A look at the South African economic impact of Covid-19
Today as we sit and try to remember the days before our rights were infringed on by an unwanted guest better known as Covid-19, we have to ponder on what the future holds for us, our children and generations to come. In this article, I intend to unpack what happened yesterday, what is happening today and what tomorrow will bring and how our futures will be impacted by the happenings of 2019/20.
2020 I’m sure is a year that many of us in the would want to forget, and rightly so, but I tend to think that we should learn the lessons that this year has taught us.
Since the start of this global crisis more than six months ago, all our world leaders responded in different ways, with different objectives and priorities. This in many ways have exposed governments and leaders. Certainly, to be a world leader during this time, is the most difficult job of all.
So, the good, the bad and the ugly is how best I can explain our current situation. The good is that Coronavirus could have very easily claimed many more lives in the world over the past six to seven months. However due to most governments’ imposition of stringent controls, it has limited the amount of losses sustained, although the number is still staggeringly high. The downside of this action taken by governments around the world is that in many cases these conditions have infringed on our human rights like, freedom of movement, access to non-essential goods and access to work and in some cases household income. Yet I refer to this as the good, because it has limited the amounts of deaths sustained to our global community.
This however brings me to the Bad. As I said before, the most difficult job in our world today is a Head of State and world leader. I’m sure that the one dreaded question in the back of all of our leader’s minds is: Do I save the country from Economic chaos or do I blindly go out and save lives at the detriment of the economy. Unfortunately, both could never be achieved. Many of our leaders have chosen to save lives, and in doing so they have sent economies into spiralling downturns. This in turn has created huge rises in unemployment and the closure of many businesses. Though considering this, the worst part about “the bad” is that we have seen many deaths. Most of us have lost family members, friends, and colleagues. We have lost community leaders and many influential figures that will very much change our lives in the future. This Pandemic has also created fear, panic, and uncertainty.
Which brings me to the catastrophic. If we think that the events over the past six to seven months have been catastrophic then you would be highly mistaken as the real catastrophe is yet to come. Once a successful vaccine has been found and rolled out to the world and the imposed restrictions have been lifted, will we only see the carnage that has been sustained. Then and only then will we be faced with challenges that we have not seen in our lifetime.
Many facets of our lives will change, both from a personal healthcare perspective as well as from an economic perspective. If the pandemic has taught us one thing, it would be to never take anything for granted again in all aspects of our lives.
By now some of us have lost our employment and livelihood and for most of us, we are unsure whether we would be next as companies continue to cutback and shut their doors for good. Industries such as hospitality, travel and tourism, eateries, construction, real estate, non-essential retail, motor vehicle sales, recreational facilities, high end retail and many more will be hardest hit as they were prohibited from trading during the extended lockdown period. This will surely have an impact on households as many are employed in these sectors.
From a South African perspective, our country has made huge sacrifices to save lives and we will surely see what the impacts will be in the months and years to come. The Government has taken on additional debt to try to save business and to ready the Healthcare Facilities to cope with the onset of the peak of the pandemic. This additional Debt will eventually need to be repaid which means that a large percentage of the revenue received by government will have to go towards servicing the debt. Last month our Minister of Finance, Minister Tito Mbaweni delivered a bleak outlook to the nation from Parliament. It is expected that the local Economy will contract by 7,2% this year due to the onset of the pandemic crisis locally.
The finance minister indicated that projected total consolidated budget spending, including debt service costs, is set to exceed R2 trillion for the first time ever in South Africa’s history. However, part of the debt includes a R500 billion loan from the International Monetary Fund funnelled directly into fighting the pandemic and described as one of the largest economic response packages in the developing world. Debt will only stabilise at its earliest in 2023/24 as set out by the minster of finance.
In addition to this the South African Reserve Bank reduced interest rates and made it easier for banks to lend money which meant that more than 2 million South Africans received R30 billion relief from commercial banks. In the private sector, insurers and medical aid schemes provided premium holidays and landlords provided rental relief. In addition to this, more than 18 million South Africans received emergency response funding through the Social Grant structure.
Though through all these measures put in place by our government, it is expected that households will be financially affected. We have seen a rise in unemployment, and this will only get worst as businesses come to terms with the fact that they will have to cut back and even close. This will have a knock-on effect for many sectors.
Landlords will have to sell mortgaged property as tenants will no longer be able to afford to pay rent, luxury goods stores will close as many business owners will now become middle class employed and clothing retailers will cut jobs and even close down (as in the case with Edcon) as people will prioritizing spending on daily needs. In only one year, we might see property prices decline as financial institutions foreclose on bonded properties as many owners would not be able to afford to keep up bond repayments.
Its doom and gloom and all due to an invisible guest that threatened our existence. This is indeed a catastrophic juncture and we can only get through this by standing together and supporting local products.
Aluta Continua, the struggle continues, only against a different shaped enemy.
By Abdu-Raof Hanslo
Editor in Chief
08/07/2020