The Covid-19 pandemic has had a devastating effect on South Africa, as it has globally. Rich countries have been able to cushion the blow by finding the money to support the firms and workers who have lost their incomes, but South Africa and other developing countries have not found the money needed for this.
In South Africa, unemployment is at an all-time record, with the official tally of a third of the workforce failing to reflect the true extent of joblessness, which has been estimated to exceed half of the adult working population. The situation for the youth, the “born-frees”, is more desperate, with 75% of those under the age of 24 unemployed, which is the highest recorded rate of youth unemployment in the world.
Although the situation in South Africa is extreme, compounding its already unenviable position as being among the world’s most unequal societies, it is not unique. Globally, Covid-19 has destroyed more jobs than any past event, with more than 400-million people losing their livelihoods.
Far from being “The Great Leveller”, which is the title of the historian Walter Scheidel’s book in which he argues that pandemics reduce inequality, the pandemic has increased pre-existing inequalities in wealth, race, gender, age, education, geographical location and health in all countries.
The wealthy typically have kept their highly paid jobs, and benefited from soaring stock markets and rising home values, as larger suburban homes have become more desirable. Low-paid workers by contrast, are more likely to have jobs in the sectors that suspended activities, including hospitality and tourism. They were also more likely to work in essential services such as nursing, policing, teaching, cleaning, and as shop assistants, in all of which they had a higher likelihood of being exposed to Covid-19. Around the world, poor workers toil in precarious hourly-paid employment, making them less able to access unemployment benefits and health insurance.
The risks poor people face are higher as they live in more crowded homes, and are more reliant on public transport and working and shopping in crowded places. Weaker neighbourhood health facilities and a higher incidence of pre-existing health problems further increases vulnerability.
Poor get poorer
The pandemic has resulted in greater geographical inequality, as poorer neighbourhoods and countries are more vulnerable to health and economic problems. In a rich country such as the US, in New Orleans, the same low-lying streets that were devastated by the flooding from Hurricane Katrina in 2005 suffered, during Covid-19, from mortality rates two to three times higher than elsewhere in the city. In the United Kingdom, the death rate from Covid-19 in the poorest areas of the country was more than double that in wealthy areas.
Low-income earners have low levels of savings and can seldom afford to be out of work for longer than a week without them and their dependents suffering from shortages of food and other essentials. This is not a problem that is confined to South Africa. In Italy, more than one in six people work in the informal sector and so could not rely on their companies for sick pay or other support, and in India up to half of the workforce has informal jobs, with no contractual rights. Undocumented immigrants who do not have official residence rights are even more vulnerable, as in many countries they are unable to access medical or welfare benefits.
The pandemic has come on top of austerity and stagnating wages, deepening the hardship endured by growing numbers of people. A survey of 37 countries showed that the pandemic caused three-quarters of households to experience a loss in income, with 82% of poorer households negatively affected. Across Europe, poverty increased by 10%. In the US, more than two million additional households reported that they did not have enough to eat as a result of the pandemic. In the UK, a third of the population – 22.5-million people – are expected to fall below the minimum standard of living when the current emergency support schemes end.
Rich get richer
While the pandemic has made poor people poorer, it has been a boon for the ultra-rich, with the fortunes of the world’s 2 189 billionaires increasing by a third during 2020 to more than $10.2-trillion, which exceeds the combined economies of all of the countries in Africa, Latin America and South Asia. In the US, while more than 44-million people lost their jobs and unemployment surged towards 15%, the fortunes of 29 billionaires doubled, with the biggest gains going to those with high stakes in the technology companies that have benefited from the pandemic.
Globally, the 20 richest billionaires now have more wealth than four billion people, more than half the world’s population.
Sustainable development goals derailed
Covid-19 has caused the biggest development setback of our lifetimes, reversing 70 years of progress. Many more people will die of starvation and poverty-related causes than from Covid-19 itself, with the pandemic resulting in as many as an additional 150-million people falling into extreme poverty. Acute hunger doubled from 130-million people in 2019 to 260-million in 2020.
Without a huge rescue package, achieving the universally agreed sustainable development goals is now impossible. The countries in the worst situation are those with limited domestic savings and large pre-existing external debts. Since 2010, external debt has risen faster in sub-Saharan Africa than in other regions, from 40% of GDP to more than 60% in 2019, when the International Monetary Fund (IMF) classed 18 countries as high-risk.
