The recent unrest could provide opportunities for remaking the country in a smarter, more sustainable way
Clean-up operations continue in Vosloorus, east of Johannesburg, after looting and rioting in the area. Picture: ALAISTER RUSSEL/SUNDAY TIMES
The unrest is a disaster for the country in so many ways. But from an economywide perspective, all is not lost. Though real output has yet to fully recover to its pre-pandemic level in the fourth quarter of 2019, many have been surprised by the speed and strength of the economy’s bounce-back from the height of the Covid-19 crisis in 2020.
A kicker will also come from rebuilding. Destroyed shops, warehouses, production facilities and infrastructure will detract from SA’s capital stock. In theory, this would lower the country’s potential growth rate. In practice, however, when these get replaced, GDP, which measures flows, will benefit from the investment necessary to fix and rebuild, which will in turn support construction and its downstream suppliers.
The temporary tax relief measures Ramaphosa announced should also help affected businesses’ cash flows, as will the funding mechanism being designed to help the many uninsured smaller and informal businesses to reopen, restock and rebuild. The Treasury, SA Revenue Service, banks and development finance institutions have all seemingly come together to do the right thing.
But on its own this will not be enough to fully restore the country’s “soft infrastructure” — trust, goodwill and expectations of the future — unless policymakers, now more than ever, also fast-track the growth-boosting reforms they have long promised. The president’s address indicated that he has been motivated by the events of the past two weeks not only to build on the reform momentum already in progress, but also to take further steps.
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