The world post Covid-19 could see more regional integration with countries working together, but there are also concerns of rising economic nationalism, which was already in the works before the crisis hit, deputy finance minister David Masondo has said.
Masondo was on Wednesday afternoon part of a panel discussion hosted by the University of Johannesburg's Institute for Future Knowledge, where he shared views on what the world may look like in the wake of the coronavirus crisis.
Other panellists included Grant Harris, a former advisor on Africa to President Barack Obama, and Professor Dong Wang of Peking University's Institute for Global Cooperation and Understanding.
The virtual panel discussion also broached issues such as opportunities for countries working together to fight the pandemic and the global risks of rising nationalism.
Masondo noted that this crisis is not unique to SA. "This is not a SA crisis, this is a world crisis," he said. Much of SA's actions would be informed by global trends. There is a fear of "economic nationalism" emerging from the global north.
"We are very worried about the rise of economic nationalism. It has already taken place even before Covid-19.
"We saw Brexit and trade wars between China and the US," Masondo said. This could impact SA's prospects for growth, for example trade barriers being instituted which may affect exports negatively.
Discussing the potential of a new world order, post Covid-19, the deputy finance minister said he does not think there will be a single hegemon to emerge and lead the rest of the world. Instead he believes there might be regional hegemons – for example a country within a region setting the rules to be followed and which is accepted by member countries.
Africa could leverage off the continental free trade agreement to develop its regional integration, he explained. African nations need to seriously work on eliminating barriers to trade, and improving transport infrastructure between nations. A common currency could also be beneficial in supporting integration.
Having to exchange currencies on the forex market in order to trade, also adds to transaction costs, a common currency could avoid this. "When trading takes place using multiple currencies it entails an exchange rate risk," he said.
Furthermore, a country with a strong currency, like the rand, might have difficulty to export into the rest of Africa if goods are unaffordable. "Common currency could play role in the post Covid-19 situation," Masondo said.
Commenting on domestic matters, Masondo said he expects there to be a greater sense of health consciousness in South Africa once the pandemic has receded, with more demand and investment in health infrastructure.
The coronavirus pandemic is expected to force SA's economy into its most severe contraction in decades with National Treasury projecting a contraction of 16.1% in a worst-case scenario. Masondo noted that a number of companies are already filing for business rescue, which would lead to retrenchments. All this has implications for government revenue.
But Masondo does not think things have to get as bad as the Great Depression of the 1930s. "The 1929 stock crash did not have to lead to a great depression, it depends on what we do," he said.
South Africa is also facing a growing debt burden and government intends to borrow more to fund interventions to address the pandemic. While cutting expenditure will be difficult, given the need to spend on fighting the pandemic, Masondo said it is important to find ways to stimulate economy. This could be through injecting money in the economy and "unconventional" interventions and focus on structural reforms to generate growth, he said.
Most recently, the Independent Communications Authority of South Africa approved the release of additional spectrum for mobile operators and internet providers which will be beneficial for busineses and government institutions to maintain productivity during the lockdown.