Economic Silver Lining amidst the Covid-19

When Rain Clouds Gather is the story of Makhaya Maseko, a political refugee from South Africa, who escapes to Botswana after serving a prison term for sabotage. He was taken to the village Golema Mimidi (to grow crops). A Village of Golema Mmidi is a unique refuge for Botswana and South African people who are fleeing tragedies in their lives.

The South African economy is likely to contract by 10% and over 1 million people could lose their jobs due to the impact of Covid19 this is according to the preliminary modelling findings. A number of institutions have made reasonable attempts to predict the impacts to the economy and subsequent jobs losses, the reality is that most of these predictions are grinding above surface and could be misleading.

The reality is that, we are headed for an economic depression if the lockdown continues otherwise deep economic recession is certain and we have already seen the signs of this worse economic situation, these signs include; worsening unemployment rates, GDP contracting by over2% already, Moody’s downgrades etc. attempts to prevent economic shrinkages have been made but depression is inevitable.         

Informal economy is grossly overlooked in the country yet it accounts for more than 20% of the total employment. The informal economy is estimated to be contributing 18% in GDP and the growth trends are out-pacing the formal economy growth.

Golema Mimidi is a village is known for calm and peace, people are progressive and goal driven.

Majority of the participants in the informal economy are often not considered when policies are being drafted even the current lockdown regulations knows no informal traders. Millions of productive South Africans are out there to suffer, these include 92 600 mechanics, 71 800 construction labourers, 52 100 traditional medicine practitioners, 35 700 electricians and plumbers and 26 500 tavern and shebeen operators. Spaza Shops were even an afterthought when lockdown guidelines were announced.

Informal economy employees might not be registered to pay income tax, UIF etc but they are surely paying VAT and in our kindness they have a share.

There has never been a right time to implement the much-spoken about structural reforms, (structural reform are essentially measures/policies that change the fabric of an economy, the institutional and regulatory framework in which businesses and people operate).

It is important to note that South Africa has a visible evidence of being able to implement reforms, implemented reforms includes; Public sector reforms such as Occupation Specific Dispensation (OSD) of 2007, Labour Market reforms such as the National Minimum Wage 2018, Pension and Welfare Policies Reforms, Financial Sector Accord and National Skills Accord Reforms to name but a few.

SA’s Economic Structural Reforms are ‘inadequate’ means to an end, the quicker we stop holding our breath the better. The inadequacy of our reforms both institutional and regulatory is premise on the obvious fact that our government is supporting neoliberal economic policies that are stagnating the potential economic growth. In as much as growth started to decline in mid-60s until late 80s, a lot should have been done by now.     

But a country that has not embraced long-term planning, it is still going to be difficult to craft a long-term macroeconomic plan to both take us out of fast-approaching economic depression we are confronted with and ensure the economy is fit and better able to realise its growth potential in a balanced way.

In order to chart a way-forward, we need a spirit of Golema Mimidi, SA needs to make some difficult yet necessary decision;

-               To choose a post-Covid-19 economic relief plan or a long-term Macroeconomic plan

A macroeconomic plan that has measurable short-term to long-term accumulative returns is long overdue. National Treasury’s Min Mboweni has been led the development of what they called ‘Economic transformation, inclusive growth, and competitiveness: Towards an Economic Strategy for South Africa 2019’. Minister Mboweni believes this is a hybrid economic plan that will turn around the economic fortunes of South Africa. Unfortunately this 77 pages document will NOT salvage the economic downturn because it is a neoliberal economic framework that purports the idea that political and economic realms exists virtually independent from one another.  

-         Phasing out of neoliberal subsidiary policies such as;

• Privatisation
• Free trade
• Reduction in government spending
• Austerity measures

By National Treasury recent admittance that the current conditions will lead to scarring and economic dislocation that policy measures are unable to fully offset. Structural reforms need to be implemented NOW. Historically reforms take some time before accumulative returns can be seen. And resistance should be expected from some of the political and economic stakeholders involved in the decision making. 

Step one in these reforms, would be to trust a National Treasury ministry with a female Minister that is rightly qualified and will put the people first hopefully stay longer David van Rooyen and be less sarcastic than Mr Mboweni, ‘imagine this’ your country. Even in her book Bessie Head goes on to say “The women were the traditional tillers of the earth, not the men. The women were the backbone of agriculture while the men on the whole were cattle drovers”, SBWL.

Structural reform that we need to prioritise in the short term, should encourage inter-trade and investment in order to advance social fairness and inclusion. 2020 is gone and 2021 will be present us with a fresh start, and a lot of fiscal expansion will be needed to stimulate economic activity.

The Novel signified a great human potential that can overcome rigid obstacles and gain demonstrable economic and political liberation for all South African people resulting in true empowerment of the previously and presently oppressed

Ndzwana Makaula is an independent economist and works for Eastern Cape Planning Commission (ECPC) as an Economics Researcher. He is also a Founder and CEO of N-squared Research Consultancy, he writes on his personal capacity