EDITORIAL: That the economy could have been worse off is no consolation
The Covid-19 crisis means our leadership cannot continue with its wait-and-see approach
It says much about the situation in which the world finds itself that the reaction to confirmation that SA is in the middle of the longest recession in more than a decade was that it could have been worse. The bad news is that it will get a lot worse.
Depending on who is asked, the road to recovery is going to be a long one. Absa CEO Daniel Mminele told Business Day on Wednesday he was in the camp that’s looking at a time horizon of about three to five years. And that’s to get to where SA was before the Covid-19 outbreak, which could hardly be described as a boom.
Forecasts by Mminele’s previous employer, the SA Reserve Bank, are hardly optimistic. It expects the economy to contract 7% in 2020, followed by expansions of 3.8% and 2.9% in the two years thereafter. Risks to those forecasts are to the downside, placing the Bank in the grouping that doesn’t see the already depressed pre-Covid levels being revisited in less than three years.
As bad as the 2% contraction in the first quarter of 2020 was, it could hardly be blamed on the pandemic, which didn’t take hold in SA until late in that period. The lockdown came four days before the quarter was up and two of those were over a weekend. It’s no wonder the outlook is so bleak, with the next release to reflect the almost universal lockdown during April and only partial easing thereafter.
While there are things SA can’t control, such as the potential for new waves of infections and lockdowns in some of its key export markets, being defeatist about the future isn’t the only option. How quick the recovery is lies in the country’s hands. The question is whether its leadership will do the right things, quickly enough.
The country was already in crisis before the outbreak of Covid-19, with an economy that had failed to match population growth for most of the so-called lost decade. In his public lecture to Wits University, Bank governor Lesetja Kganyago reminded his audience that on a per capita basis “South Africans have been getting poorer since 2013”.
That meant SA started 2020 with an unemployment rate of crisis proportions — at about 29% — and it was no big surprise when data showed that this had edged up to more than 30% in the first three months of 2020. And that will surely get worse, with some economists saying job losses this time could be double the estimated 900,000 that resulted from the global financial crisis.
As we headed towards this current crisis, the reaction was remarkable for its lack of urgency. It was a time of summit after summit, advisory committees and war rooms.
The best thing that can be said about the Eskom war room that was to be headed by deputy president David Mabuza was that it at least wasn’t burdened with too much expectation. So much so, hardly anybody asked about it when President Cyril Ramaphosa announced yet another council on state-owned enterprises.
SA’s approach before the Covid outbreak, therefore, seemed a case of hobbling along and hoping for the best. Not surprisingly, it didn’t work and the country slumped into recession — defined as consecutive quarters of declining GDP — twice in Ramaphosa’s presidency, which only dates back to early 2018.
Finance minister Tito Mboweni’s growth strategy, which he sprang on the country in August 2019, is gathering dust, having been hamstrung by the predictable opposition from Cosatu and the SA Communist Party. Likewise, mooted reforms on energy have been slow getting off the ground, and the country is still debating throwing more money at SAA, despite its rather more pressing needs.
If a crisis of the magnitude that SA faces now isn’t enough to jolt its leaders to do things differently, then the sceptics have every reason to be worried about its future.
Simply put, if things go on as they did before, the first-quarter GDP numbers will really turn out to be a harbinger of something a lot worse. And not just for the economy.
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