You are currently viewing our desktop site, do you want to download our app instead?
Moneyweb Android App Moneyweb iOS App Moneyweb Mobile Web App

2020: An economy hit by speeding truck

Its condition? Critical, with catastrophic damage. Recovery will take an agonisingly long time.
There’s little to cheer this holiday season, says the author. But if you can, be the reason someone less fortunate than you smiles or sheds tears of joy. Image: Getty Images

Imagine a pedestrian with a broken leg using crutches, waiting for the traffic light to turn green in order to cross the road safely. Out of nowhere comes a speeding truck that hits the person with such force it sends them flying up in the air to crash down 200 feet away. They suffer multiple fractures and catastrophic injuries, but they are alive.

The road to recovery is going to be a long, slow and painful one, and even then there is no guarantee of being fully recovered. The possibilities of lifelong chronic pain and disability are high.

The South African economy, like the rest of the world, was hit by such a truck (Covid-19) at full speed, resulting in catastrophic damage and with no recovery in sight.

While the bruising on other economies might be subsiding, the effects of the pandemic in South Africa are undoubtedly going to be long-lasting. This is mostly because of the self-inflicted political harm, the leadership void and the inability to tackle structural challenges.

In time, we might progress – but it will take time because there is no shortcut or quick fix to this.

To understand this scenario and what it is telling us about the state of the country’s economy, consider the following:

First, the latest numbers from Statistics SA show that business liquidations have increased by 20.8% compared with the same period last year.

Second, Statistics SA also shows us that the unemployment rate increased by 7.5% in Q3 when compared with Q2 to reach 30.8%with unemployment among the youth and black people higher than the national rate.

Third, small businesses have all but been wiped out and they are the creators of jobs. Take restaurants for example: many will not be reopening.

I am an enthusiastic supporter of small cafés and bistros, and some of my favourite Joburg eateries have closed for good.

They could not ride out the pandemic, leaving chefs, cooks, owners, staff and even suppliers without an income.

Fourth, the Covid-19 Temporary Employee-Employer Relief Scheme is coming to an end. One can anticipate that business relief support initiatives will follow. However, the lost ground for businesses in sectors such tourism and hospitality will not be turned around, simply because international travel and economic activity has resumed (for now). People will not be quick to travel, go on holidays or even spend money, since many are uncertain about their job security or future income.

Fifth – and this is where it hurts the most because people tend to look to those in leadership for hope and a sense of security – thus far, those leading the country have shown they are incapable of managing the economy.

The fact, as outlined here in the ‘Santander: South Africa Economic Outline’ (November 20, 2020), is that government debt is at 59.9% and is expected to rise to 67.9% in 2021, while debt servicing is at 14% of revenues.

Part of this can be attributed to the continued financing of inefficient state-owned enterprises (SOEs), because to maintain the solvency of South African Airways, Eskom and other entities the government has increased its financial support to them. While servicing debt.

In turn this adds to the government debt burden, meaning that SOEs pose a serious risk to maintaining public finance.

To top it all economic growth, that was barely there before, is expected to plummet due to the pandemic.

Sixth, it is hard for me to share the optimism of 4% growth in 2021, as shown by the International Monetary Fund (IMF) in its April 2020 forecast. The year has been characterised by a weak economy that is continuing to weaken.

The IMF and our showboating minister

If there is a lesson I have learnt from fellow Moneyweb columnist Barbara Curson’s writings, it’s that underperforming and weak economies tend to have revenue shortfalls.

This saw the government turning to the IMF for a rapid financing instrument in July, a deal (though it is called assistance) that to me has consequences that are as significant as the dreaded loans.

I found Finance Minister Tito Mboweni to be showboating a few weeks ago, when he suggested the World Bank keep its money if it wants to dictate policy direction for South Africa.

While this stance may be lauded, in reality South Africa’s economic woes may see him swallowing his words.

Moreover, the Economic Reconstruction and Recovery Plan launched in October will require financing and some sound policy improvements. However, as my columns about the clash of politics with economic logic show, this programme has little chance of success.

All these points taken together sum up 2020 as a year in which there has been very little good news, both where the economy is concerned and in society at large.

The pandemic has incapacitated an already-limping economy. This has been a year that has laid bare the gap between those who can afford to eat and those who cannot.

