Guest Post

Influence of Covid-19 on the Economy of South Africa

After 2020, the world may never be the same. The accelerating pandemic is shattering economic systems around the globe, exacerbating inequality and spreading fear.

South Africa and Nigeria are severely affected by the crisis. COVID-19 has disrupted the usual order of things for years to come. Here are the effects so far. 

As of this writing, South Africa has almost 288,000 reported cases. Roughly 145,000 of them are active. The country is now third on the continent by a number of cases per million residents.

There are no signs of slowing down, let alone a reversal. Both social and economic systems have suffered a blow. Here are the key developments so far.

Insufficiency of Relief Packages

The government could be praised for taking quick action. After the pandemic hit, lockdown followed without delay. However, the adequacy of the measures is questionable. 

The authorities enacted a set of regulations that constituted the first stage of their response. These included changes to the Disaster Management Act of 2002, a COVID-19 Block Exemption for the Retail sector, a COVID-19 Temporary Employee/ Employer Relief Scheme and a Draft Disaster Management Tax Relief Bill. 

The first support package amounted to $26 billion, or a tenth of the country’s GDP. The size of the support is projected to reach $46 billion by mid-2021. What remains to be seen is whether this funding can cover the dramatic humanitarian costs. 

Lockdown measures have had a serious effect on consumers, and they are being extended. In mid-July, President Ramaphosa announced that lockdown level 3 would be maintained, and curfew imposed.

Due to a new surge in cases, citizens are still confined to their homes and the future is uncertain. Restriction of movement has already caused a rise in malnutrition rates. Short-term prospects look bleak.  

Loss of Jobs

So far, unemployment forecasts have been alarming. Before the crisis, almost a third of the population was jobless. With the shutdown of businesses, we are unlikely to witness positive developments soon. Like elsewhere in the world, the gig sector has been hit the most severely. 

Now, it is estimated that roughly 6 million citizens are eligible for the special unemployment benefit. Sadly, the emergency support brings just $19 per month. This prompts more and more residents to search for alternative ways of making a living. 

One of such avenues is online trading. It started gaining momentum before the pandemic, and the appeal has now grown. Local traders access the global foreign exchange through brokers like FXTM. Through dedicated software, clients trade diverse finance instruments.

Currencies are a popular option. Virtual derivatives like CFDs are also gaining traction. Brokers educate clients on what is contracts for difference, allowing them to develop diversified investment portfolios with low risk. As offers are tailored to the region, entry to the market is affordable.  

Problems with Water Supply

The South African water system is notorious for its inadequacy. The crisis is expected to stimulate renovation. Stats SA estimates that 13% of residents have no safe access to potable water.

The reality, however, seems to differ from the official figures. Many settlements and communities have neither drinking water nor sanitation facilities. 

This is an important reason accounting for the spread of infection. If South Africa wants to curb the pandemic, it has to provide conditions for hygiene. The government is predicted to introduce new regulations concerning water supply and quality management. 

Public Health Issues

It is obvious that the existing system needs an overhaul. Before the outbreak, the National Health Insurance Bill was harshly criticized. Today, there are ground to expect its enactment. This way, universal health coverage will be financed by single-payer contributions.

Economic Changes

The outbreak has been a watershed event for the nation. According to the President, this “post-war situation” will spur development of a better economic model, disconnected from the shameful apartheid legacy. The entire system needs to be reformed. Today, the most vulnerable categories of consumers are employees of the following sectors:

  • mining;
  • tourism;
  • service;
  • production, and
  • transport. 

Key Concerns

While nobody questions the necessity of large-scale spending, its source is unclear. The government may seek funding for its recovery plan from The International Monetary Fund and the World Bank.

However, both are conservative entities with an unfavorable image. They are commonly perceived as opposing public sector growth and affordable social services. Another possible drawback is corruption. 

Decisive action must be taken, as delay could be detrimental. However, until the Government has a clear-cut strategy, its efforts may be fruitless. The relief packages issued to date are unlikely to suffice. South Africa needs a comprehensive overhaul. Otherwise, the infection will keep spreading like wildfire. 

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Diana Dsouza

Crypto Journalist and Editor of guest articles in CoinPedia. Also, Outreach & Partnerships Manager. Contact me: Partner@coinpedia.org

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