of the highest unemployment rates in the world;
Factions and political instability;
Poor implementation of governance and accountability mechanisms;
Policy discord; and
Increasing national debt.
The second quarter, which may be known as the pandemic quarter, has had ripple effects on our economic growth in areas such as employment and development and various sectors which have been affected including agriculture, mining, electricity and manufacturing.
The economic uncertainties associated with the lockdown in South Africa — and the world — has led to massive declines in investment and international trade, which have caused further economic contraction and has pushed many South African households into a position of food insecurity. The majority of children, who are from poor and disadvantaged communities, continue to lag behind in terms of education.
The United Nations Development Programme (UNDP) recently released its findings from the Socio-Economic Impact Assessment report which looked into the implications of the outbreak in society and the economy with specific focus on the vulnerable and disadvantaged.
The resident co-ordinator of the UN in South Africa, Nardos Bekele-Thomas said: “The pandemic is more than a health crisis, it’s an economic, a humanitarian, security, and a human rights crisis. Today more than ever, inequalities within and among nations are being exposed and exacerbated by Covid-19 as the poor and vulnerable are unable to protect themselves.”
As I write this article, I remember watching an interview on Newsroom Afrika of a man from a poor community who said, emotionally: “How can I buy a sanitiser when I can’t even feed myself?”
The effects of the coronavirus pandemic may be different for different countries, however it will most likely increase poverty and inequalities across the globe. The divide between black and white, rich and poor remains stark.
Recovering from the coronavirus will be a mammoth task for South Africa, but it is doable. A new economy post Covid-19, however, needs to be established.
This time should be used by South Africa to face up to some harsh truths and use the pandemic as a game changer, a chance to press the reset button and rebuild an economy that will ensure sustainable growth and development.
How to do this?
Chief executive of Pan African Investment and Research Services, Iraj Abedian says: “South
Africa needs to learn from its repeated mistakes over the past 25 years. Creating a capable
state is a requisite for sustainable growth and development. Much lip service has been paid
to this goal, but no real change has been effected … Instead, the political leadership has
promoted mediocrity within the machinery of the state.”
Thus, we need leadership that does what it says it will do. The saying “actions speak louder than words” has never rang more true in the quest for economic reform.
Firstly, control of government expenditure should be the priority because it accounts for about 45% of government revenue spend.
The need for policy reform is crucial to pave a way to accommodate the new economy
under the “new normal” post Covid-19. The continuous low growth, increasing levels of
unemployment, rising poverty and high inequality levels clearly show that South Africa’s
trajectory may be unsustainable.
It is important for the government to design and implement a spectrum of growth reforms that will enable the adequate promotion of economic transformation, support of labour-intensive industries and create a globally competitive economy.
Furthermore, reforms that boost South Africa’s economic growth in the short term, while
also creating conditions for higher sustainable growth are essential.
The National Development Plan Vision 2030 for South Africa which was adopted in 2012 to provide the country with a policy roadmap for, among other things, reindustrialising the economy, improving access to quality education and eliminating poverty, has not lived up to its expectations. Like the Public Finance Management Act (PFMA) and the Municipal Finance Management Act (MFMA) that all play a crucial part in what drives the finances of our country, it has gathered dust.
The many problems South Africa grapples with today can be blamed on the poor implementation and lack of rigorous execution of the NDP.
The National Planning Commission (NPC) — the policy think tank which was established in government structures in 2010 to design the NDP — needs to start restructuring and seek new, innovative solutions and fresh insights for long-term planning.
Apart from economic policy reforms to boost our economy, realistic strategies and initiatives that will deal directly with alleviating poverty and inequality are essential. There has to be the realisation that poverty needs to be alleviated before it can be eradicated.
Even developed countries such as the United States and the United Kingdom, which have overall poverty rates of 9.2% and 22% respectively, still grapple with this issue.
Investing and improving South Africa’s education system, with specific focus on early childhood development, which has been shown to have the greatest return on educational investment, and enhancing the relevance of education systems by better aligning learning outcomes to labour market needs is urgently needed.
South Africa, together with the rest of the world, is facing the Fourth Industrial Revolution which will require a new set of skills such as systems thinking, informatics, Artificial Intelligence (AI), big data design and analytics. It is important to take advantage of the 4IR and ensure our solutions for growth and sustainable development are integrated with it.
There is an urgent need to reskill and further equip people with scarce skills such as those in engineering, IT, health and related clinical services.
As the director of dreamXchange, Ronald Bownes said: “With the devastating
announcement of the worst GDP quarterly decline in our country’s history, we are faced with
the inevitable negative effect that this has had on our already catastrophic unemployment
situation. But it will never be about GDP or the economy. It will always be about people. A
nation’s wealth cannot be measured by GDP. It can only be measured by the individual and
collective prosperity of its citizens. Now is the time to create a People’s Economy, where
people help people to economically empower one another. This is the new era we must
create together. The era of the power of us!”
Bownes simply advocates for an inclusive economy that works for and is beneficial to every citizen of our country. It further encourages partnership with various stakeholders ranging from government, civil society, non-governmental organisations, private sector and state owned agencies. The following are some of the many ways South Africa can move forward and work against corruption, promote the interests of ordinary citizens and prioritise investment for a better, more inclusive and growing economy for all:
1. Corruption needs to be addressed:
There needs to be political will from leaders in government and political leaders across the board to end corruption and for them to practise what they preach. South Africans need to start seeing prosecutions instead of arrests only. The time for campaigns and fancy catchy phrases to end corruption is over. South Africa is said to have one of the best policy design strategies in the world. For instance, the groundbreaking social grants system is an evidence-based policy success story. Its design and implementation have been rigorously evaluated in multiple studies. These have found significant positive effects on poverty reduction.
As previously mentioned, however, we constantly fail on implementation and execution of these policies and strategies. This is because while policy design largely happens at national level, implementation tends to be handled at a provincial and/or local level. These tiers must be strengthened to ensure better implementation. This is cause for concern and clearly shows a deepening crisis of implementation.
There is an urgent need for the South African judiciary, the South African Police
Service (SAPS), National Prosecuting Authority (NPA), Special Investigating Unit
(SIU), the Independent Police Investigative Directorate (Ipid) and Chapter 9
Institutions such as the Public Protector to be allowed the chance to act on their
mandates without any fear, favour or prejudice and without political interference.
2. Consequence management: holding our leaders and senior officials accountable is critical. As Professor Adam Habib from the University of Witwatersrand who said in a Newsroom Afrika interview: “Without consequence management, people in leadership positions will never have the responsibility to act right.”
3. Widespread investment in research development: various means and strategies to
enhance the constant changes of our economy remains a focal point. This includes
the kind of sectors we need to prioritise for economic growth and the kind of
international strategies we may adopt that may be suitable to address South Africa’s
challenges efficiently. For instance following strategies from Rwanda — which we have seen improve significantly in almost every aspect in the last few years.
4. Investment in infrastructure for specific universities: crucial skills that will be needed to accommodate the “new economy” post Covid-19 especially in the developing world of the Fourth Industrial Revolution (4IR) must be catered for. Universities should become more technology and agriculturally focused because these are deemed crucial for South Africa’s GDP and overall economic growth, and
5. Prioritising infrastructure, education, and technology and employment investment in rural areas of the country: this will decrease the number of people moving into urban areas to seek better opportunities and rather improve economic activities in rural areas.