Only one month separates us from 2022. The new year brings a series of uncertainties for South Africa, a nation that has seen many tribulations over the past two years. Covid-19 has hurt the economy, with a myriad of jobs and businesses lost forever. Government corruption and inept leadership – along with relentless power cuts – are just a few of the problems plaguing the country. Predicting what will happen next year is a futile exercise. As Jonathan Katzenellenbogen describes, “Attempts at prediction often fail as soon as a large unforeseen event occurs.“ We saw this with the advent of Omicron, the latest variant of Covid-19 to be discovered. The long-suffering tourism industry, which was preparing to receive a pair of enthusiastic tourists, saw the rug cut from below when SA was rejected by the international community. Below, the financial reporter discusses what the government should do in 2022 (in terms of Covid-19) and gives insightful comments on unemployment and South African politics. This article first appeared on the Friend of the day. – Jarryd Neves
South Africa in 2022
For South Africa in 2022, the dominant force in politics will be the continued decline of the ANC. Signs of demise are omnipresent: reaching just 46% in local polls, failing policies, dilapidated cities and collapsing state-owned enterprises.
Attempts at prediction often fail as soon as a large unforeseen event occurs. Pandemics, stock market crashes, banking crises, political crises and natural disasters are mostly unforeseen and have far-reaching consequences. It’s the events of Black Swan that really matter and, by definition, are unpredictable. One of the effects of such events is to accelerate existing trends.
Like many Black Swan events, the Covid-19 pandemic and lockdowns lasted much longer and had a much bigger and wider impact than originally thought. Nearly two years of lockdown, a fourth rally wave and the Omicron variant mean immense disruption and increased uncertainty. And with that, the national mood in many countries is unstable and nervous. It is not known what will happen to this, but politics has been disrupted everywhere. This has made citizens more demanding, and politics everywhere are much more intense and agitated, making violence more likely.
Makes governance difficult
All of this makes the governance of a country much more difficult than it was in a more certain time. It is a climate conducive to violent manifestations of mass frustration and looting. In 2022, governments around the world will be very reluctant to resort to containment. The economic costs and the dangers of public frustration are simply far too high.
This is why in 2022, governments could make vaccines mandatory. On Sunday, during his “family discussion”, President Cyril Ramaphosa said this was under consideration. The public is now likely to support more mandatory vaccinations and not allow people who have not been stung to work in government and corporate jobs. With only 35.6% of the adult population fully vaccinated, South Africa still has a very long way to go to approach herd immunity. As elsewhere, making vaccinations mandatory is likely to spark a lot of public outrage and mass protests in South Africa.
Things don’t improve for next year as the world tries to figure out what the Omicron variant can mean. The key will be whether existing vaccines can protect against the mutation. The Omicron threat has dashed hopes of an increase in our tourist numbers and a recovery in the hospitality industry over Christmas and New Years. Even a few weeks of disruption will dampen growth, at least in the first quarter.
Prior to Omicron’s identification, the Reserve Bank had already slightly lowered its forecast for this year due to the violence in July, and it is now certain that the fourth quarter will be down. The Reserve Bank’s growth projection, established before Omicron, is 5.3% for this year, 1.7% in 2022 and 1.8% the following year. Compared to other emerging markets, this is weak growth and reflects the myriad of constraints due to power cuts and lack of reform.
And with moderate growth and rigid labor laws, there is little hope for a drop in our unemployment rate, the highest in the world. The expanded unemployment figure released yesterday by Statistics South Africa, which included those looking for work and those discouraged, was 46.6%.
A windfall from rising mineral prices has boosted the economy and tax revenues this year. But the prices of our exports of important raw materials such as rhodium, iron ore, coal and platinum have fallen sharply in recent months.
And with global inflation fears and expectations of central bank interest rate hikes, risk aversion to emerging markets is increasing.
As has been the case for many years, Eskom is the big drag on the economy and even with the arrival of independent producers, the problem of power outages will not go away until there is much more. additional capacity. Most of Eskom’s power plants, with the exception of the recent but not yet fully operational constructions of Medupi and Kusile, are now around 40 years old. This means increasingly long planned and unplanned power outages. Despite the promises, there are no credible plans to ensure a reliable power supply in the country. And, in any case, it would take at least a decade of good project management to get the electrical capacity we need.
With little chance of a windfall this year, negligible growth and rising unemployment, demands for welfare state expansion will rise. The question remains open as to whether the government will be able to maintain its moderate fiscal consolidation position in the face of growing demands from populists and some political supporters for a universal basic income subsidy.
The Covid Social Relief of Distress temporary grant, which allows people in desperate circumstances to get R350 per month, is due to expire in March next year. If we were to be forced into another foreclosure, it might be difficult for the minister not to make this grant permanent. The extension of the benefit system to cover the unemployed when there is little job creation is also problematic. Rising protests could influence arguments on social spending. But at some point, something will have to give way. Upward pressure on borrowing costs and, at some point, default on public debt could be the breaking point.
As if to end the year by locking the country into the class of failing economies, a bill paving the way for expropriation without compensation could pass through Parliament in the coming weeks. Legal challenges will inevitably follow the passage of the bill, but the “investors beware” sign is already in place.
As the ANC shrinks, it is more and more likely to become more rigid and double its policies, rather than pause and reflect. The policy of locating the production of goods in a range of industries will increase costs and reduce international competitiveness. Last week, the National Assembly passed the bill amending the Employment Equity Bill and, once passed by the National Council of Provinces and signed by the President, it will allow the minister to set binding racial quotas in industries.
Feeling of chaos
Next year will add to the sense of chaos and lack of direction the politics of minority governments and the triage of the new South African politics of coalitions. With the ANC falling below 50 percent in local government polls last month, a new era of possibilities has opened. The small parties and the DA have not yet shown that they will form an anti-ANC and anti-EFF coalition. Everything becomes much more complicated.
Although the ANC won almost 34 percent of the vote in Johannesburg, the DA managed to secure the post of mayor with just 26 percent of the votes at the polls. And oddly enough, the EFF voted for the DA in Council to get the job. The Red Berets intended to teach the ANC a lesson. The prognosis must be that of instability and extreme difficulty in passing a municipal budget for the city. And in another case where there might be no natural anti-ANC and anti-EFF coalition, the Inkatha Freedom Party sent mixed messages about its willingness (or not) to form coalitions with the ANC.
All of this points to what might be in sight for the national government after the 2024 elections. There may not be a natural coalition to lead South Africa.
It makes things very complicated. But even so, decreased ANC power will improve matters a lot.
- The writer’s opinions are not necessarily those of the Daily Friend or the IRR
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- Jonathan Katzenellenbogen is a Johannesburg-based freelance financial journalist. His articles have been published on DefenseWeb, Politicsweb, as well as in a number of foreign publications. Jonathan has also worked for Business Day and as a reporter and presenter on television and radio.
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