South Africa’s Endless Crisis – Economics and Ecology

On July 7, 2021, the arrest of former South African President Jacob Zuma plunged the country into a new wave of violent protests and looting. To date, at least 200 people have lost their lives, more than 2,554 arrests have been made and 50,000 businesses have been damaged or affected. While the Zuma protests may have been the trigger, they are not the sole cause, nor what underlies the popular element of the widespread violent protests and looting that South Africa has experienced over the past two years. weeks.

After nearly three decades of democracy, South Africa faces multiple crises. The country has the highest level of inequality in the world, with a Gini coefficient for the distribution of income of 0.7. Wealth is even more unevenly distributed, with the richest 1% of the population owning half of all wealth, while the richest 10% owning at least 90-95%.

The end of a decade of recession

The consequence of a lack of structural transformation in South Africa meant the country was in a precarious economic position even before the pandemic. Stubbornly high unemployment rates were already 29.1% at the end of 2019. Poverty remains excessively high. In 2015, more than half of the population – 30.4 million people – lived below the official poverty line, higher for households headed by women than for households headed by men (49.9% against 33.0%). A quarter – 13.8 million people – lived in “extreme poverty”, unable to obtain enough food to meet their basic physical needs.

In 2015, more than half of the population – 30.4 million people – lived below the official poverty line.

South Africa’s growth has trended downward since 2010, averaging just 1.7% between 2011 and 2018. In 2019, South Africa was plunged into its third recession since 1994. Triggers included: global slowdown following the global financial crisis, falling commodity prices, deindustrialization, “state capture” (i.e. systemic corruption), budget cuts , restrictive macroeconomic policies, slowdown in investment due to economic stagnation, and insufficient electricity supply and resulting blackouts, among others.

Economic crises have enabled and fueled our political crises. A growing number of people see the state as a vehicle of predatory accumulation, aided by corrupt actors in the private and public sectors. This reality underlies the acute crisis of governance and state capture in South Africa, marked by the looting and weakening of public institutions. Taken together, these economic and political crises erode confidence in constitutional dispensation.

The pandemic

The Covid-19 crisis came at a time when South Africa was already in recession. In April 2020, President Cyril Ramaphosa announced South Africa’s R500 billion bailout to support workers, businesses and households during the pandemic. The package offered a glimmer of hope for the country; however, it was short-lived. The program encountered many implementation problems. In July 2021, less than half of the budget had materialized.

The problem was, there wasn’t 500 billion rand to start with. The 2020 Supplementary Budget presented a net increase in non-interest spending of just Rand 36 billion, or less than 1% of GDP. The bulk of the bailout therefore came from existing funds or off-budget spending. One of the factors fueling the violent protests is the deliberate deception of citizens into believing that hard cash has been pumped into the economy. The public feeling is that much of the “stimulus” has been looted.

South Africa is now in its third wave of Covid-19 infections. Most of the relief measures have expired. At the same time, Covid-19 infections continue to rise as the government rolls out its vaccination program.

39% of households ran out of money to buy food in January 2021 and 17% of households experienced weekly hunger.

A third wave of pandemic and lockdowns in South Africa comes as the most vulnerable groups have lost income and are living in dire straits. According to a recent survey, 39% of households ran out of money to buy food in January 2021 and 17% of households experienced weekly hunger. The Covid-19 “Social Relief of Distress” (SRD) special grant – a cash distribution to unemployed adults who do not have other social security – introduced in the original relief program has been removed. Food price inflation has increased. The school feeding programs on which many children depend are closed. And now, with the current violence, some areas are plagued by food shortages.

As this third wave progresses, economic activity is expected to contract – even more now with the current violent protests – with likely spillover effects for workers, businesses and communities. After an economic contraction of 7 percent of GDP in 2020, the economy continues to shed jobs as the unemployment rate hits a record high of 32.6 percent. The current protests will only exacerbate the crises that have in part led to the popular element of the protests themselves, creating a vicious cycle.

Austerity at all costs

Despite the threat of multiple socio-economic crises, the South African National Treasury has remained committed to its austerity program – cutting spending to deal with debt during economic downturns – endorsed by the International Monetary Fund (IMF) and much of the business press.

Since 2014, the South African government has introduced austerity measures in an attempt to reduce debt levels and appease rating agencies. This has seriously compromised the provision of essential social services and the realization of socio-economic rights. Even in the midst of civil unrest, this policy is reinforced.

The South African government is likely to continue with plans to consolidate non-interest spending (spending on everything but debt) at a real average annual rate of 5.2%, as announced in February 2021. the budget results in lower per capita spending and leads to real cuts in health, learning and culture, and general public services. The president recently indicated that any new emergency relief measures would be planned within existing budgetary limits. Given the pressing social needs, greatly exacerbated by Covid-19 and now the violent protests, this is deeply irresponsible.

What needs to be done?

The South African government has largely moved from crisis to crisis without fundamentally addressing the political and economic causes of the crises themselves.

The factionalism of political parties within the ruling African National Congress must be resolved decisively. Factionalism is a responsibility of the nation. This must be coupled with a re-commitment to the 1955 Freedom Charter and the Constitution of South Africa, which provides for fairer economic relief as an essential element of political liberation.

In the immediate term, the South African government must protect livelihoods and support the economy.

In the immediate term, the South African government must protect livelihoods and support the economy. Relief measures previously removed to support businesses, workers and households must be renewed and adapted to respond to the Covid-19 crisis as well as the current crisis facing the country.

Such measures are not possible with the current austerity program which has been adopted. The course of austerity must be abandoned and socio-economic rights prioritized. This approach must be accompanied by a significant economic transformation in the service of the majority. Because all we have now is not even a shadow of political liberation.

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