As South Africa responds to COVID-19 as well as aims to stimulate the economy and job creation post the lockdown through an infrastructure-led package, an opportunity should not be missed to address many of the water and sanitation challenges in the country. This is much needed and would provide multiple benefits not only to the economy but also the poor communities that need the infrastructure and services, as well as municipalities that require strengthening of their water and wastewater infrastructure. This working paper looks at the benefits of including water and sanitation in the country’s stimulus package and considers possible avenues to do so.

For a summary version of the working paper see Policy Brief: A case for water and sanitation in South Africa's post-lockdown economic recovery stimulus package

Engineering News -  13 July 2020 

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Engineering News -  7 July 2020 by Terence Creamer

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Business Day - 6 July 2020 by Neva Makgetla (TIPS Senior Economist)

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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.

KEY FINDINGS FOR THE WEEK

On the pandemic

• Daily growth in reported new cases has exceeded 7% a day in Gauteng, KwaZulu-Natal and the North West, and was at 5% in the Eastern Cape. Total reported cases more than doubled over the past two weeks to reach 264 000, while the seven-day rolling average of new cases climbed from 5 000 on 26 June to 11 000 on 12 July. For the week to 11 July, South Africa reported more new cases per million people than the United States or Brazil, which have been famously unable to control the spread of COVID-19.
• Newly diagnosed cases have essentially plateaued in the Western Cape since 20 June at around 1 200 a day. As a result, the Western Cape’s share of new cases reported in South Africa fell from half a month ago to a sixth in the past week.
• The divergent regional trends raised the question of how to understand the factors driving infection rates. The much-heralded “peak” is, after all, only visible when the number of new cases starts to fall. In contrast to seasonal flu or diseases like measles, for which preventative measures exist, the only way to bring down the number of cases is behavioural change on a mass scale. Yet the government reimposed limited restrictions on especially risky activities only on 12 July, six weeks after the growth in new cases began to escalate.

On the economy

• Looser restrictions on business contributed to the rapid spread of COVID-19 but, after a spurt in economic activity, the available indicators suggest that the recovery remains very slow. The challenges appear primarily in suppressed demand as escalating risks of infection in the metros, South Africa’s economic drivers, keep high-income consumers largely at home; most households have lost income; and export demand remains largely flat, with most commodity prices still lower than before the pandemic.
• In the past week, both the ANC and Business for South Africa (B4SA) published proposals on how to boost the recovery. They share some important themes, notably around the need to mobilise both private and public financing for an infrastructure drive, the critical importance of fixing Eskom, and the need to avoid disruption to commercial agriculture. The main substantive disagreements emerge about how best to manage Broad-Based Black Economic Empowerment (BBBEE) and create a more dynamic and competitive economy.
• Neither paper appears to have any new ideas on immediate measures to cushion the effects of the anticipated depression-level economic decline over the coming year. Income losses are likely to be severe for low-income households, small business and local governments.

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South Africa aims to transition to an inclusive green economy, combining economic development, social progress and environmental preservation. Both the economy and society remain, however, highly unsustainable. Targeting the transition to an inclusive green economy therefore signifies a massive and disruptive shift, commanding a new model of development. Industrial policy is core to this process, notably to ensure a “just transition” and manage a balancing act, consisting of maximising the benefits of the transition and minimising the risks associated with not transitioning; but in line with South Africa’s capabilities to minimise the short-term trade-offs and threats. This requires a careful alignment of South Africa’s industrial policy with the inclusive green economy paradigm to support the country’s green industrial development. Ultimately, this requires the shift from industrial policy to green industrial policy. To inform such a transformation, this report reviews South Africa’s industrial policy, from an inclusive green economy lens. It investigates the extent to which South Africa’s industrial policy is responding to, if not driving, the country’s transition.

The report was produced by the United Nations Environment Programme (UNEP) with funding from the European Union in the framework of the project Inclusive Green Economy Policy Making for SDGs. 

