South Africa Beyond Covid-19 E-Book
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- Herausgeber: Jonathan Ball
- Kategorie: Fachliteratur
- Sprache: Englisch
In the aftermath of the worldwide outbreak of Covid-19, 31 of South Africa's top analysts, economists, academics and journalists – including Adriaan Basson, Koos Bekker, Pieter du Toit, Adam Habib and Thuli Madonsela – try to chart a way forward, identify our biggest stumbling blocks, and offer solutions for when the virus subsides. When reports emerged from China in December 2019 about a seemingly incurable virus, few South Africans took notice. But less than three months after those reports, in March 2020, South Africa went into a full lockdown. Life as we knew it ground to a halt. Schools were closed, businesses were shuttered, a curfew imposed, freedom of movement curtailed and hospitals prepared for an unprecedented health storm. The spread of Covid-19, the disease caused by the novel coronavirus, has forced the world and South Africa to reconsider how society works. Can the economy continue to function as it has for the past century, and how can it be reconfigured to be more inclusive? In a post-state-capture country, what must citizens expect and demand from their government? And how can we bridge societal cleavages – many caused by our unjust past – so that we emerge a stronger nation beyond Covid-19? Contributors: Pieter du Toit, Haroon Bhorat, Servaas van der Berg, Imraan Valodia, Alex van den Heever, Louis Reynolds, Kuku Voyi, James Arens, Ron Derby, Thabi Leoka, Koos Bekker, Ann Bernstein, Dawie Roodt, Norman Mbazima, Isaah Mhlanga, Qaanitah Hunter, Thuli Madonsela, Anthoni van Nieuwkerk, Mcebisi Ndletyana, Nicole Fritz, Mpumelelo Mkhabela, William Gumede, Judith February, Darias Jonker, Theo Venter, Leon Wessels, Elmien du Plessis, Ralph Mathekga, Adriaan Basson, Adam Habib, Wilmot James.
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JONATHAN BALL PUBLISHERS
Johannesburg • Cape Town • London
TABLE OF CONTENTS
Introduction: Beyond Covid-19 lies turbulence, change and opportunity
PIETER DU TOIT
The emergence of Covid-19, caused by the coronavirus, has thrown the world into disarray, challenged the global order and upended accepted norms.
The spread of the disease, first reported in China in December last year, all but dismissed by the US a month later and now spread to every corner on Earth, has hobbled the world’s economy and led to a major medical crisis.
And South Africa – emerging from an era of state capture, economic decline and corrupted governance – has suffered great damage.
A society, where repairs to its racialised past were interrupted by weak leadership and graft, was exposed as unprepared by the impact of the virus and continues to suffer the consequences, unintended and otherwise.
Geopolitics is in flux.
The emergence of a new bipolar world order, with the US and China the protagonists, has stalled, with the former relinquishing its role as the leader of the West and the latter suffering enormous economic damage – its leader, Xi Jinping, has even faced unprecedented dissent and criticism.
American unemployment is the highest it has been for almost 90 years, while Chinese growth will be the worst in 50 years.
Covid-19 also accelerated support for closed borders in Europe, where Italy became the epicentre of the disease after China managed to subdue infection and spread. Sweden has been contrarian in its approach to the virus and Germany clinical and effective.
In Britain, the government has been severely criticised for its response, where Prime Minister Boris Johnson also contracted the virus.
Epidemiologists, virologists, scientists and historians alike have been trying to understand how the virus spreads, the most effective way to prevent infection, how to defend society and what the outcome might be.
And where consensus was reached quickly, as in South Africa, about the best course of action, cause and effect quickly helped unravel earlier agreements.
President Cyril Ramaphosa was lauded for his timeous intervention in declaring a national state of disaster – which released emergency funding – soon after the first case was reported, and the clear decision-making process before the lockdown was announced with empathy and conviction.
South Africans, for the most part, agreed a nationwide “hard” lockdown was necessary to prevent a major health crisis, an event which had the potential to cripple an already fragile public healthcare system.
