Almost six months after President Cyril Ramaphosa implemented a lockdown which triggered the country’s deepest economic contraction yet, the government still does not have a recovery plan. According to Stats SA GDP plunged by a seasonally adjusted but not annualised rate of 16.4% during the second quarter of 2020. The annualised figure was a shocking 51%.
Nedbank is now forecasting a higher GDP contraction of 9%-9.5%, compared with a previous estimate of 8.1%. “Covid-19 lockdown had a devastating impact on consumer income, confidence and the ability to spend,” the bank said. According to the UN Development Programme. “It may take at least five years for the economy to return to pre-2019 levels unless innovative actions are implemented.”
Stats SA has delayed the release of its labour force survey for the second quarter until October. But Business for SA (B4SA) modelling shows a percentage point decrease in GDP growth results in a 0.91% fall in employment. Applying this ratio to a 9.5% GDP decline, employment at the end of 2019 and adding an estimate for the growth of the labour force show that the number of unemployed South Africans, using the expanded definition, could increase by 2-million people to 12.4-million by the end of 2020.
SA political and business elites seem oblivious to the growing humanitarian crisis of rising unemployment, poverty, hunger and destitution.
The expanded unemployment rate will increase to about 45%. The unemployment rate for black African females will increase to more than 50% by the time Stats SA releases its next labour force survey. Add to these figures the economic dislocation and continued decline in GDP that will take place during the following two years due to the Treasury’s planned unprecedented austerity measures, the expanded unemployment rate could increase to more than 50%. At this point the whole of society will become unviable.
SA political and business elites seem oblivious to the growing humanitarian crisis of rising unemployment, poverty, hunger and destitution. During a session with editors last week Ramaphosa said government would soon release an economic recovery plan after discussions with constituencies at the National Economic Development & Labour Council (Nedlac).
Over the past two months numerous economic recovery plans have been released by the ANC, B4SA, government and Nedlac’s labour and community constituencies. The ANC plan does not have a single new idea except a proposal to make changes to regulation 28 of the Pension Funds Act to encourage retirement funds to invest in infrastructure, an issue the party has been debating for 26 years.
In August Ramaphosa chaired a special session at Nedlac, where constituencies presented their plans. But Nedlac has never produced any plan for the economy since it was established in 1995. The unanimous view of all constituencies was that the government plan was the weakest. Little thought had gone into it. Ramaphosa’s R500bn stimulus package has been reduced to a fraction of the headline number. The R200bn loan guarantee scheme, now worth R67bn, is a monumental failure. I have stopped counting it as part of the stimulus package. The new money from the budget is about R13.4bn, according to a recent Treasury presentation.
Operation Vulindlela
Ramaphosa will soon launch a R19.6bn job creation plan. But at 0.4% of GDP it will not make any difference. Finance minister Tito Mboweni will announce Operation Vulindlela, which will repackage structural reforms the government has failed to implement for a decade. Trade & Industrial Policy Strategies, an economic policy think-tank, says of the ANC and B4SA plans: “Neither paper appears to have any ideas to cushion the effects of the anticipated depression-level economic decline over the coming year. Income losses are likely to be severe for low-income households, small businesses and local governments.”
None of the plans deals with the short-term humanitarian crisis. SA now needs a plan that will provide a basic income to millions of South Africans.
• Gqubule is founding director at the Centre for Economic Development and Transformation.
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