The second quarter of 2020 saw a strong decline in exports, combined with an even stronger slump in imports as international trade slowed down because of the COVID-19 pandemic. Several sectors, however, particularly agriculture and parts of mining, were able to increase exports over the quarter. Stringent COVID-19 containment measures implemented in most countries led to the plummeting of merchandise trade, with the “Great Lockdown” seeing South Africa through a five-week, hard nationwide lockdown in the second quarter of 2020. Exports dropped by 32.5% in US dollar terms, while imports plunged to US$14 billion in the second quarter of 2020, down by 39.2% from the same period last year. However, because of the depreciation of the rand, the decline in both exports and imports in rand terms was a little lower compared to the decline in dollar terms – with rand exports down by 17.6%, and imports by 25.9%.

Media Release: Growth in SA exports to China

This TIPS tracker highlights important trends in the COVID-19 pandemic in South Africa, and how they affect the economy. It analyses publically available data, research and media reports to identify current developments and reflect on the prognosis for the contagion, the economy, and policy responses.

Since the pandemic and the economy have stabilised, this will be the last Tracker. TIPS will continue to publish periodic in-depth analyses of developments and debates around recovery and reconstruction. Our quarterly Real Economy Bulletin will also include a section on the impact of the pandemic on the economy.

KEY FINDINGS FOR THE WEEK

On the pandemic

• The rate of transmission of COVID-19 has continued on a secular upward trend, but the increase has been both slow and unpredictable. The long holiday weekend around Heritage Day on 24 September appears to have fuelled an uptick a week later.
• The rate of transmission depends largely on the extent to which public health authorities are able to convince people to wear masks and avoid social gatherings, whether in homes or businesses.
• Overall, excess deaths during the COVID-19 pandemic seem likely to be the largest single source of natural deaths in South Africa this year. For comparison, COVID-19 is now estimated as the 12th largest cause of death globally, but ranks first in New York, Brazil and Peru, second in the UK, and third in Sweden.

On the economy

• In a pattern seen worldwide, the recovery has taken a “swoosh” shape, with a relatively sharp rebound in April and May fading into a more gradual improvement over the past four months. Breakdowns in Eskom plants remain a binding constraint, with a downturn in electricity sales in September.
• As usual with economic and natural disasters, damage from the pandemic is falling disproportionately on the poorest communities and households. Employment data for the second quarter show that job losses were highest for lower-skilled, lower-income and informal workers. These groups will also be hard hit by the termination of the COVID-19 special grant and the supplement to other social grants, currently due to end on 15 October.

Download the Tracker or read online

This policy brief aims to lay the ground for a just transition in South Africa’s metals value chain as it pertains to climate change only. It contributes to understanding: a) the nature of the impacts facing the value chain; b) the characteristics of the stakeholders at risks (namely workers, communities and small businesses); and c) the nature of the resilience plan which is required to ensure a just transition.

This TIPS tracker highlights important trends in the COVID-19 pandemic in South Africa, and how they affect the economy. It analyses publically available data, research and media reports to identify current developments and reflect on the prognosis for the contagion, the economy, and policy responses.

Over the next few months, the Tracker will explore the challenges facing different industries, looking in this issue at autos and music.

KEY FINDINGS FOR THE WEEK

On the pandemic

• Since 18 August, when the country moved to Level 2 of the lockdown, the number of cases has plateaued at over 1 500 new cases daily. For comparison, reported infections peaked at over 12 000 a day in mid-July. The current level of reported daily diagnoses was last seen in early June. The rate of transmission remains far lower than three months ago, but has climbed by 75% over the past month, leading to a modest increase in new cases in the past week.
• With new cases falling until last week, the government further relaxed restrictions from 21 September, mostly permitting much larger gatherings and shortening the curfew. Unless stronger behavioural changes bring transmission again under control, however, cases will start accelerating in the coming weeks.
• The results of reopening without adequate protection can be seen Europe and the US. In some areas, new cases now exceed April levels, bringing renewed restrictions on businesses, especially bars and personal services, and on the size of gatherings. The evidence indicates that higher transmission resulted largely from reopened nightlife and universities combined with increased tourism. In the US, initial studies suggest that around a fifth of cases are traceable to bars alone.

On the economy

• The GDP figures for the second quarter of 2020, released on 8 September, revealed the extraordinary impact of the pandemic. Evaluation of the (limited) data on monthly trends shows that the decline took place exclusively during the full lockdown in April. It was followed by a strong although incomplete rebound in May. Since then recovery has slowed, despite the elimination of almost all legal restrictions with the move to Level 2.
• The pandemic has ushered in a new world for state-owned companies, which have found they can no longer easily obtain subsidies from the state when they run substantial losses, especially when they have no core socio-economic mandate. Among others, SAA, Denel and the SABC are in a financial quandary with no obvious resolution, and Eskom has had to accept that recovery will require faster erosion of its monopoly on the national grid.
• Efforts to develop recovery plans intensified in the past month as the reopening of the economy has returned attention to more fundamental constraints on growth. The discourse has generally centred on supporting existing formal businesses, however, without complementary programmes to promote more inclusive growth. The auto and music industries point to the tough choices required in light of the economic havoc caused by the pandemic both nationally and globally.

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Business Day - 14 September 2020 by Neva Makgetla (TIPS Senior Economist)

Read online at Business Day.

Or read as a PDF.

Business Times (Sunday Times) - 13 September 2020 by Hilary Joffe

Read online at Business Live

Or read as a PDF

South Africa had a trade surplus of R30 billion in the second quarter of 2020, up from R4 billion in the second quarter of 2019. Generally, South African trade performs better in the second quarter of the year, compared to the first quarter. With the exception of 2012 to 2014, there has been a trade surplus every year in the second quarter for the past decade.

See Imports localisation and supply chain disruption study - Second Quarter 2020