The countries with the greatest risk of default include Egypt, Zambia, Angola, Ethiopia and Ghana, but South Africa, Nigeria, India and Brazil are also in the high-risk zone and Turkey, Indonesia and Mexico are next in line. To allow these countries some breathing space to address the urgent needs of their citizens, a lowering of their debt repayment obligations is required.
From disaster to recovery
To overcome the Covid-19 development disaster requires a comprehensive package of debt relief that would reduce borrowing costs and allow countries to meet the needs of their people. The priority should be to help the poorest countries, whose situation has deteriorated through no fault of their own, on the sole condition that the funds released from debt repayments are spent on supporting their citizens in need through investing in health, education and basic services. Making this happen requires the coming together of the US, EU, China, the IMF and World Bank.
Directing less than 10% of the $17-trillion rich countries have spent in response to the pandemic to supporting developing countries shift to clean energy would reduce global carbon emissions and underpin recovery. Reducing South Africa’s dependence on fossil fuels requires a just transition that ensures that the legitimate concerns of the workers and people who will be displaced are fairly addressed. An annual multibillion-dollar transfer of funds should be provided by the international community to enable South Africa to transition to reliable, affordable and clean energy and create sustainable jobs.
Policy priorities for South Africa
Despite some remarkable initial successes, post-apartheid governments have not gone far enough in translating exemplary legal frameworks that promote human rights and equity into policies which address the root causes of poverty, ill health, and joblessness.
The president has faced a torturous choice between the absolute need to contain the health risks of the pandemic through lockdown and the devastating economic consequences.
Millions of jobs have been lost, with an estimated 40% of these losses permanent, reversing decades of job creation. Those in the poorest quartile were 10 times as likely to have lost their jobs than those in the richest quartile, with poor, female, less educated and rural workers the most at risk. With only 32% of working age people in rural areas finding jobs, and barely 40% in towns and 49% in cities, now is the time to construct a bold and far-reaching recovery plan.
Desperation fuelled the reckless looting that followed the arrest of former president Jacob Zuma, although tragically the destruction only served to increase the hardship experienced by poor people, both in the short-term as lives, food, vaccines and incomes were lost, and longer term as investment confidence is undermined, particularly in places that need it most. As Ramaphosa perceptively noted in his address to the nation, there is an urgent need to overcome dire poverty and restore hope that a democratic South Africa can provide for all its people.
Bouncing back or bouncing forward along the same path is not what is required. That path has failed to create sufficient growth and jobs to overcome deep inequalities and historical injustices, and far from providing clean, reliable and affordable energy, has increased the dependence on dirty fossil fuels.
The time has come for radical reforms which unleash the potential of all South Africans to create small businesses and jobs, and for the government to fix the broken educational, health and other systems. The tide is turning against corruption, and supporting this critical battle requires the affirmation that South Africa offers the opportunity for a better life for all, not just the well-connected or privileged.
It is time to enact policies which previously seemed radical. Even the IMF and World Bank are now calling for an end to austerity. Governments around the world have jettisoned old orthodoxies to enact strong stimulus packages. There is considerable scope for the South African government to do much more in supporting those in desperate need by extending and raising the value of social grants and creating an effective basic income below which no South African should fall.
A green just transition is also urgently required, to ensure a comprehensive plan for job creation is built on the basis of a fossil free economic vision of shared prosperity for all South Africans.
South Africa is fortunate to have among the wisest and most competent global leaders and among the most skilled population in Africa. The spontaneous creation of Business for South Africa to support the government in meeting the Covid-19 crisis is a striking example of the depth of expertise and commitment which can be mobilised when needed.
The pandemic has shown the extent to which all humanity is connected and how our lives depend on others. The spirit of ubuntu needs to be expressed globally in the urgent provision of vaccines, in international aid and financial support. Nationally, the task now is to ensure that the tragic loss and suffering caused by the pandemic has not been in vain. With decisive action, this terrible crisis could lead to a better life for all South Africans.
This article draws on Rescue: From Global Crisis to a Better World by Ian Goldin, published by Hodder & Stoughton and available in South Africa through Jonathan Ball Publishers for R405 at all good bookstores and on Loot and Takealot.