SA needs an implementation-led recovery which reduces policy uncertainty, promotes investment and boosts job-rich growth, North West University (NWU) Business School Prof Raymond Parsons said on Tuesday, as the institution released its Policy Uncertainty Index (PUI) for the first quarter of 2021.
The PUI declined in the first quarter to 55.2 from 56.7 in the fourth quarter of 2020. The PUI was launched in 2016 and is published in January, April, July and October of each year. An increase beyond 50 reflects heightened policy uncertainty, while a decline means reduced uncertainty.
The coronavirus pandemic has ruined the economy which contracted by an estimated 7%, resulting in the loss of 1.7-million jobs in the third quarter of 2020 as businesses struggled to stay afloat during the most stringent parts of the lockdown.
The Reserve Bank has forecast the economy to expand 3.8% in 2021, 2.4% in 2022 and 2.5% in 2023.
Parsons said on Tuesday sustained economic recovery in SA depends on “tangible implementation of the economic reconstruction and recovery plan”.
The economic reconstruction and recovery plan, devised in 2020 at the National Economic Development and Labour Council — the country’s top social dialogue structure — is anchored on a raft of structural economic reforms, including an expanded public employment programme, infrastructure investment, mostly leveraged from the private sector, a pledge to accelerate energy generation, tourism recovery, growth and gender equality and economic inclusion.
Parsons said negative factors still dominating the positive ones in the first quarter included the continued perceived implementation risks around official policy commitments and projects such as the public sector wage bill issue.
In 2020 the Treasury took steps to make deep cuts to the public sector wage bill, setting it on a collision course with unions after the state refused to pay increases to workers in the final leg of a multiyear wage agreement.
The unions have approached the Constitutional Court and the matter is set to be heard in August.
Parsons said other negative factors included the impact of a possible third Covid-19 wave on the economy; persistent uncertainties around the access and rollout of vaccines; continued Eskom load-shedding and lack of energy security; and the interplay between factionalism within the governing ANC and the pace of certain much-needed structural reforms.
“On the positive side both the state of the nation address and the budget in February sought to nudge the policy framework towards a more growth-orientated stance within the new economic reconstruction and recovery plan, as well as dealing with the ongoing pandemic,” said Parsons.
“Even with the renewed partial lockdown in early January, there was accumulating evidence recently that SA’s economic growth would firmly ‘rebound’ back into positive territory in 2021 from its devastating -7% GDP growth last year,” he said.
“Exports have also been doing well. Various authoritative analysts have begun to revise their forecasts of GDP growth for 2021 upwards, with a recent private sector one even as high as 5%. The SA Reserve Bank’s monetary policy committee at its meeting on March 25 also raised its GDP forecast for 2021 from 3.6% to 3.8%.”
Parsons said the challenge now “is to convert the anticipated short-term economic recovery in 2021 into sustained job-rich growth in the period ahead”.
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