It has highlighted the social ills, the disparities in access to services and education, all the inequalities, the dependency on alcohol and its abuse, our violent nature, and our intolerance.

We have also seen compassion and responsiveness and innovation – but it is worrying that the South African economy and society as a whole may not recover until the pandemic is controlled. How long that will take, nobody knows.

There is little to cheer about this holiday season.

However, if you can, be the reason someone less fortunate than you smiles or sheds tears of joy.

Please consider contributing as little as R20 in appreciation of our quality independent financial journalism.



Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.


Covid did not cause economic destruction. The economy has been coping quite well with diseases that are much more dangerous than covid. Diseases like metabolic syndrome, diabetes, TB and drug-resistant TB, Aids and malaria kill large parts of the population annually. Most covid fatalities are due to comorbidities like metabolic syndrome. Lockdown does not solve the comorbidities, therefore lockdown only address the symptom, and does not cure the underlying disease.

The economic destruction was caused by human action, not viral action. The decision to implement lockdown measures was a very costly human error. The economic cost of this failure of the decisionmaking process is similar to a devastating war. At least in a war situation, some industries benefit from war spending. These industries can employ people and support some economic activity. The lockdown measures are a declaration of war on economic activity. Economic activity is the basis of the purchasing power of any national currency. A strong economy supports government projects and government employees by funding the Treasury. Treasury is forced to borrow when the economy is under pressure. Lenders become apprehensive when the economy is struggling. This forces the Reserve Bank to become the lender of last resort to Treasury through the banking system.

Lockdown measures blew a serious hole in the reliability and trustworthiness of the national currency. It is through the purchasing power of the currency that every citizen will be paying for the shortsighted and ignorant policies of the Coronavirus Central Comand Council. The future will teach us that this institution was the most destructive and devastating force that has ever hit the nation.

Your commentary is always a good read

I think a vlog on youtube would be an avenue you should open up

Thank you

True, Sensei does display a certain sexiness that would make him a YouTube sensation!

Leah and mountainboy, thank you for your kind comments. I want to contribute something meaningful and you guys afford me the opportunity. Maybe I should consider your suggestions.

I agree with the comment about your insights and something I keep asking is for someone to outline SA’s practical future and vague timelines.

Are we heading for Zim and Venezuela via Argentina of just Argentina? What do you see as the end game moves from the ANC? Wealth tax, rampant EWC Zim style but all with massive inflation? Will SA see a coup, support for the EFF who will become a major player? Or maybe SA already has an informal, African style coup where departments like SAPS, SARS, NPA, provinces and municipalities just do their own thing, largely ignoring central (or any) “government” and the rules and regulations. Think Gordhan with SAA.

Except for RW Johnson, maybe Dawie Roodt / Chris Hart, most “journalists” and “commentators” seem too scared (of the ANC) to tackle these issues.

You give it a shot; you can do it!

sadly these commentators/journalists will be labeled as racists…just because they acknowledge the elephant in the room.

The best I can do is to answer your earnest question in the following way:

Imagine you are part of a group of happy travellers waiting for the bus to pick them up on their way to destiny. A fairly well-maintained bus, painted in the colours of the rainbow and branded as Rainbow Nation Transport, pulls up to take your baggage and your group on board. The bus is full of excited travellers and the only remaining seats are right at the back. After settling into your seat, you ask the driver’s assistant what the destination and timelines are. His answer is that the people on this bus reflect the demographics of the nation and that the passengers elect the bus driver on a realtime basis. The destination is determined in a democratic fashion, by the passengers.

It slowly dawns on you that it is useless to ask any specific individual where the bus is heading because opinions and expectations differ wildly. There are many factions on the bus. They fight each other for control over the driver. The passengers even form a type of parliament in an attempt to map out a direction, timeframe and destination. The parliament is simply an extension of the shouting match. You realise that if you want to determine the destination and the timeframe, you have to study the large group that has the power to elect the bus driver who determines the destination.

You talk to passengers, ask where they come from, study their habits, their level of education, the topics of their discussions, what they spend money on, what they want for themselves in the future, and to what extent they respect the property of other passengers.

Then, after a while, you begin to form an opinion. You realize that these are good people, with hopes and dreams, who want a better future for themselves.

