South Africa’s economy like the rest of the global economy has been hit hard by the Covid-19 pandemic. Stats South Africa has released the latest economic growth data and the picture does not look good. The Gross Domestic Product (GDP) shrunk by 7%, The last time the economy shrunk by this much was in 1946. However, it fair to say that the lockdown forced upon the nation due to the pandemic and a sharp decrease in global demand has been the single largest contributor to this slump in economic growth. As a result, the more the economy opened, the more economic activity would drive quarterly economic growth in the third (13.7%) and fourth quarter (1.5%). However, this would not be enough to offset the huge contraction in the economy in the second quarter due to level 4 and 5 lockdowns. 

Now while we can look forward to a sharp economic recovery this year and in 2022 due to the return to optimal economic activity as the roll-out of vaccines gives hope to a return to some normalcy, unfortunately, this means is that South Africa will only return to a pre-Covid economy. This is an economy that still holds the same structural impediments to economic growth and development, and this is highlighted by Treasury’s economic growth projection that will remain under 2% until 2025. The implications of a low growth economy mean that much-needed job creation will remain subdued and South Africa’s sovereign debt risk outlook will remain negative in the medium term. Even though the government has committed to breaking its debt ceiling of 88% of GDP in the 2024/25 financial year, government growth projections have always over-pitched and debt to GDP has always been higher than the projections made by the government. South Africa will likely reach a debt to GDP ratio of 90% even before 2024. 

The result of this means the state will have fewer resources to spend on social needs such as education, healthcare, and social grants as debt servicing costs continue to eat into government expenditure. Moreover, infrastructure expenditure that is seen as a central tool by the state to stimulate economic growth and employment, may not see the kind of capital expenditure by the state needed to really drive growth in the economy. 

However, South Africa’s challenges are not only in the way it manages its macroeconomic environment but also in the failure to implement microeconomic reforms in the economy. For example, the state has failed to support small businesses, forgetting that these businesses are the bedrock of the economy and are the largest employers in the labour market. Moreover, the government is yet to implement legislative reforms that break-up monopolistic activities in sectors that have a huge multiplier effect. The three worst performing sectors in the economy in 2020 were construction, manufacturing, transport, and communication. However, it is these very industries that have the potential to really drive economic growth, employment and revive state tax revenues. 

President Cyril Ramaphosa and his administration despite the opportunity of the state of the nation address and the budget speech failed to present a concrete plan for microeconomic reforms and a real economic stimulus plan that supports SMEs and the informal sector. Moreover, images of #feesmustfall movement protests in Braamfontein that led to the death of a 35-year-old bystander, are a reminder of the state’s inefficiencies to meet the needs of our people. 

How can NSFAS be bankrupt even though it is central to funding higher education demand of the marginalised in our society? Unless the skill sets of South Africa’s human capital improve, we will continue to be limited in the economic complexities of the goods and services we produce. I put it to us all that the fourth industrial revolution calls on us to prepare for a global economy getting more competitive. The rise of Silicon valleys in Rwanda and Kenya means South Africa is no longer the sole “gateway to Africa.” 

It matters how we approach economic planning. It matters how we approach our commitment to sound macroeconomic foundations, but more importantly, it matters that’s in everything that we do, that the masses of our people must be at the forefront in all that we would. 

The government must show itself to truly be a government of the people and for the people. The country has long been hostage to the internal battles within the ANC! It is time for Luthuli House to get its house in order and get back to the business of governing, for I put it to us all that unless we turn the ship around, South Africa may soon become a pariah in the wave of economic interest in the Global South, especially Africa pinned to be the last frontier after the rise of the Asian tigers.