The National Planning Commission (NPC) says South Africa would have been in a better position to deal with the health and economic devastation of the Covid-19 pandemic if there was better implementation of the National Development Plan (NDP).
The NDP, which is a policy adopted by the government in 2012, aims to eliminate poverty by 2030. However, the country’s economic position has significantly weakened over the past decade and the Covid-19 pandemic has accelerated the downward spiral.
“If the NDP’s interim targets had been achieved, each South African could, on average, have earned a cumulative R119 000 more by the end of 2019, the South African Revenue Service could have collected R1.7 trillion more in taxes … and at least three million more South Africans would have been in employment,” the NPC says.
The NDP sets a target of reducing unemployment from 25.4% in 2010 to 20% by 2015, 14% by 2020 and 6% by 2030. Instead, by the end of 2019 16.3 million or 28.7% of people in SA were unemployed.
Between 2010 and 2019, the annual growth in employment was 256 000 compared with an NDP target of over 400 000 a year. This translates into achieving only 64% of the additional employment targeted by the NDP.
The unemployment rate now stands at more than 40%, according to the expanded definition, and the NPC says in a review on the progress made in implementing the NDP that the Covid-19 pandemic could push South Africa further off course.
These job losses could be permanent and unemployment is likely to rise, especially for lower-skill workers. The NPC adds that the poor are at a greater risk of being marginalised as a result of an accelerated move to a digitised economy “as a result of their low skills and limited access to digital networks.”
De-industrialisation takes toll
The NPC cites the acceleration of de-industrialisation, the stalling of youth employment and fewer small businesses creating jobs as some of the reasons behind the increase in unemployment.
The rate of job creation was close to the NDP’s target for 2010 to 2015 where the economy generated close to 2 million jobs, at a rate of 391 000 per annum. However, the commission said considerable ground has been lost since then and there is little evidence that the NDP’s employment targets will be met.
SA recorded the most coronavirus infections in Africa in 2020, prompting the government to implement a hard lockdown in March, bringing the economy to a standstill. The economy is expected to contract 7.8% in 2020, according to Treasury. It is expected to rebound 3.3% in 2021 and to average 2.1% over the medium term. Based on this projection, the economy will only recover to 2019 levels in 2024.
The effects of the pandemic are expected to linger for an extended period of time. Tax revenue is projected by Treasury to be R8.7 billion lower than the June 2020 estimate. Gross debt is projected to reach 81.8% of GDP in 2020, up from the 65.6% projected in February 2020.
If necessary interventions are not adopted, debt is expected to continue rising and could exceed 140% by 2028/29.
The main risks to the economic outlook are weak growth, the continued deterioration of public finances and failure to implement structural reforms.
Public wages must be tackled
Other challenges cited by the commission include tackling public servants’ – salaries which have grown by an average 40% above inflation between 2002 and 2020.
“Containing public sector personnel spending is not a simple matter of slicing and dicing. A long-term strategy is needed to address remuneration, performance, capacity and structure with the aim of delivering on NDP objectives,” the NPC says.
“It is possible that business failure and contraction will continue over the course of the coming year, at least. This will dramatically reduce the potential economic rebound.”
To offset some of the permanent damage caused by the pandemic, the NPC recommends that the government provide widespread financial support to all affected businesses and workers as well as expand public employment programmes.