But the warning signs of an ill-prepared government were there early on.
When the regulations, which would govern the lockdown in terms of disaster acts, were announced, we saw the first inkling of our leaders’ inability to navigate complex situations.
Where Ramaphosa was measured and considered, other leaders were boorish and blustery.
National consensus also started to fray when it became increasingly difficult to understand the rationale behind government decisions.
What was the true state of the virus’s spread and infection rate? How quickly was it reproducing? Where are the epicentres?
The subsequent extension of the lockdown, accompanied by a second wave of strict regulations and with most of them enacted without explaining what the supporting evidence and science entailed, was received with increased disillusion and disappointment.
The debate, up until then turning on medical and health considerations, shifted to the economy and the salvaging of livelihoods – with GDP growth set to decline dramatically, government revenue projected to collapse and unemployment forecasted to soar.
The country seems increasingly polarised between those who justify broad and intrusive state command and control, and those committed to a market fundamentalism with little regard for the consequences of a health crisis on society.
It is undisputed that South Africa has suffered under poor leadership and deteriorating governance for more than a decade.
Every objective marker points to a country unable to live up to its potential and political leadership, unwilling – and increasingly unable – to take evidence-based, rational and constructive decisions.
This has had a degenerative impact on society at large, with inequality rising, unemployment spiking, trust in leaders waning, participation in the political process waning and tension on the rise.
The Covid-19 crisis, however, has forced actors in society – the government, political and business leaders and the public – to reassess what needs to be done, and how urgently.
When Finance Minister Tito Mboweni delivered a dire budget speech in the National Assembly in February, observers and analysts were wagering how far Ramaphosa would allow him to embark on broad, structural economic and political changes to save the fiscus and revitalise the economy.
Now, three months later, there are no choices left anymore.
South Africans must insist on innovative solutions and new policies to ensure that when the country emerges from this governance and economic crisis, it does so not only aware of the country’s weaknesses, but also primed to effect the necessary changes.
South Africa Beyond Covid-19: Trends, change and recovery is an attempt at sourcing and distilling a range of theories and ideas to help shape the country after the virus has been defeated.
Public health must be reformed, the economy needs to be repaired, society must heal, we need honest leadership and we need a clear path to recovery.
South Africa deserves nothing less.
Pieter du Toit is News24’s Assistant Editor for in-depth news and investigations and the author of The Stellenbosch Mafia: Inside the billionaires’ club.
INEQUALITY
Economic fallout is ferocious, but health crisis must be focus
HAROON BHORAT
In the current environment, it is safe to argue that there is a surfeit of information on Covid-19.
So, in trying to battle for space in your day, an attempt will be made to distill what are currently the five key facts required for understanding the economics of Covid-19 for South Africa.
Fact 1: We are not doing badly
The Covid-19 infection data suggests that South Africa’s trends – to paraphrase the incomparable Professor Salim Abdool Karim – are unconventional relative to comparator economies.
Indeed, at the same stage of the epidemic, South Africa had the lowest number of confirmed cases relative to the UK, US, Brazil and India.
This positive pattern may be explained, in part, by both an early and strict lockdown. Yes – the intensity and timing of the lockdown also mattered!
In addition, the containment of imported cases primarily among high-income earners and tourists, served to flatten the curve.
However, we should not be lulled into a false sense of security. All the expert evidence indicates that we are on a “delayed exponential infection curve”.
That is just a fancy way of saying that Covid-19 infections will increase dramatically as the economy gradually opens and we shift into more widespread community transmission.
What we have done though, is hopefully to lower the absolute number of infections and deaths over time (flattened the curve) than would have occurred without the lockdown measures.
A second reason to be optimistic – again alluded to by Professor Karim – is that South Africa is in the unique situation of having a large number of community healthcare workers (CHWs).
These CHWs play a crucial role in the fight against HIV and TB through screening, prevention, treatment adherence and health promotion.
These healthcare workers are spread across South Africa and can now serve as our first line of defence – our first responders as it were – against Covid-19 in order to educate, screen, and refer for testing at the household level.
