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

• The move from Level 5 to Level 4 saw a sharp increase in cases, with Gauteng, the Eastern Cape and the North West now seeing exponential growth. In contrast, after an initial spike,
  KwaZulu-Natal has brought the rate of growth down sharply, and the contagion has also slowed in the Western Cape. The question remains whether government, business and civil society interventions to promote behavioural change could still rein in the pandemic and hold down the number of cases through to the end of the year.
• In the past week, it became increasingly clear that while South Africa could increase the number of hospital beds, it would struggle to get enough health professionals to care for patients in them.
• Lobbying by industries with a high risk of transmitting infections – especially personal services and entertainment – escalated. They contended it was unfair that they could not open up with the rest of the economy in Level 3. Yet the risk-adjusted approach explicitly differentiates between high-risk activities based on their perceived social benefits. To bolster their arguments, industry advocacy groups typically overstated their sector’s contribution to the GDP. For instance, the Tourism Business Council told Parliament last week that it contributed 9% of the GDP. According to Statistics South Africa, however, in 2017 the figure was under 3%.

On the economy

• The available data show an initial rebound in the economy following the move to Level 3 flattened out last week. A survey of business by TIPS, BUSA and the Manufacturing Circle found that, when UIF funds run out next month, many companies anticipate retrenchments due to low demand.
• The government plans a R500-billion stimulus package centred on guaranteed loans for small and medium business; the UIF COVID-19 TERS fund; and investment in infrastructure. As of 6 June, however, only around R500 million had been lent under the R200-billion loan guarantee scheme, which accounts for the lion’s share of the proposed stimulus package.
• Virtually any effort to mobilise funding on the scale proposed for the stimulus package will affect the power as well as profits of different social groups, and consequently run into heated debates and intense lobbying. In the past week, debates swirled around the reprioritisation of the national budget, the use of UIF funding, the role of impact investments, and borrowing from the IMF and the World Bank. The government approached the IMF for a loan of US$4,2 billion, or R70 billion.

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Engineering News -  12 June 2020 by Simon Liedtke

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South Africa had a trade surplus of R35 billion in the first quarter of 2020, up from a trade deficit of R4 billion in the first quarter of 2019. With the exception of the first quarter of 2017, South Africa has had a trade deficit in the first quarter of each year as far back as 2010. In 2020 constant Rand terms, imports declined by 5% between the first quarter of 2019 and the first quarter of 2020, but grew by 30% from the first quarter of 2010. In contrast, exports grew by 8% in the year to the first quarter of 2020, and grew by 55% between 2010 and 2020.

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

Business Day - 8 June 2020 by Neva Makgetla (TIPS Senior Economist)

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Engineering News -  8 June 2020 

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Business Day - 28 May 2020 by Claire Bisseker

Read online at Business Day.

Or read as a PDF.

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

• The country moved into Level 3 this week, bringing a heightened risk of contagion as around five million people returned to work and church services reopened. From the past week, however, the pandemic accelerated in Gauteng and the Eastern Cape, with the growth in infections rising to almost 6% a day. At that rate, the number of cases will double every two weeks, and the move to Level 3 could aggravate the situation further.
• The Cape Town health system has begun to show signs of strain, with high levels of infection among health workers leading to shortages and efforts to recruit from other provinces. Still, the rate of infection has slowed, apparently in large part due to improved tracing. If these efforts deteriorate again, however, or Level 3 means the contagion takes off again, further lockdowns may become unavoidable.
• Despite the move to Level 3, there was still little sign of a government education campaign to empower people to manage the new risks they face at work, in public transport, in their families and in the newly reopened spaces for worship.

On the economy

• Clusters continued to emerge in mining, retail, the public services and some manufacturing establishments. Outbreaks also appeared in a few residential institutions, which in other countries have had a disproportionate effect on mortality from COVID-19. But only the mining industry provided an overview of trends, making it difficult for the public at least to identify the main areas of risk.
• The trade data show that South African exports declined by 55% in rand terms in April, although imports fell only 7%. For comparison, total US imports dropped 20% in April, while for China they fell 6%. The largest decline in South Africa’s exports emerged in the auto industry, followed by gold and base metals.
• The extent of fiscal pressure on municipalities because of the pandemic began to emerge in May. Because the metros depend primarily on their own revenue, rather than national grants, they faced the greatest difficulties, since their income plummeted while demands increased. The national government has committed R20 billion for assistance, but has not yet indicated allocations between municipalities. In any case the funds will likely only become available in early August, following the adjustment budget.

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Engineering News -  5 June 2020 by Tasneem Bulbulia

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Business Day - 4 June 2020 by Luyolo Mkwntane

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Business Day - 4 June 2020 by Lynley Donnelly

Read online at Business Day.