As South Africa eases into its “new normal” after being devastated by the COVID-19 pandemic, the country faces an uphill battle to rebuild a ruined economy that was in bad shape even before the country was forced into over six months of lockdowns.
On Wednesday, President Cyril Ramaphosa addressed the nation to announce the next step in a phased lockdown, dropping down to level 1, which will effectively be the status quo now that the worst appears to be over in the worst affected country on the African continent (655,572 cases and 15,772 deaths).
“Our economy and our society have suffered great devastation. We have endured a fierce and destructive storm,” Ramaphosa said in his address, noting that the number of known new infections had fallen from an average of 12,000 per day in July to fewer than 2,000. “Just as we have acted together to defeat this virus, we must roll up our sleeves and get to work rebuilding our economy. We have a mammoth task ahead of us.”
The evidence of South Africa’s devastation is clear for all to see. The second quarter of 2020 saw the economy shrink by 51% on an annualised basis – even though the country was in a massive recession, facing extraordinarily high levels of unemployment, before the lockdown. And at a quarter-on-quarter rate, GDP has contracted by 16.4%, according to Al Jazeera.
In a statement last week, Finance Minister Tito Mboweni said “the magnitude of the GDP contraction underscores the need for fiscal and economic reforms to raise confidence and boost growth”.
The hardest hit industries were construction, manufacturing and mining, shrinking by 76.6 percent, 74.9 percent and 73.1 percent, respectively. The hospitality industry has also shrunk by 32.5% in a country that relies heavily on its tourism industry.
However, economist at Pan-African Investment and Research Services, Iraj Abedian, has said now is not the time for government to talk about solutions and South Africa’s recovery will be determined by the government’s ability to take action – something for which the dominant ANC party has a poor track record.
“Even before this crisis, the economy was in a mess and with the government simply talking they are only making things worse,” he told Al Jazeera. “Over the past decade, the country’s fiscal position has been analysed to death and what we need now is action – nothing more and nothing less.”
“If we are to experience a turnaround, the private sector will need to provide massive capital investment. That is simply not going to happen with uncertainty and corruption,” Abedian added.