Crisis is a term often abused when it comes to the South African story. It has lost much of its power when commentators – and I include myself here – bemoan the state of the economy. Every time I consider the word, I remember what someone once said to me about the notion of a recession to many in the country: that for the majority, it’s a condition that they’ve never really escaped, never mind the data prints from our statistical body.
It’s a poignant comment that has tempered my views on the state of us, and served to cool blood pressure levels with the reading of yet another negative data print on the economy. It’s proved a healthy endeavor if you consider what’s been coming out of Statistics South Africa during what amounted to a very long "wasted nine years".
You could say that in watching our economic deterioration and the worrying fiscal position, I’ve chosen to pay less attention to the details, but rather to the situation as a whole. There’s a smart idiom that best captures it: something about the forest and the trees. In practice it has just meant focusing on our structural problems of poverty and unemployment since the mid-eighties; inequality and the legacy of a policy of racially defined underdevelopment.
Quite simply, without addressing these issues, there’s simply no way we could help the vast majority escape the recession they’ve been stuck in for decades.
However, when I consider the ramifications of the Covid-19 outbreak, I now have to consider the proposition that there’ll be no forest. This pandemic will prove no small footnote in our young country; its effects could burn the forest entirely.
The days have blurred before me so quickly as everyone tries to make sense of just how the world we knew has been upended by a health crisis that up until a few weeks ago was something crackling away in some distant "little" province in China. Perhaps what we missed is that "little" is relative when talking about any town, city or province in the world’s second-biggest economy, and certainly its most influential.
A comfort for me, and I guess many others, was that an authoritative political system was best placed to keep the disease in check. How wrong we have all been in ignoring the threat posed by the disease.
There’s no nation that hasn’t been caught out by the crisis that has seen commerce freeze as some of the world’s largest cities look like the set of yet another dystopic movie. In recessions past or rather of the modern era, they’ve normally been triggered by the popping of an asset bubble somewhere in the world. This contraction comes directly from the nuts and bolts of the entire global economy and, as such, poses a grave question for us.
With an unemployment rate that sits just above 29% and a jobless rate among the youth of above 55%, it's already remarkable that we aren’t in the throes of much deeper social upheaval. Now, if we are just in the beginning stages of the pandemic and an explosion of cases is just around the corner, how will this structurally flawed economy handle job losses to the tune of 150 000 a month? These aren’t necessarily in the unskilled sector of the job market, but throughout.
At the end of the last global recession, it was calculated that just over a million jobs were lost in South Africa. If we are to take our cue from the US, it’s a figure that we would be lucky to repeat.
In the US, where corporates are quick to slash jobs because of the lack of protection, some 10 million jobs have been lost over a period of just two weeks. It’s already matched the number of jobs lost during the 2007 and 2009 recession.
Now, in a South African context, job losses will not be as swiftly executed as in the US because of our labour regulations. But delayed or not, they will come, and this time with a state incapable of softening the blow without embarking on what could be a dangerous bout of increased borrowing in US dollars. Dollars being pertinent here, as one of our strengths has been that our debt is mainly in rands, protecting us from an escalation that can be caused by a rapidly depreciating currency.
The $1 billion loan from the New Development Bank, created by the grouping of BRICS nations six years ago, is just a drop in the ocean when you consider the economic risks faced. In all likelihood, it’s off to the International Monetary Fund for a fiscally constrained Treasury, no matter the thoughts of the detractors in the governing alliance.
Given how the Washington-based institution thinks, one wonders just what consideration will be given to our "unique" structural fault-lines. In truth, given the states performance in addressing them over past decade and the rampant corruption, who can honestly blame them if they are to disregard the hallowed project of pursuing social and economic justice for us all.
These are the worst-case scenarios as I sit in the second week of three-week lockdown, where everything and anything is possible. I’ve treasured the ability to keep a sober head, but it's proving difficult when the forest already looks ablaze.
What a way to meet you in my first column for Fin24, but our problems have been elevated beyond crisis in these most uncertain of times.
Ron Derby is editor of Fin24.