The COVID-19 Economists Group, convened by Miriam Altman, has published a paper outlining four scenarios for the South African economy amidst the COVID-19 pandemic.
The paper, titled “Top COVID-19 policy priorities for protecting employment”, said it is within South Africa’s power to limit the damage of the pandemic.
Altman, the commissioner in the National Planning Commission of the presidency, told Business Day TV the pandemic has worsened South Africa’s already struggling economic landscape.
South Africa entered the COVID-19 pandemic with 29% unemployment, over 40% living in poverty, and the highest rate of inequality in the world. This is all set to rise.
Limiting the damage caused by the COVID-19 pandemic and the lockdown will require an “enormous effort”, Altman said.
She said South Africa needs to get back to economic activity as soon as possible, adding that it has to be done responsibly.
She said a balance must be found between containing the virus and other health, social, and economic imperatives in a way that is mutually reinforcing.
The paper proposed moving from a centrally regulated approach that controls activity to enabling communities and businesses to adhere to the protocols required to contain the virus.
It said the focus should now be on three top priorities to ensure that the return to work is sustained and employment is protected:
- Craft and implement “risk-adjusted strategies” that act like dynamic early warning systems and virus containment measures.
- Engage far more deeply with communities to identify strategies that can be sustained in a variety of living conditions.
- Widespread financial support to all affected business and workers to limit the extent of permanent damage.
“Neither a lockdown nor an economic opening will be successful without the first two priorities. The third priority is essential to the success of an economic rebound,” the paper said.
The best and worst-case scenarios for South Africa
The COVID-19 Economists Group prepared four scenarios which consider the possible economic impacts of different COVID-19 policy response packages.
The scenarios revolve around various issues, including:
- The extent of reliance on lockdown versus risk-adjusted strategies.
- The efficacy of township physical distancing strategies.
- The pace and extent of business and wage support that enable activity to survive.
- The meaningful steps to address significant pre-existing policy reforms that stimulate a new wave of economic activity.
The COVID-19 Economists Group said there is only one correct choice in these four – the final scenario.
“It pulls through to structural change and some hope of achieving the spirit of the NDP’s Vision 2030 for employment and poverty reduction,” they said.
The other scenarios offer some thoughts on potential risk that are within South Africa’s power to avoid.
Altman highlighted that the worst-case scenario listed in the table below is not the worst that can happen.
“There could be domestic reverberations into the banking sector, exacerbating a banking crisis, or more dramatic shifting to reduce labour ratios or political cleavages that deepen as resources become ever more scarce,” she said.
|Four Scenarios Linked to Four Covid-19 Policy Responses|
|Measure||Scenario 1||Scenario 2||Scenario 3||Scenario 4|
|GDP change in 2020||-20%||-15%||-10%||-10%|
|Employment change in 2020||-3.2 million||-2.5 million||-1.6 million||-1.6 million|
|Unemployment rate in 2020||43%||40%||36%||36%|
|Change in real GDP in 2018/19 to 2022/23||-R341 billion||-R206 billion||-R9.8 billion||+R158 billion|
|Permanent job losses by 2023||-1.8 million||-0,9 million||-0,2 million||+0,2 million|
|Unemployment rate by 2023||37 %||33 %||30 %||28 %|
|Tax revenue shortfall in 2020||R400 billion||R350 billion||R225 billion||R225 billion|
|3-year tax revenue shortfall relative to 2020 Budget||R1,562 billion||R1,064 billion||R686 billion||R370 billion|
|% of tax revenue accruing to interest payments by 2023||29%||23%||19%||17%|
|Policy response element|
|Risk-adjusted strategy effectively implemented||Poor||Partial||Impactful||Impactful|
|Township community engagement in physical distancing||Poor||Poor||Impactful||Impactful|
|Economic interventions create a bridge for firms and employees to the other side. Enables rebound||Poor||Partial||Impactful||Impactful|
|Significant structural improvements lead to lifting potential growth rate||Poor||Poor||Poor||Impactful|