The Statistics South Africa recently released the latest Gross Domestic Product (GDP) numbers. As predicted, the GDP dropped by -16,4% in quarter two when compared to quarter one of 2020. However, comparing the quarter-on-quarter annualised data, the GDP had declined by -51,0%. This is a historic fall, mainly attributed to South Africa’s nationwide lockdown to contain the COVID-19 virus.
The cost of the COVID-19 induced lockdown is reflected in the key economic data, recently published by Stats SA. The anticipated drop in production output (i.e., GDP) confirms the massive fall in economic activity countrywide since the inception of the lockdown.
The bad news arrives regardless of simultaneous interventions by the central bank and government, including reducing the interest rate to a record low and spending hundreds of billions of rands to minimise the impact of COVID-19 on businesses and socio-economic wellbeing of the people.
Without a doubt, this coronavirus pandemic caused economic devastation affecting millions of people. There are hardships ahead for many people with little hope that South Africa will return to economic normalcy. Many people lost their jobs, and some had their salaries reduced, which leads to a decrease in households’ income. These unfortunate events are detrimental to the economy as lower households’ income is likely to lead to a decrease in demand for and spending on goods and services. Thus, firms will have to either shut down or further cut jobs because of a decrease in demand for goods and services they sell.
The important question is how quickly the South African economy can return to its pre-pandemic level and grow beyond this level? Well, with our current political structures and economic situation, it is difficult to be hopeful. I think without good governance and strong political will, the economic recovery process will be very sluggish. Two key factors that continue to constrain the South African economy from taking off are load shedding and corruption.