South Africa’s Road to Economic Recovery after Covid-19

According to the World Bank’s South Africa Economic Update (Edition 13) titled ‘Building Back Better from Covid-19 with a Special Focus on Jobs,’ the pandemic has exposed long-standing structural weaknesses in the South African economy. These have progressively worsened since the global financial crisis of 2008-09. Addressing these weaknesses is of paramount importance if the South African economy is to sustainably rebound after the pandemic, and deliver the much-needed growth to address the unemployment crisis.

Unlocking growth is doubly important as South Africa’s weak recovery is putting pressure on public finances. This will exacerbate the gap between government revenue and expenditure, leading to sharp increases in the gross borrowing requirement. According to National Treasury’s 2020 Budget Review, the cost of government borrowing has been steadily rising due to credit rating downgrades and capital market outflows.

Public debt is now at almost 80% of GDP and under the current trajectory debt levels will not stabilise before 2026. According to a Brookings Institute article titled ‘South Africa after Covid-19- light at the end of a very long tunnel,’ low-wage workers in the country suffered almost 4 times as many job losses as high-wage workers. Failure to address the structural weaknesses of our economy will see calls for expensive solutions like the Basic Income Grant grow louder.

Addressing the Shortage of Skills

One of the most important causes of South Africa’s long persisting economic woes is the shortage of technical and managerial skills. This is a problem throughout our economy but is most pronounced in the public sector, as can be seen in the mismanagement of Eskom and the appalling state of our public hospitals. It will take a long time to fix this and requires necessary reforms to improve the efficiency and quality of our education system.

In the meantime, the country must be open to importing skills where required. Skills are mobile in the modern global economy. South African businesses need to be able to tap into such skills in order to become more competitive and productive.

Reworking Immigration Policy

In a moribund economy like ours, the inward migration of skilled persons contributes to economic growth, which creates work opportunities in the domestic economy, especially for low-skill workers. Government should take a bold policy approach and include persons who are willing to establish a business and offer pathways to citizenship for successful business people from migrant communities in a way that brings them into the formal economy.

Retired persons from other countries who have an acceptable pension income should also be welcomed. The Western Cape economy, whose tourism industry has been battered by lockdowns, would benefit especially from the influx of affluent retirees, who would also contribute to the growth and work opportunities in the domestic economy.

[perfectpullquote align=”left” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The country must also reduce reliance on taxes that distort incentives to work and invest. South Africa’s overreliance on corporate income taxes and the volatile nature of corporate earnings needs to be reduced, along with cutting government spending.[/perfectpullquote]

Secure Property Rights Matter (Title deeds)

In a September 2017 GroundUp article, ‘Title deeds: how do we fix the system?’ Lauren Royston, a senior associate at the Socio-Economic Rights Institute (SERI) argues that nearly half of all subsidised properties in the country are not registered in the deeds registry. She goes on to say that the housing subsidy programme is plagued with corruption and maladministration, and those poorer South Africans who are even lucky enough to access the programme have about a 50% chance of having their title deed registered.

A serious effort to remedy this is required, not just on grounds of simple justice, but also because registered ownership would provide collateral for entrepreneurs from poor backgrounds to access capital, thereby boosting the small business sector. Out of a working-age population of 40 million people, only 15 million are employed, which includes 3 million jobs in the public sector.

In 2013, the Free Market Foundation launched the Khaya Lam Project which aims to bring about the titling of all the Apartheid era properties in which black families had and still have occupation rights, but not title deeds. The Khaya Lam Project is a significant step towards unleashing the “dead capital” accumulated under Apartheid. Property rights are a fundamental part of dignity, and of a growing, inclusive economy.

According to Wolfgang Fengler, Marie-Francoise Nelly, Indermit Gill, Benedicte Baduel and Facundo Cuevas, in an article for the Brookings Institute published on the 13th of July titled ‘South Africa after COVID-19 – light at the end of a very long tunnel,’ if South Africa were to match the self-employment rate of its upper-middle-income peers like Turkey, Mexico, and Brazil, the country could potentially halve the unemployment rate.

Maintaining Law and Order

One of the most serious threats to the South African economy is increasing lawlessness. The operation of many businesses in our townships is being disrupted by extortionate demands from criminal rackets. This is imposing an additional burden on businesses, which will have a business cost of having to spend more money on increased protection and a socio-economic cost in the form of reduced economic growth, which in turn, will further exacerbate poverty in our townships creating a vicious negative feedback loop.

It is crucial that more resources are allocated to maintaining law and order and ensuring police are well-trained and able to protect those conducting legitimate businesses from criminal elements who are extorting them. If this does not happen, many businesses will be forced to close.


There has been clear devastation of people’s livelihoods wrought by the pandemic, and the government insisting on prolonged and disastrous lockdowns. There is low-hanging fruit in addressing structural weaknesses and a policy and social environment that is generally hostile to businesses and therefore growth. South Africa needs a proactive approach in order to successfully navigate a post-Covid-19 future.

The country must also reduce reliance on taxes that distort incentives to work and invest. South Africa’s overreliance on corporate income taxes and the volatile nature of corporate earnings needs to be reduced, along with cutting government spending.

Sindile Vabaza is a freelance writer and aspiring economist. The views expressed in the article are the author’s and not necessarily shared by the members of the Free Market Foundation.

Photo by Towfiqu barbhuiya on Unsplash.