You also realise that, because you are from a minority group, without much power to appoint bus drivers, that they will sell your luggage when they need fuel for the bus. This bus will stop at KFC and not at a Sushi restaurant. This bus might be heading for a funeral, church gathering or soccer match, but it is definitely not going to the Opera House, the University, The Department of Economics, or the Kruger National Park. This bus may end up in Umtata or the Alfred Duma Local Municipality, but it is definitely not going to New York, Beijing, Perth or Bern. It is not even going to Sea Point or Bellville. If you want to go to any of those places you have to find another bus.

This is a democracy. The people appoint the bus driver, and they decide where they want to go. They always select the bus driver that takes them on a free ride with enough sponsored beer and KFC and inevitably delivers them to a destination somewhere between Sutherland and Ceres, without food and shelter. This is what happened in Zimbabwe and Venezuela.

Timeframe? This bus still has a lot of fuel in the form of pension savings, a strong chassis in the form of the banking system and infrastructure. The pension money will last about 5 years. After that, the chassis will buckle due to the potholes.

You can isolate yourself from the bus by living in an enclave like a security complex and earning income in hard currency. Many individuals, who are able to isolate themselves from the actions of the majority, enjoy their lives, and even thrive, in Venezuela and Zimbabwe.

what does a “economy” mean with infrastructure FUBAR!

Those who truly believe that Covid is the cause for the incoming collapse is at this point absolutely crazy. Those who could have made provisions and who still to this day refuse to accept the reality that they need to emigrate financially deserve what is coming to them. My sympathies lies with those who realize that the collapse is coming but who do not have the means to adequately prepare for it.

The math is quite simple. If the government continues its current spending patterns and do not implement the much needed structural reforms they will LITERALLY run out of spending power in 3-5 years from now. The proverbial pawpaw will hit the fan once they can no longer pay state salaries, grants & debt servicing cost. Many economists still believe that at or before this point the government will be forced to do the right thing. Spoiler but they will not, they will do what most other failed states had done and will simply start printing currency to continue as usual. I am at this stage mostly prepared for high inflation / currency devaluation, everyone should ask themselves how prepared they are for a collapse.

The presses have just started up, as usual they are caving on the ” agreed salary increases.”

The big joke was when the Minister of Finance said that if the IMF dictates policy to South Africa in return for a loan, he will just issue bonds in the local market. If it was that easy, why doesn’t Zimbabwe just issue bonds in their local market to get it out of their financial problems? (Because nobody wants to buy them.)

When the developing nations stop paying their debt its going to make 2008 financial crisis look christmas during the Stalingrad Offensive of 1942.

I guess its buy on the bond market whilst they are still paying the interest on their loans.

The frogboiler and his ” honorable” gang did just follow the orders of the one world brigade on Covid. South Africa was damaged goods before March 20 already. The “gubaments” reaction to Covid just supplied a further nudge down the drain and a wonderful excuse for the economic disaster – believed only by the inhalers of ANC / Commie BS. Its beyond the point of repair, certainly with this hopeless government.

The “frog boiler” is intrinsically weak in every way, except mainly thuggish behaviour. “Government” is just running on momentum with more and more “civil servants” just doing their own thing. Many, particularly in the middle and lower ranks, are decent people led astray by incompetent and corrupt bosses above them and trade union leaders. These “leaders” all have their own interests at heart, mainly monetary, but some ideological (Gordhan, Patel etc). None of them have SA and its people at heart.

As you say, “beyond repair” but, like a Congolese truck, will stumble along, held together with wire and chewing gum until collapses.

The very worst thing covid has done is hobble immigration plans.

As long as BEE exists on all levels South Africa will not be competitive or recover. This is the elephant in the room that no one wants to discuss. Its BEE that ensures that SOE’s will continue to fail. In Eskom, other SOE’s and in government there are too many people doing too little to earn ever increasing salaries regardless of output or adding any value for their salaries. Productivity is poor and in several cases, consulting companies do the work that employees should be doing. Public service delivery is collapsing but the public servants want to be paid more? Its a recipe for #Zimbabwe-here-we-come

The solution is simple. Cancel BEE. Cancel expropriation without compensation rhetoric. Who wants to give away 25% of your profit on day one to someone whose only contribution is their skin color. Its less risky and better to invest elsewhere.

And the levels of crime are not going to encourage investment either.

Well articulated! The last paragraph in particular.

