How the South African Economy Reacts to Global Crisis

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Despite early imposing of lockdown, South Africa is seeing a surge in coronavirus cases. Its social and economic systems are now severely impaired. As of this writing, there are almost 23,000 active cases and roughly 1,000 official deaths. The figures are relentlessly growing, and the government does not seem to be doing enough.

A Chance for Economic Overhaul?

President Ramaphosa admits that the crisis is a “post-war situation” that marks a watershed for the country. This turning point will be followed by transition to another, more viable model. It is high time South Africa severed all connections to the shameful legacy of apartheid.

The effects are spreading across the economic system quite unevenly. Predictably, low-income consumers have suffered the most. Before the crisis, they worked in such industries as:


  • tourism;
  • services;
  • transport;
  • mining, and
  • manufacturing

Inadequacy of Relief Packages

So far, the government has released a support package worth $26 billion. While its size equals 10% of the national GDP, more help will be needed. By mid-2021, the package is projected to expand to $46 billion.

Early introduction of lockdown may have lowered the devastating power of the virus. However, its economic effects will be lingering. The humanitarian costs are colossal. As citizens were staying inside their homes, malnutrition rates shot up. Consumers have seen the deterioration of their well-being overall.

Layoffs and New Opportunities

Around the world, millions of people have lost their jobs due to the shutdown of economies. South Africa is no exception. The country’s unemployment was already severe before the outbreak — every third resident was jobless. Now, the figures are only getting worse, and the improvement will be slow.

The government has introduced a special unemployment benefit. At the moment, roughly 6 million people are eligible for the monthly payment. Its size, however, is modest — just $19. Many industries have seen massive layoffs, but the so-called gig economy was hit the hardest.

In these tough times, the local population is turning to alternative sources of finance. As global brokerage firms operate in the country, online trading is expected to see a boom. Through intermediaries like FXTM, residents are learning to manage currencies, stocks, and derivatives. Internet-based trading through MetaTrader 4 platform may be the only way out for many families.

Lack of Sanitation

Many local residents do not have access to safe potable water. According to the most optimistic estimates by Stats SA, 13% of the local population are deprived of this basic necessity. Unsanitary conditions and lack of water cause the infection to spread like wildfire. The government is looking at ways to remedy the situation. The problem is especially acute in informal settlements and areas with high numbers of the homeless.

Importantly, the authorities are fully aware of these dire conditions. To contain the virus, changes need to be implemented fast. Inadequate sanitary infrastructure and lack of hygiene render all other measures useless. New bills concerning the quality of water are expected soon. In particular, these should address water supply and sanitary conditions for the poor.

Healthcare System

The pandemic highlights the inadequacy of local healthcare. The need to build a well-funded system is urgent. Before the outbreak, the National Health Insurance Bill was being aggressively attacked. Now, it is likely to be adopted with little resistance. This means universal health coverage will be funded through single-payer contributions.

Bailouts and Restructuring

The Government of South Africa owns several assets seen as mismanaged or abused. These include South African Airways (SAA) and Eskom, which are associated with alleged corruption. Such entities are in urgent need of an overhaul. Recently, The Ministry of Public Enterprises has initiated the process of asset disposal.


The importance of a solid recovery plan is undeniable. What causes tension is the source of funding. Conservative institutions like the International Monetary Fund and the World Bank are perceived as oppressive. The public sees them as barriers to the development of the public sector and affordable social services.

The Need for Strict Control

Corruption is a potential downside of any bailout. The Special Investigating Unit has been created to prevent abuse of power. It reports to the President and the Parliament. Compliance with the constitution is also monitored by members of civil society. However, the efficiency of these measures is yet to be assessed.

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