South Africa’s economic recovery: the blows just keep on coming
While the government’s decision to halt the rollout of the Oxford/AstraZeneca vaccines has dominated headlines this weekend, Eskom’s decision to implement stage 2 load shedding has largely flown under the radar.
The electricity cuts were ultimately suspended on Sunday – however, the adverse power situation is another downside risk to South Africa’s GDP recovery prospects, warn economists from the Bureau for Economic Research (BER).
“The return of power cuts again emphasised that, while the current government focus is (correctly) on dealing with the Covid situation and rolling out a vaccination strategy, we cannot afford to dither on addressing South Africa’s pre-Covid growth constraints,” said the BER.
The economists said that several factors are at play that risk keeping the South African economy stagnant even after an initial vaccine-induced boost in economic activity.
These include:
- Continued uncertainty around electricity supply (ie, load shedding);
- A failure to timeously conclude the radio spectrum auction;
- A failure to embark on bid window five of the renewable energy programme;
- Failure to provide room for greater private sector participation in many other sectors of the economy.
“It is worth remembering that South Africa’s real GDP growth averaged a paltry 0.9% between 2010 and 2019. In per capita terms, we were already going backwards before Covid struck, i.e. GDP growth was below population growth.”
The group said that South Africa cannot afford to go back to that economy.
“To prevent this, a concurrent process needs to be pursued where reforms are implemented and a vaccination programme rolled out.”
“Against this backdrop, President Ramaphosa’s State of the Nation address (Sona) on Thursday will be watched for any updates on timelines for the execution of reforms, as well as possible further details on the revised vaccination strategy.”
Company closures
Company news last week also emphasised the detrimental impact of the protracted return to normality amid the second Covid-19 wave, and by extension the need for reforms and vaccines, the BER said.
Movie operator Ster Kinekor announced that it was going into business rescue, while well-known bus operators Greyhound and Citiliner said that they are closing down in the next two weeks. Greyhound first started operating in South Africa as far back as 1984.
Another bus company, Putco, has also fallen on hard times and announced that it would be laying off more than 200 workers.
“These unfortunate developments speak to a narrative that we are yet to see the full extent of the economic damage inflicted by the pandemic and the associated containment measures,” the BER said.
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