Editor’s Note: Earlier today, the UN Security Council discussed the impact of COVID-19 on security and development options in the Great Lakes Region. Here, Sanet Madonsela assesses her country’s current economic-health tradeoffs that, if not properly handled, will merely exacerbate misery in a country already experiencing deep economic uncertainties, instances of institutional corruption, and uneven access to health and other services.
On the 21st of April 2020, South Africa’s President, Cyril Ramaphosa announced the country’s plan to inject a staggering R500 billion into the country’s social and economic support package amidst the global Corona-pandemic. This support package makes up 10% of the country’s gross domestic product (GDP). It is said to be the country’s biggest one-time fiscal outlay. While some economists believe the stimulus package to be well targeted, questions have arisen regarding how it will be funded. Of the amount announced by the President, only a mere R130 billion will be reprioritized from the country’s existing budget. Ramaphosa stated that the rest would be sourced internally as well as from international finance institutions like the World Bank, the International Monetary Fund, BRICS New Development Bank, and the African Development Bank. Financial support from the IMF and the World Bank for Covid-19 is said to not come with the usual calls for structural adjustment. However, the political left, in South Africa remains skeptical of receiving funds from these institutions.
It is important to note that South Africa’s economy was bleak before the outbreak of the global pandemic. The country was experiencing a technical recession, credit rating downgrades, rotational power outages, and high unemployment levels. This has resulted in business groups and economists requesting the reopening of the economy. The President has experienced increased pressure due to the economic impact of the current national lockdown. He has responded stating that the country would take a risk-adjusted approach to dealing with this challenge. While opening the economy could ease the economic burden on the country, it could result in a massive outbreak of the virus. Instead, the country has implemented measures to cushion the blow of the pandemic. Amongst these are: subsidies for businesses and wages, social grants catering to the poor and vulnerable and the prioritization of the health sector’s budget. While the health budget will be boosted, details regarding how the health system will be capacitated have not been provided. While these measures could assist in closing the inequality gap in the country, they can create further opportunities for looting given the endemic corruption existing in the country.
The global Corona-virus pandemic has managed to expose the many internal challenges the country is faced with. It has highlighted the shocking levels of poverty, unemployment and inequality in the country. While some citizens have eased into the nationwide lockdown, others are unable to do so as they are confronted with overcrowding, poor sanitation and food insecurity. They face greater nutritional and hunger challenges. Some even fear dying of hunger more than they fear dying from the virus.
It is worth noting that that the lockdown of schools means that the 9-million children who normally benefit from school nutritional programmes will not have access to food. While government has implemented the provision of food parcels to impoverished communities, its’ efforts have been countered by officials allegedly hoarding and selling food parcels. This means that resources allocated to assist the most vulnerable, including vulnerable children, are now being redirected to opportunistic government officials and their supporters. They do this through exploiting the government’s now-relaxed procurements system in the midst of this global crisis.
While the government’s immediate social grant increase is welcome, it should be noted that it would be insufficient as social grants tend to be redirected towards household expenses of adults who are usually employed. The Minister of Labour and Employment, Thulas Nxesi, confirmed that the country’s 3-million informal sector workers would not be covered by the department’s measures to lessen the impact of the national lockdown, as they are not registered for the Unemployment Insurance Fund (UIF). Government however, has now introduced a temporary distress unemployment grant to assist those who are not currently receiving any other grants or UIF. It is estimated that over a million people will lose their jobs as a result of the pandemic. The question now is “Where to from here?”
Like most countries, South Africa is faced with a catch 22 situation. Should they open up the economy to reduce the economic impact? Alternatively, should they extend the lockdown to ease the burden on a health system seeking to flatten the curve? Any viable solution would have to take into consideration the vulnerable health system, the high levels of unemployment, low economic growth, and the reduced income per capita. While some trade-off may seem sensible, it should be noted that an extended lockdown could undermine health services such as the immunization of children; while the blow to the economy could be fatal. Instead, a good mitigation strategy should be put in place to deal with the virus until a vaccine is available. It should be stressed that the immediate removal of the lockdown without a clear health and economic plan could result in both high levels of mortality and economic downfall.
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