South Africa Beyond Covid-19: Trends, change and recovery

By Pieter du Toit

In the aftermath of the worldwide outbreak of Covid-19, 31 of South Africa's top analysts, economists, academics and journalists – including Adriaan Basson, Koos Bekker, Pieter du Toit, Adam Habib and Thuli Madonsela – try to chart a way forward, identify our biggest stumbling blocks, and offer solutions for when the virus subsides.
When reports emerged from China in December 2019 about a seemingly incurable virus, few South Africans took notice. But less than three months after those reports, in March 2020, South Africa went into a full lockdown. Life as we knew it ground to a halt. Schools were closed, businesses were shuttered, a curfew imposed, freedom of movement curtailed and hospitals prepared for an unprecedented health storm.
The spread of Covid-19, the disease caused by the novel coronavirus, has forced the world and South Africa to reconsider how society works. Can the economy continue to function as it has for the past century, and how can it be reconfigured to be more inclusive? In a post-state-capture country, what must citizens expect and demand from their government? And how can we bridge societal cleavages – many caused by our unjust past – so that we emerge a stronger nation beyond Covid-19?
Contributors: Pieter du Toit, Haroon Bhorat, Servaas van der Berg, Imraan Valodia, Alex van den Heever, Louis Reynolds, Kuku Voyi, James Arens, Ron Derby, Thabi Leoka, Koos Bekker, Ann Bernstein, Dawie Roodt, Norman Mbazima, Isaah Mhlanga, Qaanitah Hunter, Thuli Madonsela, Anthoni van Nieuwkerk, Mcebisi Ndletyana, Nicole Fritz, Mpumelelo Mkhabela, William Gumede, Judith February, Darias Jonker, Theo Venter, Leon Wessels, Elmien du Plessis, Ralph Mathekga, Adriaan Basson, Adam Habib, Wilmot James.

• Language: English
• Publisher: Jonathan Ball
• Release date: May 29, 2020
• ISBN: 9781776190928

Book preview

Introduction: Beyond Covid-19 lies turbulence, change and opportunity

PIETER DU TOIT

The emergence of Covid-19, caused by the coronavirus, has thrown the world into disarray, challenged the global order and upended accepted norms.

The spread of the disease, first reported in China in December last year, all but dismissed by the US a month later and now spread to every corner on Earth, has hobbled the world’s economy and led to a major medical crisis.

And South Africa – emerging from an era of state capture, economic decline and corrupted governance – has suffered great damage.

A society, where repairs to its racialised past were interrupted by weak leadership and graft, was exposed as unprepared by the impact of the virus and continues to suffer the consequences, unintended and otherwise.

Geopolitics is in flux.

The emergence of a new bipolar world order, with the US and China the protagonists, has stalled, with the former relinquishing its role as the leader of the West and the latter suffering enormous economic damage – its leader, Xi Jinping, has even faced unprecedented dissent and criticism.

American unemployment is the highest it has been for almost 90 years, while Chinese growth will be the worst in 50 years.

Covid-19 also accelerated support for closed borders in Europe, where Italy became the epicentre of the disease after China managed to subdue infection and spread. Sweden has been contrarian in its approach to the virus and Germany clinical and effective.

In Britain, the government has been severely criticised for its response, where Prime Minister Boris Johnson also contracted the virus.

Epidemiologists, virologists, scientists and historians alike have been trying to understand how the virus spreads, the most effective way to prevent infection, how to defend society and what the outcome might be.

And where consensus was reached quickly, as in South Africa, about the best course of action, cause and effect quickly helped unravel earlier agreements.

President Cyril Ramaphosa was lauded for his timeous intervention in declaring a national state of disaster – which released emergency funding – soon after the first case was reported, and the clear decision-making process before the lockdown was announced with empathy and conviction.

South Africans, for the most part, agreed a nationwide hard lockdown was necessary to prevent a major health crisis, an event which had the potential to cripple an already fragile public healthcare system.

But the warning signs of an ill-prepared government were there early on.

