S Africa facing ‘mammoth task’ to rebuild coronavirus-hit economy

Johannesburg, South Africa – President Cyril Ramaphosa has urged South Africans to “roll up our sleeves” to help rebuild the country’s faltering economy as he announced the rolling back of most COVID-19 restrictions.

The easing, which will begin at midnight on Sunday, will see larger social gatherings permitted, extended hours for the sale of alcohol, a return from next month to international travel under strict conditions as well as the full reopening of key industries such as construction and manufacturing.

Government directives to wear face masks in public and observe physical distancing remain in place along with a national curfew – albeit only for four hours from midnight until 4am.

In a televised address to the nation on Wednesday evening, Ramaphosa said the first wave of the coronavirus pandemic has been defeated and it is now time to revive economic activity.

“Our economy and our society have suffered great devastation. We have endured a fierce and destructive storm,” he added, noting that the number of new infections had fallen from an average of 12,000 per day in July to fewer than 2,000.

GDP shock

The government in late March began enforcing one of the world’s strictest lockdowns aimed at stemming the spread of coronavirus. All sectors of the economy deemed inessential were shut down as part of a series of drastic measures under a five-level risk system.

Already in a recession before the pandemic struck, official statistics last week showed the economy had shrunk at an annualised rate of 51 percent during the second quarter of 2020 – the worst quarterly collapse on record. If the second-quarter results are not annualised, the country’s gross domestic product (GDP) contracted by 16.4 percent.

Among the financial sectors hit the hardest were construction, manufacturing and mining, with each shrinking by 76.6 percent, 74.9 percent and 73.1 percent, respectively. Meanwhile, personal services including hospitality dropped by 32.5 percent.

Despite attempts in recent months to gradually reopen the economy while managing COVID-19 infection rates, the sharp deterioriation in South Africa’s fiscal position has fuelled long-standing concerns over high unemployment and poverty in the world’s most unequal society.

“I have an education – a mechanics qualification. But here I am, trying to sell cigarettes illegally to survive,” Brian Mgidi told Al Jazeera from a desolate street corner in Melville, a trendy Johannesburg suburb usually bustling with restaurants and cafes.

With more than 650,000 coronavirus infections and 15,000 related deaths, South Africa is the worst-affected country on the continent.  

“Just as we have acted together to defeat this virus, we must roll up our sleeves and get to work rebuilding our economy. We have a mammoth task ahead of us,” Ramaphosa said in his speech.

The president said comprehensive details of efforts to revive the economy will be unveiled in coming weeks after negotiations between the government and South Africa’s labour and business sectors.

‘What we need is action’

In a statement last week, Finance Minister Tito Mboweni said “the magnitude of the GDP contraction underscores the need for fiscal and economic reforms to raise confidence and boost growth”. 

But critics say the promises of action come far too late and ring hollow as the government’s initial $30bn coronavirus stimulus largely fell flat after the country’s banks were hesitant to grant government-guaranteed loans to businesses on the brink of collapse as a result of the pandemic. At the same time, funds designated for fighting the virus were reportedly swindled through corruption.

“Even before this crisis, the economy was in a mess and with the government simply talking they are only making things worse,” Iraj Abedian, an economist at Pan-African Investment and Research Services, told Al Jazeera.

Analysts believe fostering competitiveness and curbing runaway public debt – expected to rise above 80 percent of GDP this year – is key to turning around South Africa’s fortunes.

“Over the past decade, the country’s fiscal position has been analysed to death and what we need now is action – nothing more and nothing less.”

Politicians and businesspeople linked to the governing African National Congress have been implicated in fraud over the supply of personal protective equipment to the government. Ramaphosa previously promised swift action against anyone accused of coronavirus-related corruption but to date, no arrests have been made.

“If we are to experience a turnaround, the private sector will need to provide massive capital investment. That is simply not going to happen with uncertainty and corruption,” Abedian added.

The results of years of government inaction have been hastened by the economic downturn brought by the coronavirus pandemic – and experts warn of a potentially bleak outlook.

“The possibility of social unrest is now a real and present danger – people are desperate,” Isaah Mhlanga, Chief Economist at Alexander Forbes told Al Jazeera.

“South Africa does not want to even contemplate the economic devastation that awaits should drastic and rapid action not be taken soon.”

Much of the touted reforms hinge on changes to the country’s moribund energy sector. In spite of muted economic activity, state power utility Eskom has been forced to implement rolling blackouts to prevent a complete collapse of an overstretched and under-maintained national electricity grid.

“Eskom desperately need revenue from sales that they simply can’t generate,” energy analyst Ted Blom told Al Jazeera.

“COVID-19 could have presented an opportunity to undertake critical repair work to Eskom’s ageing fleet. But both staff and suppliers refused to work or were forced to shut down during the lockdown.”

If this downturn persists, it will not only be catastrophic for South Africa but the entire southern African region which depends on the country for two-thirds of its GDP.

Many expatriates working in the country have fallen on hard times, losing their jobs and being unable to send remittances to starving family members or even return home due to coronavirus-related travel curbs.

“I was laid off in March as a result of the pandemic. There is no money left now for my family in Harare and we are struggling here,” Zimbabwean expat Mandipha Nleya, who lost her job as a kindergarten teacher, told Al Jazeera.

“I just had to make the most painful decision I don’t wish on any parent: To decide which one of my children would continue their schooling as I can no longer afford both.”

Construction contractor Brian Simon said the economic malaise has created deep uncertainty but the reopening of the economy was a glimmer of hope.

“You can’t give up,” said Simon, who is now scrambling to complete work he began at the start of 2020.

“South Africans never have, so there is no use in starting to now.”