Displaying items by tag: Economic recovery

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

• South Africa appears to have succeeded in cutting the transmission of COVID-19 sharply over the past month, although reported new cases per 100 000 are still far higher than in early June. Known active cases declined 45% from their peak in mid-July through 9 August.
• The reasons for the decline are not obvious. The critical factor has likely been the willingness of millions to wear masks and socially distance as far as possible, reinforced by government action to discourage high-risk activities in mid-July.
• Despite the improvement, six out of nine provinces still reported more than 10 new cases per 100 000 residents as of 8 August. According to recommendations by the Harvard Global Health Institute and the Safra Centre for Ethics, that means they should maintain strict limits on social and recreational gatherings. An OECD study found that if South Africa permits another peak in infections this year, it will shave 2% off the GDP forecast for 2020 and 2021.

On the economy

• The available data suggest that economic growth is still recovering slowly.
• The pandemic has had a particularly harsh impact on women in South Africa, as internationally. They are more likely to work in jobs that directly serve the public, where the risks of both infection and job losses are highest. They are also less likely to have paid work at all, and so benefit less from relief efforts tied to employment and income. And they face increased domestic violence during the lockdown. The increase in social grants goes only a small way to offsetting these disadvantages.
• The social and political stresses resulting from the long-running pandemic have begun to emerge in rising protests as well as the corrosive discourse on corruption in procurement. Nonetheless, proposals for recovery from economists and business organisations continue to focus on long-run demands rather than ways to cushion the immediate economic impacts of the pandemic. Opportunities include setting up systems to limit workplace outbreaks; developing a just transition for industries that cannot open safely in the short run (notably entertainment venues, tourism and liquor stores) while identifying new opportunities; expanding public employment and other programmes to relieve the devastation wrought on poor communities; and finding more progressive ways to fund state programmes.

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The COVID-19 pandemic has dealt a body blow to the global economy, and South Africa is no exception. Recovery will not succeed, however, unless it addresses the long-standing blockages to inclusive growth. That in turn requires both immediate efforts, to minimise the economic impacts of the pandemic even while it still rages, and longer-run strategies to diversify the economy away from mining and to ensure greater equality in education, workplaces, and access to assets. These kinds of strategies inevitably require innovation and consequently entail risks, as well as running into resistance from the beneficiaries of the status quo. But South Africa will not achieve either higher growth or social cohesion unless it does more to promote a more inclusive, diversified and equitable economy.

This policy brief reviews the short- and long-run impacts of the pandemic on the economy, followed by proposals for moderating these impacts while laying the foundations for faster, more equitable and more inclusive growth after the pandemic ends.

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Business Day - 26 May 2020 by Gaylor Montmasson-Clair (TIPS Senior Economist) and Jesse Burton (Senior Associate at E3G and the University of Cape Town).

Read online at Business Day

Presentations

Neva Makgetla: TIPS COVID-19 Tracker: The economy and the pandemic
Owen Willcox: The macroeconomic response to the COVID crisis
Gaylor Montmasson-Clair: A case for a green and just economic stimulus package

Media

Why QE is the best way to fund stimulus needed to get SA throughCovid-19 crisis (LynleyDonnelly - Business Day 4 June 2020)
Placing green stimulus at heart of South Africa's postpandemic recovery would yield big co-benefits (Terence Creamer - Engineering News 4 June 2020)

Background

The 2020 forecast for South Africa's economic growth at -7% would be the worst since democracy, and is likely to come with massive job losses and firms closing down. There are however options to mitigate the economic impact of the disease. They include a shift in the macro-economic approach as well as ramping up new industries, including renewables. This Development Dialogue will start with a review of the latest trends in the pandemic and the economy, and then consider at-scale responses to the economic downturn.

About the Speakers

Baba-Tamana Gqubule is a senior economist at TIPS and has experience as a Policy Analyst at the Economic Development Department.
Owen Willcox is a Principal Consultant at Oxford Policy Management and previously worked at National Treasury for 11 years.
Gaylor Montmasson-Clair is a senior economist at TIPS. Gaylor has written extensively on the green economy, renewables and the just transition.
Neva Makgetla is a senior economist at TIPS. Dr Makgetla has published widely on the South African economy and worked for many years in government.

As South Africa responds to COVID-19 and aims to stimulate the economy post lockdown through an infrastructure-led package, an opportunity exists to address many of the electricity-related challenges in the country by unlocking the potential of renewable energy technologies. This policy brief looks at the benefits of including renewable energy in the country’s stimulus package and considers possible avenues to do so.

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The R500 billion stimulus package announced by President Cyril Ramaphosa on 21 April 2020 is almost certainly cheaper than not acting. While stimulus packages are complex to manage, the complexities of managing a messy set of rolling closures as a result of a crisis like COVID-19 would be worse. Experiences from previous crises indicate that early implementation of stimulus measures that stop short-term shocks from turning into systematic crises offer the best means to reduce the economic impact of the pandemic and avoid the resulting human suffering. This policy brief aims to assess whether the current stimulus measures are adequately aligned to the expected shocks resulting from COVID-19.

Business Day - 11 May 2020 by Neva Makgetla (TIPS Senior Economist)

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South Africa has adopted a phased approach to reopening the economy. The relaxation of restrictions on economic activity will depend on the extent to which the contagion is controlled and the health sector prepared to deal with a surge. In that context, the specific regulations for the economy are still being considered. This brief seeks to assist the process by analysing the experiences of countries that succeeded in ending the threat of COVID-19.

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This brief argues that government needs a large response to the COVID-19 crisis, with a package that approaches R1 trillion. A stimulus that large cannot be financed using the conventional mechanisms. Instead, government must use quantitative easing, both to offset the collapse in demand and to finance government expenditure. Interest rate cuts will help but the response to this crisis has to be driven by fiscal policy, because only fiscal policy can replace lost wages and revenue. An inadequate stimulus risks turning a recession into a depression.

Business Day - 27 April 2020 by Neva Makgetla (TIPS Senior Economist)

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Engineering News - 24 April 2020 by Marleyn Arnoldi

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Both South Africa and the world face an economic crash as a result of the COVID-19 pandemic. The downturn, which threatens to rival the Great Depression, results from the need to take extraordinary efforts to limit the contagion. Internationally, the consequence has been plummeting demand, especially in the global North, with falling export prices except for gold, as well as disrupted supply chains for most producers. In South Africa, the lockdown has brought a sharp decline in domestic production, combined with a rapid increase in joblessness, falling household and business incomes, and shrinking government revenues.

This brief looks at the impacts of the pandemic on the global economy, and especially South Africa’s main trading partners. Reopening the South African economy will take time and provide opportunities unevenly by industry and region. The regulation of economic activity will depend in part on the extent of infections, in part on the relative priority given to different value chains, and in part on the risk associated with the production of specific goods and services. But the recovery will also be affected by economic factors, in part rooted in the shutdown period and in part reflecting long-standing economic challenges nationally and internationally. The brief analyses the blockages to reopening the economy, which in turn lays the basis for more effective and strategic measures. 

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Business Report - 19 April 2020 by Edward West

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Engineering News - 17 April 2020 by Simone Liedtke

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Business Day - 13 April 2020 by Neva Makgetla (TIPS Senior Economist)

Read online at Business Day.

Or read as a PDF.