The president of South Africa, Cyril Ramaphosa presented the Economic Recovery Plan in October 2020 to the joint sitting of the parliament. The essence of this recovery plan is to enhance the state’s capacity, create more jobs, revitalize the state of economy, reduce corrupt practices and fight criminal activities. The outbreak of COVID-19 pandemic had a devastating effect on South African economy, especially in terms of unemployment. During the pandemic, there was great increase in economic crisis which led to loss of jobs and poverty, most especially among the youths. Many lost their jobs and lived without income for a long period of time. Some could not even afford their daily meal let alone settling their bills. Unemployment, according to the layman definition comprises of people who are available to work but could not get a job. South Africa’s unemployment rate rose to the highest on a global list of 82 countries. Since the beginning of the second quarter of this year, the rate of unemployment in South Africa escalated from 32.6% to 34.4% according to Pretoria, August 24 Reuters. President Cyril Ramaphosa also added in his speech that, “Many live lives of unbearable scarcity and many do not work, especially the youths”. The unexploited potential embedded in a South Africa’s unemployed youths is great because there are quite a lot of young people who are neither learning nor engaged in income-generating activities. Two consecutive recessions were also recorded in South Africa at the time the pandemic struck. The aim of the recovery plan is to create jobs, re-industrialize the economy, accelerate economic reforms, and fight crime and corruption while improving the competences of the state. The South African Economic Reconstruction and Recovery Plan also aims to ensure a swift and lasting economic recovery, with measures to limit the immediate impact of the pandemic on vulnerable workers and households, and to revive economic growth in the short and medium term. South African Economic Reconstruction and Recovery Plan’s interventions are in pursuit of the National Development Plan goals of reducing unemployment, poverty and inequality. It is geared towards ensuring that beyond just returning the economy to its pre-COVID-19 levels, it adds more GDP growth and Jobs. The plan is anchored on a social compact aimed at ensuring that there is cooperation and collaboration towards growing the economy, protecting the poor and vulnerable, transforming the patterns of ownership in the economy and enhance competitiveness through provision of quality services and infrastructure. Its success rests on the strength of the social compact and the associated mobilization of resources. According to the South African Economic Reconstruction and Recovery Plan, three phases are expected to
be undertaken in order to achieve the laid down objectives. These phases include: Engage and Preserve – which includes a comprehensive health response to save lives and curb the spread of the pandemic; Recovery and Reform – which includes interventions to restore the economy and Reconstruct and Transform – which entails building a sustainable, resilient and inclusive economy. If all these phases are meticulously and vigorously pursued, it will transform into economic revitalization. Some of the areas that the “Economic Reconstruction and Recovery Plan” is expected to revive include: investment in infrastructure, food security, gender equality, employment opportunity, tourism support among others.
Some of the challenges confronting South African economy
There are many challenges that have put South Africa’s economy in distress in recent times. Some of these challenges include but not limited to:
· Lack of economic growth and investment: low level of economic growth and investment has overtime, contributed to the dwindling of South Africa’s economy. This was aggravated by the advent of Covid-19 pandemic during which the economic growth and investment was at its lowest ebb.
· Covid-19 pandemic: Covid-19 pandemic affected the world’s economy including that of South Africa. During the pandemic, the South Africa’s economy was greatly affected thus making the economy more vulnerable, bearing in mind that the South Africa’s economy had experienced recession twice prior to the 2020 Covid-19 imposed lockdown. The economic crisis necessitated by Covid-19 pandemic resulted in loss of jobs, low levels of capacity utilization and increase in the level of inequality. According to president Ramaphosa, about two million jobs were lost which has resulted in inequality and poverty.
· Criminality: As a result of increase in the unemployment rate, so many youths have resorted to criminal activities. According to Quarterly Labour Force Survey released by Statistics South Africa, unemployment has increased by 1.8% when the rate of unemployment in the first quarter was compared with that of the second quarter. If the rate of joblessness is left unchecked, this may have a negative toe on the South Africa’s economy as foreign investors will be unwilling to invest in the country.
· Corruption: Corruption has led to so many economic crises in South Africa. This has resulted in negative perception by foreign investors. Corruption has been a major challenge in the development of African economies. South Africans are not among the
happy nations according to the recent Bloomberg’s Misery Index. The “unhappy” status is partly due to varying degrees of corrupt practices even amid Covid-19 pandemic.
· Unemployment: The advent of covid-19 has further thrown South Africa’s economy into distress as millions of people lost their jobs while a lot were underemployed. According to Bloomberg’s Misery Index, South Africa is at the third-worst position among major economies due to inflation and unemployment.
There is need for an urgent call for all stake holders (public and private sectors) to work in unison to bring about the implementation as well as workability of the Reconstruction and Recovery Plan. This clarion call is very necessary in order to halt the continual increase in the unemployment rate in South Africa. President Ramaphosa once said during one of the hybrid plenaries of the National Assembly that: “All efforts geared at providing interventions for the recovery of the economy after the Covid-19 pandemic should involve all sectors particularly, the private sector. In an attempt to assess government’s capability to address the economic crises through the Economic Reconstruction and Recovery Plan, President Ramaphosa was very categorical by saying: “Economic Reconstruction and Recovery Plan is not the final solution”. It must be noted that part of the government’s recovery plan is to expand Employment Tax Incentive and defer Pay-as-you-earn (PAYE) and excise taxes all in an attempt at reducing unemployment rate while aiding economic recovery. Due to Covid-19 pandemic, it has become very challenging for the South African government to tackle youth’s unemployment. The South African government noted that the pandemic alone resulted in the loss of about two million jobs across the country thus imposing historical burden of unemployment, poverty and inequality across the length and breadth of the country.
In conclusion, while the government is working round the clock for speedy implementation of the Economic Reconstruction and Recovery Plan, all stakeholders (particularly the private sector) must partner with the government to ensure drastic reduction in unemployment rate bearing in mind that Covid-19 pandemic is still very much with us and may slow down all efforts at achieving desired results. The Economic Reconstruction and Recovery Plan is still being implemented and it is expected to reduce the unemployment rate and also boost the economy in the coming days.
Dr. Olusola Bodede is a postdoctoral researcher. He writes in his personal capacity.