The global shock prompted by the COVID-19 pandemic, and unprecedented restrictions designed to protect public health, have led to a sharp contraction in the domestic economy. Government interventions have cushioned the impact on workers and businesses, but have not offset the full decline. South Africa’s economic growth is forecast to fall by 7.2 per cent in 2020 as a result of the crisis, the March and April 2020 credit rating downgrades, and the compounding effects of weak investor confidence. The economic outlook is highly uncertain.
Yet this crisis also presents an opportunity to enact major reforms. To break with a pattern of weak growth and overcome structural inequality, the South African economy cannot merely return to where it was before the pandemic. Forging a new economy in a changed global reality will require a social partnership between business, labour, communities, and government.
Government envisions a package of economic reforms that will improve productivity, lower costs and reduce demands of state-owned companies on the public purse. These measures include finalising electricity determinations, unbundling Eskom and taking other steps to open up energy markets, modernising ports and rail infrastructure, and licensing spectrum. Additional reforms, in line with Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for South Africa include:
- Lowering the cost of doing business, reducing red tape and improving access to development finance for small, medium and micro enterprises.
- Support for agriculture, tourism and other sectors with high job creation potential.
- Facilitating regional trade.
- Reducing the skills deficit by attracting skilled immigrants.
- Revamping the skills framework, and undertaking a range of reforms in basic education and the post-schooling environment to improve outcomes for workers – and the firms that can employ them.
To realise the full benefits of these reforms for the economy’s growth potential over the long term, implementation should begin now.