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Ideological responses, traditional economic theory won't lift SA out out of Covid-19 slump

- William Gumede

South Africa will have to prioritise new business, employment and growth based on the current and new domestic and global needs unleashed by Covid-19.

Given the cataclysmic nature of the Covid-19 economic crisis, conventional economic responses - of pursuing counter-cyclical fiscal policy, which is increasing public spending and cutting taxes, to stimulate the economy, employment and growth - on their own, will not do as solutions for South Africa.  

Ideological responses or wishful thinking will also not do. 

The government will need an integrated economic stimulus response, which should focus on rebuilding neglected public and social infrastructure – housing, education, water, transport and technology; while at the same time focusing on saving current critical businesses, jobs and opportunities, and creating new businesses, job creation initiatives and economic diversification.

An integrated response must also include overcoming the social impact of Covid-19, ranging from gender-based violence, mental illness, to a rise in crime. The backbone of an integrated economic response would therefore be based on building value chains that will produce the infrastructure, skills and material to deal with all these problems in an integrated way.

Such an integrated economic strategy must focus on both on Covid-19 relief, as well as post-Covid-19 economic reconstruction – both at the same time. A new integrated Covid-19 response strategy should carefully select the strategic sectors to be expanded or newly created, to diversify the economy, and which new technologies will help South Africa benefit from the Covid-19 acceleration in the digital economy.

Here are at least 12 pillars for an integrated Covid-19 economic recovery plan.

The first pillar would be to support current industries and create new ones, through expanding neglected public services in the areas which have increased the spread and impact of Covid-19. South Africa has large informal settlements, dilapidated township and rural housing – where no social distancing is possible. This is an opportunity to use a giant rollout of new housing to sustain existing construction-related businesses and create new ones,as well as jobs and growth.

The second pillar should be to foster a housing material manufacturing sector, where all the inputs, equipment and material that go into construction would be manufactured. New mass post-Covid-19 skills training for the poorly skilled would then be built around such a sector.

Crumbling water and sanitation infrastructure in the townships, informal settlements and rural areas will fan the Covid-19 spread. The third pillar would be expanding water and sanitation across the country, with similarly, a manufacturing arm which would build the inputs, material and equipment for the rebuilding of a water and sanitation sector.

South Africa’s public education system is falling apart – whether it is the poor quality of education itself, or school infrastructure such as classrooms, equipment and toilets. Human development is going to be essential, both to reskill those losing jobs because of Covid-19, and those who were jobless before the virus. However, the skills development should focus on training relevant people to operate in the post-Covid-19 economy. 

Rebuild health infrastructure, food production chain 

The fourth pillar of a Covid-19 integrated economic, social and health strategy should be the upgrading the public education system – again linked to construction manufacturing, aimed at boosting current businesses, creating new ones and expanding skills.

Covid-19 has exposed South Africa’s ailing health system. The fifth pillar should be rebuilding health infrastructure, and equipment and skills should be a crucial part of an integrated economic plan. South Africa imports most of its health equipment, personal protective equipment (PPE) and medicines from abroad. This is the moment to build a health-related manufacturing sector which could not only supply local needs, but also African and developing countries' needs. A mass health manufacturing skills development programme would then focus on fostering the skills needed for such a new expanded health manufacturing sector.

Covid-19 has battered South Africa’s food production chain. Producing food for the country, but also for the world, should be the sixth pillar of an integrated response. It should focus on expanding existing viable commercial farming, fostering new commercial farming and upscaling informal farming to produce the products the country and the world needs. A core component would be to build the agricultural manufacturing sector to produce the inputs, equipment and building material. Agricultural skills development should be linked to these areas.

Congested, dilapidated and outdated public transport - with minibus taxies, trains and metered taxies - has made it impossible to practise social distancing – and is helping along the rapid spread of the virus. Covid-19 is the moment to restructure the public transport economy, infrastructure and culture. As a seventh pillar, government will have to garner the political courage to transition South Africa from the death-trap minibus taxis to safer, cleaner and integrated transport – and link a skills development programme around these.

South Africa will have to prioritise new business, employment and growth based on the current and new domestic and global needs unleashed by Covid-19.

Covid-19 will accelerate the inevitable expansion of the digital economy, with many companies and people shifting online more quickly than before the virus. The new needs - ranging from working from home, to less to face-to-face interactive manufacturing and services, to online education - brought on by Covid-19 bring opportunities for new businesses to be created to meet these needs.

As an eightth pillar, Covid-19 provides the opportunity for South Africa to leapfrog into the digital economy. Increasing infrastructure and access to cheaper, faster internet and new technologies is a crucial for South Africa to benefit from the expansion of the digital economy. A Covid-19 strategy will bring South Africa’s businesses, public schools and homes into the digital economy. This means that there has to be dramatic expansion of the digital economy's manufacturing sector that should produce the materials, products and new mass digital skills.

The ninth pillar, is the opportunity to foster a green economy manufacturing hub in South Africa to provide new solar, wind and other sustainable energy sources. The inputs, materials and infrastructure must be produced here. A mass skills development programme should be launched alogside this to provide the skills for such a new manufacturing sector. Covid-19 provides an opportunity to create a recycling manufacturing economy, in the way China, Denmark and Sweden have done, where waste is reproduced as either inputs for others or as new products or to produce energy.

Most South Africans eke out a living in the informal economy, travel in informal transport and live in informal housing. This has also increased the spread of Covid-19. The 10th pillar should be to formalise the informal economy, travel and housing. A core element of an expansion of post-Covid-19 manufacturing sectors should be around formalising these sectors. Similarly, mass skills development programmes must also be centred on these areas.

Fiscal and monetary policy reforms crucial

The 11th pillar should be to boost the civil society organisation sector to secure existing jobs and create new ones. Civil society groups should help co-deliver public and basic services in communities – from combating gangsterism, combating gender-based violence and fostering community police partnerships to keep crime down.

Fiscal and monetary policy reforms are a crucial 12th pillar. Fiscal policy must have a programme of payment and tax holidays, easier finance, low-interest loans and softer collateral requirements for business and private individuals from private and public institutions. The Covid-19 social grant should be extended beyond the Covid-19 period. However, social grants could be linked to training and community work in critical areas, such as crime prevention, cleaning and volunteering. Monetary policy must be aimed at continuing to push for policy rate cuts as far as prudently possible, and injecting liquidity into the financial system.

In all these integrated economic recovery initiatives, government should strike partnerships with the private sector to initiate business recovery and creation. Alternatively, to partner and enter into public and private partnerships according to sound business principles set by private sector players who know their industries, not bureaucrats.

 William Gumede is Associate Professor, School of Governance, University of the Witwatersrand; and author of South Africa in BRICS (Tafelberg This is an edited extract from an address “Building a post-Covid-19 Economy based on the Freedom Charter”, at the Webinar: “Fighting for Freedom: The Charter 65 Years On” organised by the Human Sciences Research Council, 25 June 2020. This extract appeared on News24.