Imraan Valodia: A new, fairer economy is possible, but that would mean sacrifice

2020-05-10 06:00
Business is booming for people who own cars and wheelbarrows in Olievenhoutbosch. They charge between R5 and R30 to carry groceries.

Business is booming for people who own cars and wheelbarrows in Olievenhoutbosch. They charge between R5 and R30 to carry groceries. (Ntwaagae Seleka, News24)

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That Covid-19, the lockdown and whatever will come after will have had a lasting and devastating impact on our economy seems indisputable, writes Imraan Valodia.



Since it was first reported in Wuhan, China in December 2019, the SARS-CoV-2 virus and the resultant disease, Covid-19, has evolved from being a distant perceived threat to having the most devastating impact on the world economy of any single event since the Great Depression.

This has occurred in a matter of less than 6 months. Having declared a state of national disaster on 15 March 2020, President Ramaphosa announced on 23 March that South Africa would commence a three-week national lockdown starting at midnight on 26 March 2020.

The lockdown was then extended for a period of 2 weeks, and continues for the foreseeable future, albeit now in terms of the South African government’s risk-assessed phased approach.

The economic, health, social and political consequences of the pandemic have wreaked havoc on our lives and left us all permanently scarred.

The pandemic has exposed the deeply unequal world that we live in, and uncovered how vulnerable the economic situations of millions of our citizens really are.

It is ironic that it is not the working of the economy, but rather the shutting down of the economy, that has most starkly exposed our unequal world.

Those at the top own the most of everything

Two pieces of research on income and wealth, conducted by my colleagues Gabriel Espi and Aroop Chatterjee in the Southern Centre for Inequality Studies, highlight the extent of South Africa’s inequality.

If we divide South African households into five groups (quintiles), we can create a picture of income inequality and how different income groups have been able to live through the challenges of a lockdown.

Professor Imraan Valodia. (Media24 Archives.)

On average, South African households in the poorest income quintile have a total monthly income of just R2600, which has to support, on average, 5 members of the breadwinner’s household.

About 18 million South Africans live in these households.

In contrast, the highest income quintile has an average income of R38 000, which has to support two household members. Some 7 million South Africans live in these households.

The data on the distribution of wealth is even worse.

The poorest 50% of South Africans have an average net wealth of negative R16 000.

That means their assets are less than their liabilities: they are deeply in debt.

By contrast, the richest 10% of South Africans have an average net wealth of R2.8 million per person. The top 1% of holders of wealth in South Africa have an average net wealth of R17.8 million per person.

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An elderly man at a social grant paypoint in South Africa after the Covid-19 lockdown. (Marco Longari/AFP via Getty Images)

The ability of these households to withstand the economic effects of a sustained lockdown is very different indeed.

For low-income households, closing off the taps that allow them to earn their meagre income has meant being plunged immediately into hunger and even deeper poverty.

With this income and wealth picture in mind, it is not at all surprising to see the shocking food queues that we have seen over the last five weeks.

Low-skilled and informal occupations are by far the hardest hit

Let us consider the world of work, in which the inequalities go much deeper. Andrew Kerr and Amy Thornton from the University of Cape Town have done some very interesting research  that aims to examine who, notwithstanding the lockdown, is able to work and who is not.

They estimate that just over two million South Africans, who make up 13.8% of those who had employment pre-lockdown, are able to continue working from home for the same income they were earning before the lockdown.

It is hardly surprising these are mainly professionals and those with high levels of skill. For most low-skill occupations, outside of those who are essential workers, the lockdown has meant a dramatic fall in income.

That has affected 10.5 million workers - approximately 63% of the workforce.

Some of these workers are facing the prospect of long-term unemployment as large businesses consider shutting down permanently.

The effect of the lockdown has been particularly severe on one group of workers: the approximately 5 million workers who earn their livelihoods in the informal economy.

A busker wearing a face mask to prevent the spread

A busker wearing a face mask to prevent the spread of the coronavirus walks in the streets in Cape Town. (Gallo Images, Nardus Engelbrecht)

For this group, who rely on a functioning economy to earn a small amount of income from selling vegetables at a bus rank, preparing food for sale at the train station, or collecting waste for recycling, the lockdown has meant immediate poverty and hunger.

As my colleague at Wits University, Melanie Samson has shown, waste pickers, while clearly part of essential services, remain unseen by policymakers because they form part of the informal economy.

Formal sector waste services are deemed to be essential services and allowed to operate, but those who perform exactly the same services in the informal economy are not.

The double standard could not be more stark.

Until government relaxed the lockdown rules and allowed some informal trade to happen and announced a special Covid-19 grant for the unemployed and those working in the informal economy, the lockdown was placing informal workers in an impossible moral dilemma: abide by the lockdown regulations and starve, or break the rules and expose yourself and others to the risk of infection.

My colleagues at the African Centre for Migration and Society at Wits University have highlighted the fact that the percentage of foreign born migrant workers in the informal economy is twice as high as that of South Africans.

For most of these migrants, the lockdown means neither an income from informal work, nor a Covid-19 grant.

Gender Inequality

The gender inequalities in our society have also been starkly exposed. Besides the gender inequalities in employment, the lockdown has revealed the deeply unequal gender relations within households.

Ours is unfortunately a society with significant levels of gender-based violence. For many of our women and children, the lockdown has meant a dramatic increase in gender-based violence.

The Foundation for Human Rights reports that, during the first week of the lockdown, SAPS received more than 2333 complaints of gender-based violence - a 37% increase on the weekly average for 2019.

One of the most significant but unseen gender inequalities in our economy is the unequal value that society places on care work. Care work is undervalued mainly because the work is done largely by women.

This inequality is seen starkly in a comment by Matt Hancock, the UK Health Secretary (the equivalent of our Minister of Health). Responding to a question on the numbers of health workers that have died in the UK as a result of Covid-19, Hancock replied: “We’re seen very sadly four doctors die so far, and some nurses”.

Quite disgusting! While our Health Minister is doing a better job than Matt Hancock, our gender data on the unequal burden of care is not dissimilar to that in the UK.

According to our time use survey in 2010, women in South Africa spend 5.8 times more time doing unpaid care work than men do. It would be interesting to see how much more unequal this burden is during a lockdown.

Effects on the economy

That Covid-19, the lockdown and whatever will come after will have had a lasting and devastating impact on our economy seems indisputable.

Might it also provide the impetus for a new economy – one that is more equitable, more resilient and more sustainable?

President Ramaphosa has raised the idea of a new social compact to get us onto such a path.

As a hopeless optimistic, I do think that it is possible to gain consensus on such a social compact, and rebuild our economy as on that is more equal.

However, a key ingredient for a social compact is getting those who have a lot to give up some of their short term interests, in the long term interest of the entire society.

How does one convince people to give something up in an economy that is likely to contract by as much as 10 percent?

- Professor Imraan Valodia is Dean of the Faculty of Commerce, Law and Management and Head of the Southern Centre for Inequality Studies at the University of the Witwatersrand.

Read more on:    aaron motosoaledi  |  gender based violence  |  pandemic  |  inequality  |  coronavirus
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