The role that CHWs play as cadres who can be redeployed in the battle against Covid-19, is a key advantage we have in fighting this pandemic.
Fact 2: Growth crash followed by recovery
Despite these two early Covid-19 advantages, the economic fallout from the lockdown has been deep and ferocious.
The prevention initially of all but essential forms of economic activity has laid bare the vulnerable forms of livelihood strategies undertaken by the majority of South Africans.
Put differently: it took all of three weeks from the first day of lockdown for widespread food insecurity to give rise to legitimate anger and protests in South Africa.
Economic growth is projected to decline by 7% for the year.
To put the scale of this economic collapse into context: this would be the biggest contraction in the South African economy since 1960 – and, in turn, is 4.5 times larger than the contraction experienced in the aftermath of the Great Recession in 2009.
In that recession we lost over a million jobs, and although we do not have firm numbers yet, it would not be a surprise if the economy shed at least the same number of jobs.
However, whilst we are looking at a massive crash in 2020, there is positive hope for 2021: these same growth models also project a strong bounce-back.
No less than the IMF has a growth recovery of 4.1% for 2021.
Fact 3: A Covid-19 support package
The state, though, in quickly recognising the scale of this socio-economic destruction, announced a massive stimulus package.
The empirics of the stimulus package again speak to a highly responsive government, at least in terms of scale and commitment. How big is it?
The package, although definition dependent, stands at about R502 billion.
When you exclude reprioritisation – another fancy word meaning ‘shifting from one budget-line item to another’ – the actual stimulus is about R328 billion.
This package includes a massive injection into social assistance as well as a national wage-subsidy programme.
Before you sniff at the value of the stimulus, note the following: this stands at about 10% of GDP, which ensures that South Africa’s Covid-19 stimulus package is higher as a share of GDP, than that spent by Canada, Brazil and South Korea.
In addition, we yield the highest relative spending on Covid-19 among other emerging markets in the world, including China and India.
Fact 4: The new Covid-19 workplace
The pressure really now is on the cluster of economic ministries to navigate a course that would simultaneously allow economic activity to be opened up, whilst also ensuring that this does not unduly fuel the rise in infections.
This is a delicate balancing act, for which there are no prior rules to guide policymakers.
There are two key elements required to thread the needle through an appropriate lockdown whilst optimally maintaining the growth of infections.
Firstly, there is a key requirement that both relevant areas of expertise within government and the private sector – namely health and economics – work intricately and directly together.
This is more than just governance-speak.
Let me explain: suppose that the new health data suggests a massive spike in a particular region or indeed sector, given the lockdown phase we are in.
This information, if instantaneously shared with the economic cluster, would allow for a quicker set of decisions around which sectors, or indeed even firms or regions, could be switched to a higher lockdown threshold.
This type of close interaction, where a health-economics cluster approach is being pursued, needs to be intensified.
Secondly, there is a strong need to adopt a framework in the lockdown phasing which is related to key factors about sectors: the ability to work from home and the amount of physical interface required whilst at or travelling to work.
Current phases in the lockdown framework are not ostensibly related to these factors.
Data allows us to code sectors in this way, and this coding of sectors could potentially guide and inform the phasing of lockdowns in concert with the evolution of infections data.
Ultimately, the use of too-stringent criteria to try and overmanage the exit from lockdown would not seem in any manner to either benefit the economy, nor serve as an appropriate Covid-19 public-health response.
Fact 5: The deficit hangover
Lest we forget that the largest stimulus package in South Africa’s history will also result in the largest deficit-to-GDP levels this country has ever seen.
Recall that not only will we be required to find funds for the stimulus package (and pay it back literally with interest), but also that tax revenue and GDP will of course decline sharply in 2020.
What are some of the projected numbers then?
If we assume no change in tax revenue, the deficit-to-GDP ratio will rise to about 13.5%.
If revenue falls by 15% – a most reasonable estimate – the deficit-GDP ratio is projected to rise to 19%. We are effectively either going to be doubling or close to tripling our deficit levels.