When the regulations, which would govern the lockdown in terms of disaster acts, were announced, we saw the first inkling of our leaders’ inability to navigate complex situations.

Where Ramaphosa was measured and considered, other leaders were boorish and blustery.

National consensus also started to fray when it became increasingly difficult to understand the rationale behind government decisions.

What was the true state of the virus’s spread and infection rate? How quickly was it reproducing? Where are the epicentres?

The subsequent extension of the lockdown, accompanied by a second wave of strict regulations and with most of them enacted without explaining what the supporting evidence and science entailed, was received with increased disillusion and disappointment.

The debate, up until then turning on medical and health considerations, shifted to the economy and the salvaging of livelihoods – with GDP growth set to decline dramatically, government revenue projected to collapse and unemployment forecasted to soar.

The country seems increasingly polarised between those who justify broad and intrusive state command and control, and those committed to a market fundamentalism with little regard for the consequences of a health crisis on society.

It is undisputed that South Africa has suffered under poor leadership and deteriorating governance for more than a decade.

Every objective marker points to a country unable to live up to its potential and political leadership, unwilling – and increasingly unable – to take evidence-based, rational and constructive decisions.

This has had a degenerative impact on society at large, with inequality rising, unemployment spiking, trust in leaders waning, participation in the political process waning and tension on the rise.

The Covid-19 crisis, however, has forced actors in society – the government, political and business leaders and the public – to reassess what needs to be done, and how urgently.

When Finance Minister Tito Mboweni delivered a dire budget speech in the National Assembly in February, observers and analysts were wagering how far Ramaphosa would allow him to embark on broad, structural economic and political changes to save the fiscus and revitalise the economy.

Now, three months later, there are no choices left anymore.

South Africans must insist on innovative solutions and new policies to ensure that when the country emerges from this governance and economic crisis, it does so not only aware of the country’s weaknesses, but also primed to effect the necessary changes.

South Africa Beyond Covid-19: Trends, change and recovery is an attempt at sourcing and distilling a range of theories and ideas to help shape the country after the virus has been defeated.

Public health must be reformed, the economy needs to be repaired, society must heal, we need honest leadership and we need a clear path to recovery.

South Africa deserves nothing less.

Pieter du Toit is News24’s Assistant Editor for in-depth news and investigations and the author of The Stellenbosch Mafia: Inside the billionaires’ club.

INEQUALITY

Economic fallout is ferocious, but health crisis must be focus

HAROON BHORAT

In the current environment, it is safe to argue that there is a surfeit of information on Covid-19.

So, in trying to battle for space in your day, an attempt will be made to distill what are currently the five key facts required for understanding the economics of Covid-19 for South Africa.

Fact 1: We are not doing badly

The Covid-19 infection data suggests that South Africa’s trends – to paraphrase the incomparable Professor Salim Abdool Karim – are unconventional relative to comparator economies.

Indeed, at the same stage of the epidemic, South Africa had the lowest number of confirmed cases relative to the UK, US, Brazil and India.

This positive pattern may be explained, in part, by both an early and strict lockdown. Yes – the intensity and timing of the lockdown also mattered!

In addition, the containment of imported cases primarily among high-income earners and tourists, served to flatten the curve.

However, we should not be lulled into a false sense of security. All the expert evidence indicates that we are on a delayed exponential infection curve.

That is just a fancy way of saying that Covid-19 infections will increase dramatically as the economy gradually opens and we shift into more widespread community transmission.

What we have done though, is hopefully to lower the absolute number of infections and deaths over time (flattened the curve) than would have occurred without the lockdown measures.

A second reason to be optimistic – again alluded to by Professor Karim – is that South Africa is in the unique situation of having a large number of community healthcare workers (CHWs).

These CHWs play a crucial role in the fight against HIV and TB through screening, prevention, treatment adherence and health promotion.

These healthcare workers are spread across South Africa and can now serve as our first line of defence – our first responders as it were – against Covid-19 in order to educate, screen, and refer for testing at the household level.

The role that CHWs play as cadres who can be redeployed in the battle against Covid-19, is a key advantage we have in fighting this pandemic.

