State credibility questioned amid increasing allegations of corruption in South Africa

Business confidence continues to gain momentum in South Africa, albeit at a slower rate in July, new data from the South African Chamber of Commerce and Industry shows.

The Sacci Business Confidence Index (BCI) slumped to 70.1 in May 2020, but recovered to 81.4 in June and to 82.8 in July 2020. Although the BCI was 12.7 index points up on the low May 2020 level, it was still 9.2 index points below the level of 92.0 of July 2019.

The turnaround of the Sacci BCI that started in June 2020 continued in July 2020 but the momentum slowed, it said.

On a month-on-month basis, Sacci said that the most negative effects on the sub-indices of the BCI were caused by lower manufacturing output, less merchandise import volumes, less new vehicles sold, decreased real retail sales, and disrupted construction activity.

Lower inflation and increased precious metal prices together with a lower US dollar crude oil price were notable although the rand continued its volatility and tend to trade lower.

“It appears that the global economy has moved beyond the economic trough that resulted from measures to curb the spread of Covid-19 and prepare countries to flatten the curve of infections,” Sacci said.

The economic lockdown processes, however, had a substantial real impact on the global economy, it said. The lockdown also highlighted the economic vulnerabilities of economies and their structural deficiencies.

South Africa retained a strict and long-running Covid-19 mitigation.

The chamber  said that some measures have had a devastating effect on business, households, and government revenue and expenditure, while the experience and success of the government’s emergency relief measures might have had mixed results.

It was essential for South Africa to manage and balance the punitive effects of the lockdown process on business and the economy, with the need to contain the public health effects of the Covid 19 pandemic.

Getting this balance right should have meant that whilst the economy was in lock-down, the intended public health benefits of containing the pandemic should have been visible. The exponential rise in Covid 19 positive cases has catapulted South Africa to be in the top 5 countries in the world and we have the highest number of positive cases of all of African countries combined.

This may well mean that whilst the imposed lock down has had a devastating effect on the economy and livelihoods, the benefit to the public health care is not as clear, given the exponential rise in positive cases, hospital admissions and mortality numbers in this period.

Corruption

Sacci said that allegations of corruption on the Covid 19 procurement and the apparent irregular awarding of contracts to “sudden” businesses owned by friends and relatives of influential, ruling party and top government officials is serious cause for concern.

“This is damaging SA’s recovery effort and brings into question the new administration’s intent to stamp out corruption. In announcing the Covid-19 relief measures, the president had stated that measures would be put in place to ensure that public finances would not be irregularly spent.

“This promise has not been fulfilled and raises the issue of credibility.”

Questions must be asked on whether the state has both the will and capability to root out and stop corruption, the business body said.

“We are not sure whether another cabinet committee is a solution. We have had other cabinet committees on a number of hard issues including Eskom, infrastructure, and other matters.

“Perhaps the time has come for government to pause, reassess and re-evaluate its own cabinet resource capabilities, by enquiring whether some of its cabinet committees have the required level of competence, grit and experience to handle the big tasks.

“Otherwise, the government could end up contracting a bad condition of ‘not knowing what they don’t know’, and this generally leads to delusion and self-deception,” Sacci said.


Read: Officials push for lockdown level 2 this week: report

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State credibility questioned amid increasing allegations of corruption in South Africa