It is for this reason that, as the National Treasury emphasises, accessing cheap debt is a key ingredient for managing the fiscus.
Ultimately, though, there are no easy solutions to reigniting a Covid-19-affected economy. It is evident, however, that addressing the public-health crisis is non-negotiable.
Simultaneously, though, the role played by social assistance and the protection of jobs remains a critical, all-inclusive response to the pandemic.
In the immediate term, clear, economically sensible lockdown phasing – together with a deficit-reduction plan – is central to this economy’s growth prospects.
Haroon Bhorat is a professor of economics and Director of the Development Policy Research Unit at the University of Cape Town. He is one of the country’s foremost experts on inequality and poverty.
Poverty rises, inequality shifts as Covid-19 impact continues unabated
SERVAAS VAN DER BERG
The tentacles of Covid-19 are everywhere. From an economic perspective, it has a direct effect on the need to strengthen and expand the health system.
But its indirect economic effects are much larger, through the lockdown with all its attendant effects, and the global recession which will continue even after the lockdown is over.
Already, some economists are forecasting a contraction of 10% in economic activity this year, and even this might be optimistic.
Thank heavens for the grant system!
Economic contractions do not affect everyone equally.
Those most affected are tenuously linked to the modern economy. Workers in public employment and in most large firms are relatively protected.
The jobs least affected by the lockdown are those that can be done from home using computers and internet connections which favour professionals and skilled workers.
The least protected are those who cannot work from home who have been in low-wage employment, in small firms or engaged in informal activities.
Before the crisis, South African income inequality was already extremely high, higher than has been observed anywhere else in the world.
If those losing their income sources were already earning low incomes, this would worsen inequality, but may not increase measured income inequality all that much.
The already massive gap between high-income earners and low-income ones will not grow much further when people who had little income to lose become poorer.
Thus, measured income inequality may increase moderately from its already exceptionally high level.
What about poverty?
An opinion piece by Ihsaan Bassier, Joshua Budlender, Murray Leibbrandt, Rocco Zizzamia and Vimal Ranchhod in The Conversation showed a reduction of three-quarters of all informal income due to the lockdown would, on its own, increase extreme poverty, defined as an income of less than about R7 000 per person per year, from around 14% of the population to around 21%.
But these authors also showed that many informal-sector workers were in households where there were also recipients of the child-support grant (CSG).
The CSG, the star social-policy reform of the post-transition period in South Africa, has been shown to have many benefits, inter alia for child nutrition, stimulating job search and the labour-force participation of women, and ameliorating rural poverty.
Now it offers a vehicle for reaching the poor and enhancing their income at a time when such vehicles are in short supply.
Bassier and co-authors demonstrated that increasing the value of the CSG would counter the impoverishing effect of the lockdown on informal income.
If such an increase in the value of the CSG is large enough, it may even reduce poverty, all other things being equal.
The government too saw the value of using this grant and used it as a major social-relief measure, although not quite to the degree these authors had advocated.
But the CSG cannot reach all who need social relief. Households fully dependent on informal-sector income would not gain from an increase in the CSG and many would sink into extreme poverty, while some who were mainly dependent on the CSG may be lifted above the poverty line.
Other grants have also been increased.
The increase in the social old-age pension is particularly welcome news for many rural households. Households in rural areas in particular, tend to form around income, so the raised old-age pension has wide benefits.
The demise of small entrepreneurs
The drying up of both informal and much formal sources of income during the current lockdown period changed economic prospects for many South Africans, not only poor ones.
In an economy desperate for sustained long-run growth to lift more people out of poverty, the lockdown and recession will have a devastating effect on small entrepreneurs who must serve as a major engine for growth in any long-run growth process.
Many, who had gambled by embarking on an entrepreneurial career and started new firms or businesses – even very successful ones – may not survive the lockdown or recession.
The tools at the disposal of the government to assist are limited and difficult to use: the scope for mismanagement and even corruption is large, the bureaucratic process complex, and the criteria for support difficult to apply.
