This TIPS tracker highlights important trends in the COVID-19 pandemic in South Africa, and how they affect the economy. It analyses publically available data, research and media reports to identify current developments and reflect on the prognosis for the contagion, the economy, and policy responses.
KEY FINDINGS FOR THE WEEK
On the pandemic
On the economy
Download the Tracker or read online
The COVID-19 pandemic has dealt a body blow to the global economy, and South Africa is no exception. Recovery will not succeed, however, unless it addresses the long-standing blockages to inclusive growth. That in turn requires both immediate efforts, to minimise the economic impacts of the pandemic even while it still rages, and longer-run strategies to diversify the economy away from mining and to ensure greater equality in education, workplaces, and access to assets. These kinds of strategies inevitably require innovation and consequently entail risks, as well as running into resistance from the beneficiaries of the status quo. But South Africa will not achieve either higher growth or social cohesion unless it does more to promote a more inclusive, diversified and equitable economy.
This policy brief reviews the short- and long-run impacts of the pandemic on the economy, followed by proposals for moderating these impacts while laying the foundations for faster, more equitable and more inclusive growth after the pandemic ends.
Download a copy or read Policy Brief online.
Business Day - 26 May 2020 by Gaylor Montmasson-Clair (TIPS Senior Economist) and Jesse Burton (Senior Associate at E3G and the University of Cape Town).
Read online at Business Day
Neva Makgetla: TIPS COVID-19 Tracker: The economy and the pandemic
Owen Willcox: The macroeconomic response to the COVID crisis
Gaylor Montmasson-Clair: A case for a green and just economic stimulus package
Why QE is the best way to fund stimulus needed to get SA throughCovid-19 crisis (LynleyDonnelly - Business Day 4 June 2020)
Placing green stimulus at heart of South Africa's postpandemic recovery would yield big co-benefits (Terence Creamer - Engineering News 4 June 2020)
The 2020 forecast for South Africa's economic growth at -7% would be the worst since democracy, and is likely to come with massive job losses and firms closing down. There are however options to mitigate the economic impact of the disease. They include a shift in the macro-economic approach as well as ramping up new industries, including renewables. This Development Dialogue will start with a review of the latest trends in the pandemic and the economy, and then consider at-scale responses to the economic downturn.
About the Speakers
Baba-Tamana Gqubule is a senior economist at TIPS and has experience as a Policy Analyst at the Economic Development Department.
Owen Willcox is a Principal Consultant at Oxford Policy Management and previously worked at National Treasury for 11 years.
Gaylor Montmasson-Clair is a senior economist at TIPS. Gaylor has written extensively on the green economy, renewables and the just transition.
Neva Makgetla is a senior economist at TIPS. Dr Makgetla has published widely on the South African economy and worked for many years in government.
As South Africa responds to COVID-19 and aims to stimulate the economy post lockdown through an infrastructure-led package, an opportunity exists to address many of the electricity-related challenges in the country by unlocking the potential of renewable energy technologies. This policy brief looks at the benefits of including renewable energy in the country’s stimulus package and considers possible avenues to do so.
Download a copy or read the policy brief online.
The R500 billion stimulus package announced by President Cyril Ramaphosa on 21 April 2020 is almost certainly cheaper than not acting. While stimulus packages are complex to manage, the complexities of managing a messy set of rolling closures as a result of a crisis like COVID-19 would be worse. Experiences from previous crises indicate that early implementation of stimulus measures that stop short-term shocks from turning into systematic crises offer the best means to reduce the economic impact of the pandemic and avoid the resulting human suffering. This policy brief aims to assess whether the current stimulus measures are adequately aligned to the expected shocks resulting from COVID-19.
South Africa has adopted a phased approach to reopening the economy. The relaxation of restrictions on economic activity will depend on the extent to which the contagion is controlled and the health sector prepared to deal with a surge. In that context, the specific regulations for the economy are still being considered. This brief seeks to assist the process by analysing the experiences of countries that succeeded in ending the threat of COVID-19.
Download copy or read policy brief online.
This brief argues that government needs a large response to the COVID-19 crisis, with a package that approaches R1 trillion. A stimulus that large cannot be financed using the conventional mechanisms. Instead, government must use quantitative easing, both to offset the collapse in demand and to finance government expenditure. Interest rate cuts will help but the response to this crisis has to be driven by fiscal policy, because only fiscal policy can replace lost wages and revenue. An inadequate stimulus risks turning a recession into a depression.
Engineering News - 24 April 2020 by Marleyn Arnoldi
Both South Africa and the world face an economic crash as a result of the COVID-19 pandemic. The downturn, which threatens to rival the Great Depression, results from the need to take extraordinary efforts to limit the contagion. Internationally, the consequence has been plummeting demand, especially in the global North, with falling export prices except for gold, as well as disrupted supply chains for most producers. In South Africa, the lockdown has brought a sharp decline in domestic production, combined with a rapid increase in joblessness, falling household and business incomes, and shrinking government revenues.
This brief looks at the impacts of the pandemic on the global economy, and especially South Africa’s main trading partners. Reopening the South African economy will take time and provide opportunities unevenly by industry and region. The regulation of economic activity will depend in part on the extent of infections, in part on the relative priority given to different value chains, and in part on the risk associated with the production of specific goods and services. But the recovery will also be affected by economic factors, in part rooted in the shutdown period and in part reflecting long-standing economic challenges nationally and internationally. The brief analyses the blockages to reopening the economy, which in turn lays the basis for more effective and strategic measures.
Download a copy or read the policy brief online.
Business Report - 19 April 2020 by Edward West
Read online at Business Report
Engineering News - 17 April 2020 by Simone Liedtke