There is an increasingly high risk that South Africa will not by 2025 have recovered to its pre-lockdown levels of GDP. In a research report – Vaccines and re-opening: Covid-19 risks to the 2021 recovery – HSBC, one of the largest banks in the world, indicates that South Africa will not recover as quickly as most of the emerging markets.
HSBC places South Africa in a cluster of countries that will not by end 2022 regain their pre-Covid GDP levels. This list also includes France, Italy, Spain, the UK, Mexico and Argentina. According to HSBC’s estimates the rest of the Eurozone will have recovered by end 2022, with Germany reaching that target by the first quarter of 2022.
SA on the bus to Argentina
But there is more. Whilst the World Bank reckons emerging markets will recover better than advanced economies from a second wave of Covid-related lockdowns, HSBC is of the opinion that South Africa will not be in that group. It places South Africa in a similar position as Argentina due to:
- A high number of Covid-related mortalities;
- Low levels of vaccine procurement;
- Limited scope for economic stimulus; and
- Deep recessions in 2020
HSBC also reckons that South Africa and Argentina face risks “moving further to the downside”.
Hostility to economic freedom the real risk
Whilst HSBC’s analysis is a realistic assessment of risk, it doesn’t touch the underlying fundamental problems that harass the world of enterprise and sabotage economic growth with its concomitant job creation and poverty reduction effects. (EOSA is well aware growth in itself doesn’t guarantee adequate job creation, but it remains a clearly better proxy for job creation than the absence of growth, not to mention the shrinkage of the economy under Ramaphosa.)
CEOs and economic commentators often give the impression that economic Nirvana will arrive if South Africa can end poor service delivery, adding wastage through corruption to their hopes. While that would bring welcome relief, it will not address the fundamental problem that is hampering growth and job creation, namely an array of policies and strategies that, whilst guided by an ideological hostility to economic freedom, are so incoherent that it baffled the head of JSE equities into despair.
The bungling of procuring vaccine is the latest example of both the incoherence and the ideological hostility. The government wants to be in control of the vaccination process; the president is adamant, moreover, that this is a frontline opportunity for black economic empowerment. Given the fairly dismal results of the vast majority of economic empowerment efforts by the government, there is a very high risk that a BEE approach could have a negative impact on the vaccination program.
And this reveals the crux of the matter. For a government willing to kill off businesses through lockdown regulations (declaring them non-essential for months and then refusing lifelines to restaurants and the hospitality industry), preaching that the “saving of lives” is of paramount importance, the real agenda is now visible for all who have eyes to see and ears to hear:
Saving lives is of primary importance when established businesses can be hurt but of secondary importance as long as there can be black empowerment efforts.
This is the third example since Covid-19 has surfaced that the government response has less to do with saving lives than to ensure the ongoing wastage of resources enrich cronies and the promotion of “black enterprises” at the expense of existing businesses. Let’s examine the first two of those examples briefly.
When looting is less of a crime than a walk on the beach
The first example was the enablement of a frenzy of corruption, throwing away not only goodwill, but also the opportunity to get the medical profession and infrastructure ready to deal with Covid patients. Despite those solemn presidential promises that there would be no corruption with the emergency Covid-funding, the Auditor-General’s reports showed the reality was just another orgy of greed. Far fewer convictions have followed this mismanagement and enrichment than the criminalisation of ordinary “fellow South Africans” who have gone to the beach for a walk or to surf.
The second example is the form of governmental business support to enterprises that were hurt and are being hurt by lockdown. (Any person claiming that Covid is hurting the economy is living a lie. It is the lockdown regime that hurts the economy.) The official support was structured in a way to assist firms that comply with BEE criteria; small formal white-owned SMEs had to survive without aid. Their workforce could qualify for the Covid TERS-grants, but on the soft loan side they were ignored and shunted aside.
To think it will be different with the vaccination procurement effort of the government that will use preferential tender processes to promote black-owned businesses for the vaccination drive is simply preposterous. Not even Red Riding Hood will believe the president.
This makes it clear that saving lives is not a priority: what is really of ultimate importance for the government is the restructuring of the economy and the world of enterprise in accordance with the racial make-up of the country.
With the powers they have bestowed on themselves in terms of declaring a State of Disaster, the government has transformed itself into a central command operation, not accountable to anyone. On the economy, they follow Stalin’s strategy that is intent on the demise of the kulak class, the very class they are now aiming to tax even more to pay for the vaccine.
Collective consensus on NDZ’s Class suicide
The class suicide concept of Amilcar Cabral, propagated by Nkosasana Dlamini-Zuma, has never been repudiated. Ramaphosa has not distanced himself from that statement, just as he has never distanced himself from the economic perspectives of Jacob Zuma who had claimed that market demand does not determine the price of an item and that the only factor that determines value is the labour effort in the production thereof.
Ramaphosa is also on record that he himself doesn’t believe the private sector is a more efficient service provider than the government.
In that ideological framework the formal, established world of enterprise is not an institutional resource or asset, but an obstacle that should be radically transformed. Those who may doubt the position of the president on this: read his lips, hear his words and study again his statements in his CR 17 manifesto to assess whether he is really business friendly.
This government, and these strategies, are the deeper reasons why HSBC has declared South Africa to be at risk of not recovering, even over the medium term, to pre-Covid levels of economic activity. The country cannot, because its government is doing everything in its ideological power to prevent that from happening.