LET’S ALL THANK NKOSASANA DLAMINI ZUMA FOR RUINING THE ECONOMY. She will go off and retire soon with her PHAT pension and all the gubment perks whilst the poor (the ones they claim to help) get poorer !! Great Job !!!
Nkosasana Dlamini Zuma Joematt Petersen

lets not forget who voted her into power…..let them eat cake!

We know what ails….What can one do(even at this late stage)! What others did: wealth went offshore, Magnus bought Mauritius ( and pushes it down our throats every day), some bought gold, some bought defensive stocks( tenuous…eg sasol and oil folded) . Gold and plat miners will do well if ZAR implode. Gold/plat ratio….will it go back to 1 again. See implats up nicely. Lots of people buying “tech stocks” . Had a look at Sygnias 4IR fund ….very vague as to how shares are selected…looks like you buy into a basket of a basket of shares. Old Mr M bought into it, promotes it and , I think bought 5 Maseratis out of it, A lot of these current tech stocks a bit like the year 2000 and google….no 18 kid on the block and took the prize , left others standing. Buy USD or pounds? Nobody knows how forex will play out. So all in all, buy little tranches of whoever has the baton in a particular field. What….and here I include mostly overseas stocks: gold shares(drd still nice), Plat shares(watching the ratio), Tesla( did really I say that?), amazon , alibaba/tencents,some USD, some oil( you never know, even Sasol) a bit of tech( again Tesla, Xvidia) and ……(bitoin —just stack a bit monthly in case) How The Economic Machine Works by Ray Dalio. He is a Good mind to follow. The Black listing and Liquidation and debt restructuring that’s Coming to Main Street will be a long and painful period it will take years before a significant amount of the public has a Decent income statement and Cash flow Statement and after this lots off People will never have the Balance sheet they had before Lockdown ever again.

Yet: the US stock market marches on to the cliff like a lemming. I have been investing that side for a long time and really do not get these levels. The S&P should be a third lower and even then the key ratios are wacked:
Market cap : GDP is bonkers
Market cap : operating cashflows insane

Investors seem to extrapolate the virtually zero free risk free rate on US Treasuries to meaning that equity multiples can sit at 35 and more

Ray Dalio adds a lot of valuable information to the debate. He is the Master of macroeconomics and monetary theory. Valuations do not make sense because the actions of the Fed does not make sense. The Fed is devaluing the unit of account. If we price the S&P 500 Index in terms of ounces of gold, rather than in dollars, the picture becomes clear. Although the Index is making new highs in terms of dollars daily, in terms of gold it is 66% below the high of the year 2000.

The Fed is the smoke and mirrors factory.

Or is the Fed merely suppling a product ( Dollars) to keep supply and demand in balance ( theoretically just a little inflation rather than deflation)? Is fiat currency merely a measure of exchange and no longer a store of value? My answer would be yes it is.

I drove past our local post office yesterday, and there was a queue of people waiting to enter the building. Some wore masks, others didn’t. Just about everybody was standing or sitting shoulder to shoulder with no social distancing.

Where does one start when one cannot even get the basics right?

The future for SA?

Watch the voting patterns across Southern Africa.

Forty years later the people are still voting for Zanu-PF in Zimbabwe, Frelimo in Mozambique and the MPLA in Angola, with disastrous results.

The liberation parties have denied voter education to the voters.

Let’s give the devil what it deserves. The first three weeks of lock down was perhaps necessary. Maybe the following three weeks too, but only due to the the unknown nature of the virus.

Once it has shown similar patterns of a normal flu virus in season, apart from being more severe to those vulnerable with comorbidities and other compromised immune systems, no further lock downs were necessary. In fact the economy should have been thrown open already then, with proper care for those vulnerables.

The problem is that the virus will resurface again in the next winter season – as the Europeans and others in the Northern hemisphere is experiencing right now – hence the “second wave”. This year’s vaccine will be ineffective next season and others to follow, with new vaccines needed every time.

The bottom line is, is that the SA Economy was in dire straights already, pre Covid with quarter on quarter of negative growth, together with systemic structural problems enhancing the former. The arrival of the virus only exploited the shortcomings in our economy. Covid was perhaps also only the last straw that broke the Camel’s back.

End of comments.



Follow us:

Search Articles:Advanced Search
Click a Company: