The small and medium enterprise (SME) sector is critical for the South African economy and job creation – but it is highly vulnerable to external shocks. In responding to the COVID-19 crisis there is much to learn from the experience of the 2008 global financial crisis (GFC) and the impact that the credit contraction after the GFC had on the South African economy and the SME sector. This policy brief looks at the effect of the GFC, particularly the extent of credit contraction and its impact on small businesses and job creation; and makes some recommendations on how to avoid a repeat of the same the cycle.
Context for the conference
Economic recovery since the 2008/09 financial crisis, across countries and within economies, has been uneven. South Africa has experienced relatively stagnant GDP growth and uneven patterns of growth across and within its sectors, as well as high levels of inequality and unemployment, with the absorption rate well below that of other upper-middle-income countries. In addition, participation in the South African economy continues to be shaped by race, gender, class and geographical location. The impact of COVID-19 is likely to result in severe shifts in the global and domestic political economy and likely to deepen pre-existing structural constraints on growth in the medium to long term.
The impact of COVID-19 on South Africa’s trading partners is likely to result in long-term subdued foreign demand for South African goods and services. Traditional pathways to industrialisation, i.e. the dynamics and processes of external and domestic linkages that facilitate structural change, are being challenged. In this context, debates related to the appropriate application of specific industrial policy tools which aim to facilitate transformative structural change, have resurfaced.
Assessing and addressing the impact of the pandemic on African economies and societies is necessary to inform and tailor the appropriate responses of African governments to facilitate economic recovery, while expanding access for the most vulnerable groups in society to participate in the economy.
African governments have implemented stimulus packages, containment measures and other necessary restrictions to limit the spread of the virus and to sustain and balance the economy. The implementation of public policy measures, in response to the pandemic, has triggered questions about the systemic resilience of global and domestic value chains, as well as renewed interest in advocating for the diversification and localisation of production and shorter supply chains in certain sectors that can adapt in times of crisis.
The recovery will require mobilising efforts between public, private, national and regional leaders across a number of key areas. The 2021 Forum will explore these issues and bring together academics, policymakers and practitioners involved in the various aspects of regional industrial development. The aim is to deepen the understanding of a cross-section of issues, and the related opportunities and challenges.