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If South Africa hopes for stability and prosperity, urgent structural reforms must be made

Kenneth Diole
By Kenneth Diole
23 Jun 2020
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For the South African economy to recover from the Covid-19 pandemic, there is a pressing need for the government to implement key structural reforms. Improvements in governance to enable efficiency in the delivery of basic services, alignment of the education system to the future world of work, and a responsive justice system are among them.

The lockdown has demonstrated that many people have been oblivious to the stark challenges of poverty, unemployment, and inequality. The majority of South Africans – 55.5% or 30.3 million – live in poverty, according to the 2015 poverty trends in South Africa by Statistics South Africa. The fact that over 3.5 million people applied for the R350 special social grant in a matter of two days paints a bleak picture of the current reality.

In addition to this, before the lockdown, the unemployment rate in South Africa was 30.1% with the narrow definition and 39.7% with the broad definition. To put things into perspective, during the Great Depression of the 1920s, the global unemployment rate was 24%.  This situation, now infinitely exacerbated by the lockdown, has had a dire impact on the country’s ability to deal with both poverty and unemployment. 

National Treasury has projected that the economy will see a contraction of 7% to 10% due to Covid-19. In a worst-case scenario, this contraction will lead to job losses of around 1.8 million.

In the past week alone, Edcon announced the retrenchment of 22,000 employees. Other companies such as the SABC, Sasol and Comair have issued retrenchment notices. The broader impact of this is dire. According to the treasury and Stats SA, the average working person supports three to five people. As a result of these job losses, more than five million lives will be negatively impacted.

To make matters worse, economic data as per Stats SA indicates that the South African economy has been growing at a very low average of 1.5% over the past 10 years. Unemployment, in terms of the narrow definition, rose from 22.5% to 29%, while the labour force during the same period was growing at a rate of 101,000 people per quarter. This, in an economy that was creating on average 53,000 jobs per quarter in the formal sector.

It is imperative that the government prioritises key structural reforms in the short to medium term. No nation can maintain stability and prosperity if opportunities for young people are divided along racial lines. 

Lockdown has worsened what was already a difficult situation. Before the lockdown, South Africa was already in a technical recession, which was further aggravated by the junk status downgrade we got from Moody’s.

Chief economist at Alexander Forbes, Isaah Mahlanga, believes the South African economy will need to grow by over 3% for the next few years just to get us to where we were before Covid-19.

For this to happen, there is a pressing need for the government to implement key structural reforms that will enable the economy to benefit the majority – and not just some – of its people. Improvements in governance to enable efficiency in the delivery of basic services, alignment of the education system to the future world of work, and a responsive justice system should be among these reforms

Another priority area is transportation. The recent taxi strike demonstrated that the legacy of the apartheid era is still very much with us. The spatial planning policies that placed the bulk of the labour force on the outskirts of central business districts has meant the majority of the working class is heavily dependent on public transport – buses, taxis and unreliable trains. When people are denied access to reliable, safe and efficient transport, their ability to get to work and participate in the economy is threatened and their future severely undermined.

Skills development is another area of vital importance. The lockdown has highlighted the challenges facing the basic education sector. As learning and teaching migrated to digital and online platforms, well-resourced schools were able to seamlessly adapt. However, many public schools, particularly in rural and peri-urban areas, still lack the capacity to do so. The unequal divide in access to resources and quality education continues to find expression in race and class. It is not surprising, then, that the latest unemployment figures indicate that young people – especially in provinces with serious challenges in basic education – are the worst hit.

It is imperative that the government prioritises key structural reforms in the short to medium term. No nation can maintain stability and prosperity if opportunities for young people are divided along racial lines. 

When people are struggling to survive and yet are expected to pay a premium for basic services, it’s unlikely most will ever be able to escape from these cycles of poverty, unemployment and inequality.

It is only a matter of time before they rise up and demand change. DM

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