South Africa is an upper-middle-income country with a per capita income similar to that of Botswana, Brazil, Malaysia or Mauritius. Despite this relative wealth, the experience of the majority of South African households is either one of outright poverty, or of continued vulnerability to becoming poor. Furthermore, the distribution of income and wealth in South Africa may be the most unequal in the world. Finally, although significant progress has been made over the last five years, many South African households have unsatisfactory access to clean water, energy, health care and education facilities.
It is likely that this situation will have a direct impact upon both the social and political stability of South Africa, as well as upon the nature of the country’s growth path. Recent empirical research has shown that countries with more equal distribution of income and wealth perform better in terms of economic growth than those with less equal distributions. Other studies point to the links between poverty, inequality and political instability. The introduction of policies that act to reduce levels of poverty and inequality could contribute towards the achievement of the economic goals that have been targeted by the South African government while contributing towards higher standards of living for all.
Although South Africa has undergone a dramatic economic, social and political transition in the last two decades, many of the distortions and dynamics introduced by apartheid continue to reproduce poverty and perpetuate inequality. The correct identification of these and the introduction of remedial policies have been identified as priorities by both government and civil society. The importance of reducing poverty and inequality has been a consistent theme of the new government. Statements made by government have recognised that planning needs to be focused on the objectives of narrowing inequality, breaking down the barriers that hamper participation in the economy and reducing poverty.
The pandemic has unearthed South Africa's stark social and economic differences between rich and poor. Experts say the crisis has worsened the country's ailing economy, as the government flounders to find a solution.
South Africa's economy has taken a hit during the COVID-19 pandemic, leaving the majority of the country's population frustrated as the future looks increasingly uncertain.
South Africa has recorded more coronavirus cases than any other country in sub-Saharan Africa.
Some South Africans point to flaws in the leadership of President Cyril Ramaphosa which has led to the worsening economic situation, while others say Africa's most industrial state was already in a precarious position when the coronavirus crisis began. The latter place the blame on Jacob Zuma, Ramaphosa's scandal-ridden predecessor.
"South Africa was already at the precipice of a fiscal cliff and in an economic recession at the time the country went into lockdown," Jannie Rossouw, a professor at School of Economics and Businesses, Wits University, commented; "Naturally, the Zuma administration is to be blamed, and Ramaphosa must share in such blame," Rossouw added.
The country's economic growth over the past five years stood at an average of 1.5%, while the official unemployment rate was at 29%. The country's credit rating was downgraded by major international credit rating agencies, including Moody's and S&P.
Political and economic commentators add that the coronavirus crisis is a game-changer for South Africa's ailing economy. COVID-19 dealt a crushing blow to a struggling economy, after a decade of politically orchestrated looting and plunder, that could [barely stand] a mild wind, let alone a hurricane.
The shadow of state capture
The majority of South Africans at least 54% of households have no access to clean water, while at least 14% live in crowded informal settlements.
To minimize the economic impact of COVID-19, South Africa introduced various fiscal and monetary stabilization measures such as direct cash transfers to households and businesses through a $26 billion (€23 billion) recovery package. These measures are nowhere near what could be considered a recovery package. They amount to a scheme whereby the government borrows [money] to avoid a human tragedy and has yet to figure out how to avoid an economic collapse. This knee-jerk reaction is driven largely out of fear and not based on wisdom and well-considered strategy.
Black and white divide remains stark
The shutdown has also exposed the inequality between black and white, rich and poor, which still persists in South Africa's education system a quarter-of-a-century after the end of minority white rule.
The closure of schools meant that only children from educated families were able to advance in their education as they have access to home schooling, while the majority of children who are from poor communities lag behind. COVID -19 is expected to widen the already disproportionate participation of poor and rich graduates in the national economy.
Poor communities do not have the required internet infrastructure to participate in online lessons, for example. The pandemic has also negatively impacted the lives of those children who rely on school food programs. This is the food they are usually given at schools, supplied by the government through independent contractors. The closure of the schools has meant continuous hunger to thousands of children relying on the food for survival. The national feeding program provides meals to nine million extremely poor children.
How can South Africa recover from the crisis?
Economists say the country is already on a slippery slope to socialism, but add that authorities need to scrap unnecessary regulations if they are to get the nation back on its feet. Not doing so will merely make it less attractive to do business without any economic advantage. At the same time, they urge, it is necessary to contain government expenditure. In this regard, the most challenging aspect is reigning in civil service remuneration, which accounts for some 45% of government revenue. It is time for less talk and more action.
South Africa needs to learn from its repeated mistakes over the past 25 years. Creating a capable state is a requisite for sustainable growth and development. Much lip service has been paid to this goal, but no real change has been effected over the past 20 years. Instead, the political leadership has promoted mediocrity within the machinery of the state.