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.