Mr President, focus Sona on the unemployed and vulnerable

South Africa’s policy response to the uncertain economic outlook must be nimble and adaptive.
President Cyril Ramaphosa. Image: Waldo Swiegers/Bloomberg

As the Presidency prepares for the State of the Nation (Sona) address – due to be delivered on Thursday (February 10) – the president’s advisors and policymakers need to understand that many South Africans remain vulnerable to the pandemic’s adverse economic effects.

One of the critical reflections from 2021 is that the economic outlook remains uncertain, especially in the face of a virus that is evolving all the time. Although the effects of the quick rise in Covid cases related to the Omicron variant on the overall economy were muted, some sectors continued to suffer setbacks due to less consumer spending. Furthermore, since it is not known whether the following variant will be virulent and deadlier than the previous strain, the implications on the economy remain uncertain.

Thus, appropriate policies are urgently needed. It’s crucial to make correct policy decisions and ensure their implementation is swift and unobstructed. Additionally, decisions and actions on policies (be they economic, developmental or monetary) must recognise that the presence of Covid means the global economy is evolving in unexpected ways.

With this in mind, South Africa must be attentive to risks, including the risk that internal conflict within the ANC poses a threat to the country’s future.

This is specifically due to the persistency and scale as the factional fights intensify, and the implication of this on the government, state resources,  entities, and service delivery.

If the president and the government he leads are committed to rebuilding the economy during the ongoing pandemic, they cannot relax on account of the resilience displayed by the economy once restrictions were eased and vaccinations began.

Further, unlike advanced countries like China and the US, where economies withstood the early battering (in 2020) of the pandemic and respectively grew by 8.1% and 5.5% in 2021, South Africa failed to reach its projected 5.1% growth. Instead, according to the World Bank: South Africa Economic Update (July 2021), SA could only manage 4% growth in 2021.

That said, one cannot overlook that in 2020, South Africa experienced a 7% contraction and one of its worst economic [situations] since the dawn of democracy. Moreover, the prospects for medium-term growth remain elusive. The persistency of the pandemic and subsequent behavioural change in sectors, business models and markets make Covid a constrainer of an already struggling economy.

Moving forward, the government, as led by President Cyril Ramaphosa, must recognise that it can no longer oscillate between imposing rigid and strict restrictions in response to the severity of the virus.

Read: ‘South Africa is becoming an outlier in workplace regulations’

The social and economic realities are that the Covid-induced devastation has not been a matter of gradual attrition but a swift broader erosion – more so than any prior economic decline period.

First, Covid-sensitive sectors like tourism, hospitality and restaurants wiped out jobs, and some medium and small businesses saw bankruptcy and permanent closure. For those who make a living from those sectors, they could only watch as the pandemic crushed and decimated livelihoods, families and their sense of security.

Second, provinces and cities are affected differently, as are the people who work and live in them. No city or province is unscathed from the economic downturn. Overlaying the geography with the working-age population reveals a concerning impact: the unemployed, including those retrenched in Covid-sensitive sectors, are most likely to be young people.

For example, from the latest data from Statistics South Africa (Q3 2021), we know that Gauteng and KwaZulu-Natal accounted for half of the 660 000 fewer people employed compared with the second quarter of 2021.

However, expanded unemployment in Limpopo, Eastern Cape and the North West exceeded 50% and continues to rise.

If one delves deeper into the data, an underappreciated impact emerges: it is not just urban cities and provinces characterised by metropolitan areas that are struggling with unemployment.

The impact of Covid widens the fissure that was there, and you can see how that can occur. While they are not necessarily known for their tourist hotspots, Limpopo, North West, and even the Eastern Cape also have jobs in the hospitality industry (think Sun City).

Finally, these effects are considered against a country with high youth unemployment and one where African women are proportionally more affected by unemployment than others in the labour market.

Even if a portion of those who lost jobs and any other ability to generate income due to Covid were to find work and have access to unemployment benefits and relief grants, the impact on employment would still be significant.

Therefore, policymakers, advisors and Mr President, you need to pay attention to:

  • The economic impact of Covid-19 on specific industries, geography, and the workforce. For example, the association between a city, peri-urban and rural area’s core economic generation, susceptibility to the pandemic adverse effects and job losses/job retention.
  • Have a targeted stimulus package and stop the generic approach. The former can be achieved by increasing support to areas in cities, provinces, and regions dominated by industries hard-hit by Covid-19.
  • Attend to the interaction between location (geography) and the economy and labour participation. Pushing a significant portion of government aid to metros will not solve the youth unemployment crisis. In contrast, it exacerbates the problem of inter- and intra-migration to big cities for opportunities.

Of course, the economic outlook remains uncertain. However, South Africa’s policy response should not be.

Instead, it must be nimble and adaptive to a range of plausible outcomes.

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It would be a very good idea to clarify a few points in the SONA:

It is a good idea before getting involved in further “stimulus packages” to audit the last one from 2020 – R500 billion – where did it all go – this is rhetorical and we do not want Zondo 2 and 3 in the years ahead.

Who makes the “correct policy decisions” – The SIX? The CCC? – are we still under a revolving auto renewing state of disaster – when will this sword of Damocles over the SA economy be lifted?

Will government undertake to never commit to a hard lock down again – this is essential to foreign investment, current investment (Alcohol bans/ restrictions – cigarette bans) and to stem the current accelerating emigration trends of the wealthy?

https://www.moneyweb.co.za/in-depth/own-your-life/the-worst-of-the-omicron-variant-is-behind-us-who/#comment-972458

Will you commit to actually taking steps against those few identified in the Zondo commission for levels of corruption that beggar belief – this is also essential to foreign investment and confidence in any sovereign state?

Last but not least – with a population where the average age is 26 and unemployment of youth is in the stratosphere – will you follow a path that the UK government has and dismiss the potential enforcement of a vaccine mandate? The virus is largely accepted as endemic now – enforcing a mandate affects both the un/employed unvaccinated and the un/employed vaccinated – regardless of your view on vaccines, the vaccinated remain only one jab away from being deemed by the state/ your employer – as being unvaccinated? Where does this stop?

https://www.moneyweb.co.za/news/south-africa/dismissal-of-employee-who-refused-to-get-vaccinated-was-fair-rules-ccma/#comment-974661

A productive populace cannot live in a constant state of anxiety and fear.

When his policies led to hyperinflation, Mugabe legislated maximum prices for bread. Bread disappeared from the shelves and became unavailable at the mandated price. The authorities in the USSR tried to hide the intrinsic inefficiencies of Central Planning by providing cheap bread to the population. With the cost of bread below, what would have been the market price, farmers fed bread to their pigs instead of wheat because wheat was more expensive than bread. The point is- government interference in the free market leads to inefficiencies and has unintended consequences.

Let’s do a hypothetical experiment. What will happen if the government makes the current minimum wage a maximum wage instead? Unemployment will disappear, wages will replace the need for a BIG, and money will be distributed to the beneficiaries more efficiently by cutting out SARS and the pathetic government officials. All citizens will win, the state capturers and the politicians will lose.

Change labor legislation to transfer some power from union members to employers and incentives them to make a profit, create jobs, grow the economy, and pay taxes. All of a sudden people will invest, the tax base will grow, the productivity of labor will increase because of the higher capital investment in plant and equipment, and wages will rise.

All citizens will win but populist politicians will lose. That is why this Sona will just be another pathetic and boring socialist talk shop. They organize a splendiferous occasion to impress only themselves, on the backs of taxpayers, to tell themselves what they already know.

End of comments.

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