WIDER Working Paper 2020/23

This working paper, Initial considerations for the creation of an inter-regional industrial hemp value chain between Malawi and South Africa, forms part of the project: Southern Africa – Towards Inclusive Economic Development (SA-TIED)

Abstract

Interest in industrial hemp has revived in the past 20 years. Malawi is considering legalizing the cultivation of industrial hemp as an alternative cash crop to tobacco with great potential. This study considers the potential and challenges of creating an industrial hemp value chain between South Africa and Malawi, with Malawi concentrating on upstream cultivation and South Africa on downstream value-adding activity. The research supports a finding that industrial hemp offers strong opportunities as a niche market even if mainstream demand is slow to materialize or does not materialize at all. It also shows that undertaking such an inter-regional endeavour would be considerably more complicated than initially envisaged, given the agricultural structure and operation of the Malawian economy and its smallholder farmers.

Download Working Paper: https://www.wider.unu.edu/sites/default/files/Publications/Working-paper/PDF/wp2020-23.pdf

TIPS acknowledges the support of the SA-TIED programme for this working paper, with special thanks to UNU-WIDER and the South African Department of Trade and Industry.

In the first quarter of 2020, which represents the period before widespread global lockdowns were implemented due to the COVID-19 crisis, South Africa continued with a positive trade balance. A trade surplus of R34.7 billion in constant rand was recorded in Q1 2020, up by 42% from the previous quarter. The increase in the trade balance is attributed to exports having declined at a much lower rate than imports as an initial response to the COVID-19 economic impact, as well as a decline in imports due to the earlier shut down in China and a significant drop in the value of crude oil imports of about R10.5 billion.

Main Bulletin: The Real Economy Bulletin - First Quarter 2020

In this edition

Trends in GDP growth: The first quarter of 2020 saw South Africa enter a third straight quarter of economic decline. But 2020 began a qualitative shift in the national and global economy. In the second half of 2019, the downturn was driven largely by the continued stagnation in commodity prices. From January to March 2020, however, the economy was increasingly weighed down by the impact of the COVID-19 pandemic. As a result, the South African economy is expected to shrink by around 7% in the coming year, while the global economy will fall by 5%, and by 6% if China is excluded. Read more.

International trade: South African exports in January and February showed signs of a recovery compared to the previous year, but they began to fall in March as the effects of the pandemic widened. Read more.

Employment: Although the year to the first quarter of 2020 saw some jobs growth, employment fell sharply during the lockdown, and has recovered only slowly since then. In the year to March 2020, employment climbed by 90 000 jobs. But the available data suggest that over a third of all formal private-sector employees were unable to work in April, during Level 5 of the lockdown. Depressed international and domestic demand mean that the reopening of the economy will not restore all of those jobs. Read more.

Investment and profitability: Investment and profitability data are only available through the end of 2019. The available indicators point to a liquidity crisis across business as incomes fell to near zero in April and demand has only come back slowly as the lockdown has eased, while many companies face substantial start-up costs. Read more.

Foreign direct investment projects: The TIPS FDI Tracker tracks foreign direct investment projects on a quarterly basis, using published information. Twenty-four projects were recorded this quarter with an investment value of about R40.7 billion. Read more.

Briefing note: Coronavirus – The impact of Covid-19 is likely to exacerbate pre-existing inequalities: The lockdown regulations in response to the COVID-19 health crisis have disrupted economic activity, the organisation of work, and communities. COVID-19 has presented itself as a health crisis, burying itself in a host of pre-existing inequalities and has manifested as an economic crisis in South Africa. This briefing note aims to consider the impact of the lockdown regulations on different groups in society from a gender perspective. Read the briefing note online: Coronavirus – The impact of Covid-19 is likely to exacerbate pre-existing inequalities.

Briefing note: Coronavirus – South Africa’s banking system response to SMMEs: With the economic impact of COVID-19 likely to be worse than the 2008 financial crisis, the risk to the economy is a significant reduction in credit and less financial liquidity. The impact would be that small businesses in particular would struggle with cash flow in addition to the myriad of other problems in the post COVID-19 economy, including a drop in consumer credit, constrained demand, and disruptions of supply chains. Have there been lessons learned from a recent financial crisis, and a resultant shift in the approach taken during this economic crisis by the South African banking system? Read the briefing note online: Coronavirus – South Africa’s banking system response to SMMEs.

Engineering News -  30 June 2020 

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