Fact 2: Growth crash followed by recovery

Despite these two early Covid-19 advantages, the economic fallout from the lockdown has been deep and ferocious.

The prevention initially of all but essential forms of economic activity has laid bare the vulnerable forms of livelihood strategies undertaken by the majority of South Africans.

Put differently: it took all of three weeks from the first day of lockdown for widespread food insecurity to give rise to legitimate anger and protests in South Africa.

Economic growth is projected to decline by 7% for the year.

To put the scale of this economic collapse into context: this would be the biggest contraction in the South African economy since 1960 – and, in turn, is 4.5 times larger than the contraction experienced in the aftermath of the Great Recession in 2009.

In that recession we lost over a million jobs, and although we do not have firm numbers yet, it would not be a surprise if the economy shed at least the same number of jobs.

However, whilst we are looking at a massive crash in 2020, there is positive hope for 2021: these same growth models also project a strong bounce-back.

No less than the IMF has a growth recovery of 4.1% for 2021.

Fact 3: A Covid-19 support package

The state, though, in quickly recognising the scale of this socio-economic destruction, announced a massive stimulus package.

The empirics of the stimulus package again speak to a highly responsive government, at least in terms of scale and commitment. How big is it?

The package, although definition dependent, stands at about R502 billion.

When you exclude reprioritisation – another fancy word meaning ‘shifting from one budget-line item to another’ – the actual stimulus is about R328 billion.

This package includes a massive injection into social assistance as well as a national wage-subsidy programme.

Before you sniff at the value of the stimulus, note the following: this stands at about 10% of GDP, which ensures that South Africa’s Covid-19 stimulus package is higher as a share of GDP, than that spent by Canada, Brazil and South Korea.

In addition, we yield the highest relative spending on Covid-19 among other emerging markets in the world, including China and India.

Fact 4: The new Covid-19 workplace

The pressure really now is on the cluster of economic ministries to navigate a course that would simultaneously allow economic activity to be opened up, whilst also ensuring that this does not unduly fuel the rise in infections.

This is a delicate balancing act, for which there are no prior rules to guide policymakers.

There are two key elements required to thread the needle through an appropriate lockdown whilst optimally maintaining the growth of infections.

Firstly, there is a key requirement that both relevant areas of expertise within government and the private sector – namely health and economics – work intricately and directly together.

This is more than just governance-speak.

Let me explain: suppose that the new health data suggests a massive spike in a particular region or indeed sector, given the lockdown phase we are in.

This information, if instantaneously shared with the economic cluster, would allow for a quicker set of decisions around which sectors, or indeed even firms or regions, could be switched to a higher lockdown threshold.

This type of close interaction, where a health-economics cluster approach is being pursued, needs to be intensified.

Secondly, there is a strong need to adopt a framework in the lockdown phasing which is related to key factors about sectors: the ability to work from home and the amount of physical interface required whilst at or travelling to work.

Current phases in the lockdown framework are not ostensibly related to these factors.

Data allows us to code sectors in this way, and this coding of sectors could potentially guide and inform the phasing of lockdowns in concert with the evolution of infections data.

Ultimately, the use of too-stringent criteria to try and overmanage the exit from lockdown would not seem in any manner to either benefit the economy, nor serve as an appropriate Covid-19 public-health response.

Fact 5: The deficit hangover

Lest we forget that the largest stimulus package in South Africa’s history will also result in the largest deficit-to-GDP levels this country has ever seen.

Recall that not only will we be required to find funds for the stimulus package (and pay it back literally with interest), but also that tax revenue and GDP will of course decline sharply in 2020.

What are some of the projected numbers then?

If we assume no change in tax revenue, the deficit-to-GDP ratio will rise to about 13.5%.

If revenue falls by 15% – a most reasonable estimate – the deficit-GDP ratio is projected to rise to 19%. We are effectively either going to be doubling or close to tripling our deficit levels.

It is for this reason that, as the National Treasury emphasises, accessing cheap debt is a key ingredient for managing the fiscus.

Ultimately, though, there are no easy solutions