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Covid-19 and the recession in South Africa

by Salaamedia

Humairaa Mayet

As the coronavirus spreads rapidly around the world, many countries have opted for lockdowns and shutdowns, and the effects of these are gradually becoming more and more visible on the economy. South Africa, which entered into lockdown on 27 March, is presently encountering economic strife in the face of Covid-19.

Professor Duma Gqubule, an independent economist and director of the Centre for Economic Development and Transformation, spoke to Salaamedia’s Azhar Vadi. Gqubule claimed that South Africa is facing the economic equivalent of an earthquake and described future events as catastrophic. According to a forecast from Price Waterhouse Cooper, an accounting firm, South Africa’s economic growth will shrink by 8.4% in a best-case scenario and by a shocking 20.4% in a worst-case scenario.

What the world’s economies are undergoing right now rivals both the Great Depression of the early 20th century and the global financial crisis of 2007-8. Multiple stock markets have collapsed and hundreds of countries are experiencing “a job bloodbath” as millions find themselves unemployed. Gqubule predicted that unemployment funds across the globe – including South Africa’s Unemployment Insurance Fund (UIF) scheme – will be exhausted in the coming months.

“Responses should equate to the predicted shock and according to the United Nations, governments should budget 10% of their gross domestic product (GDP) for their shock response funds,” said Gqubule

In the case of South Africa, approximately R500 billion would be required. Countries must ensure that adequate personal protective equipment (PPE) is provided to all citizens and that all hospitals and medical facilities are well equipped and able to implement necessary emergency measures. Cash grants have been given to residents in several countries including America, and Gqubule stated that he believes that cash grants of R1200 per month should be given to South Africans in order to soften the blow of the recession. This will total to R200 billion over six months, leaving the remaining cash available for other purposes. Gqubule also emphasised the necessity of child support grants and loans for small, medium, and macro enterprises (SMMEs) with government guarantee.

“There is no telling how long this crisis of global capitalism will last and South Africa may well experience a second wave accompanied by intermittent lockdowns.”

Listen to the full discussion below:

Featured image from AdobeStock via Google. 

 

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