Nor is there much fiscal space for even well-targeted and administered government support.
The way in which much of the funding voted for small businesses by the US Congress ended up in the coffers of big business is an example of how difficult it is to target such instruments well.
Many small businesses, formal or informal, will thus probably not survive.
Some may rise from the ashes, perhaps even reposition their business to be better attuned to the new landscape; others may give up and join the job queue.
Those with specific skills and knowledge of the working of business may even jump to the front of that job queue. Some may, once the economy again returns to growth – currently a dim prospect – return to informal or other entrepreneurial activities.
But all would bear the scars of the virus and its terrible twins: the lockdown and recession.
Rural-urban migration, households and education
I mentioned earlier that South African households often form around sources of income. In rural areas, old-age pensions act as a magnet, drawing in the unemployed, the non-economically active and children to what often become granny-headed households, while many other household members are in the cities working or searching for jobs.
So, children may remain while parents move to urban areas.
The children may later join a parent or parents in the cities, often when entering primary or high school.
While part of the household remains in a rural area, rural pension incomes may be supplemented by child grants and remittances from urban household members.
As urban roots grow stronger over time, fewer household members may remain in rural areas.
What will happen now that many urban individuals have lost their jobs or sources of income? We know that, during the Level 5 lockdown, many such people moved back to their rural homes.
If the jobs or informal business opportunities that attracted them to urban areas are gone, how many would give up and rather remain in the relative familiarity of their rural homes rather than starting the search for an urban income afresh?
Perhaps this may be true, especially for those who are only a few years below the age of pension-eligibility. On the other hand, remittances may also dry up.
And what about the children who have been brought back to the rural areas?
It is not clear if all will return to their schools in urban areas.
Perhaps we could see some shifts in the school-going population when schools resume, with some rural schools expanding at the expense of urban ones.
That may not last once economic growth resumes, but in the meantime, it may not make education planning any easier.
Deeper inequalities remain
So, the lockdown has affected different people differently.
Some have been plunged into poverty, while others have been rescued by relief measures such as the grant supplementation.
Some have seen their dreams of successful businesses shattered.
Many have to fall back on that familiar South African last resort, the extended family.
It will take some time before the full effect of Covid-19, the lockdown and recession will be clear.
Income inequality may rise moderately, and poverty much more.
But Covid-19, the lockdown and recession again put the spotlight on deeper inequalities in our society, such as inequality of opportunity, of support structures, of safety nets, and of health services, to name a few.
Servaas van der Berg, Resep (Research on Socio-Economic Policy), Department of Economics, Stellenbosch University
A new, fairer economy is possible, but that would mean sacrifice
IMRAAN VALODIA
Since it was first reported in Wuhan, China in December 2019, the SARS-CoV-2 virus and the resultant disease, Covid-19, has evolved from being a distant perceived threat to having the most devastating impact on the world economy of any single event since the Great Depression.
This has occurred in a matter of less than six months. Having declared a state of national disaster on 15 March 2020, President Ramaphosa announced on 23 March that South Africa would commence a three-week national lockdown starting at midnight on 26 March 2020.
The lockdown was then extended for a period of two weeks, and continues for the foreseeable future, albeit now in terms of the South African government’s risk-assessed phased approach.
The economic, health, social and political consequences of the pandemic have wreaked havoc on our lives and left us all permanently scarred.
The pandemic has exposed the deeply unequal world that we live in, and uncovered how vulnerable the economic situations of millions of our citizens really are.
It is ironic that it is not the working of the economy, but rather the shutting down of the economy, that has most starkly exposed our unequal world.
Those at the top own the most of everything
Two pieces of research on income and wealth, conducted by my colleagues Gabriel Espi and Aroop Chatterjee in the Southern Centre for Inequality Studies, highlight the extent of South Africa’s inequality.
If we divide South African households into five groups (quintiles), we can create a picture of income inequality and how different income groups have been able to live through the challenges of a lockdown.
