2021 ‘will feel like a recession’, despite moderate economic growth

The country's economy experienced a particularly tough 2020 due to the Covid-19 pandemic and subsequent lockdown, which closed large parts of the economy for prolonged periods of time.

South Africa’s third quarter expenditure on gross domestic product (GDP) expanded by 67.6% in quarter-on-quarter terms after contracting by a revised 53.7% in the second quarter, Statistics South Africa said in December.  

PwC Africa partner and chief economist Lullu Krugel says the economy will continue to feel the impact of the Covid-19 pandemic.

 "We will probably end up the year anywhere between an 8 to 10% contraction in the economy and we will probably see growth of 3.5% next year.  

"However, it will take us two to three years for us to just get to where we were in 2019, which was not a fantastic year to start up with.”

Economist Duma Gqubule, founding director at the Centre for Economic Development and Transformation, says any growth in the economy will be technical and, for the majority of South Africans, 2021 will feel like a recession.  

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"There won't be another lockdown next year, the numbers will show an increase in GPD because we are measuring it off a very low base.  

 "But for a number of South Africans it will feel like a recession what we are going through next year, because there will not be more jobs created, people won’t have more income.”

Gqubule believes economic growth will take another four years to reach 2019 levels.

"If you take into account the growth of the population over this period and the fact Treasury's forecasts are always wrong, I believe we could be heading for another lost decade of economic development, because our per capita income will take longer than until 2024 to be where we were in 2019.”

Efficient Group economist Francois Stofberg believes the roll-out of a Covid-19 vaccine might just shine some light at the end of the dark economic tunnel.

"Currently, we see this shift from the developed world back to the emerging markets and South Africa will see a big benefit as a result of that.   

 "As the shift occurs, it should be good for our exporters and markets as well, the currency market and for the JSE. 

 "I think there is a lot to look forward to in term them of repricing assets and a lot of demanding for our commodities and for our export industrial companies.”

Krugel says besides the focus on health measures to combat corononavirus, government also needs to focus on investing in developing skills which will grow the economy. 

 "We would need something done around the electricity crisis that we sit with. In the economy, we would need something done around private sector investment coming back in the economy and getting people and business ready to invest in the economy again.  

 "Those are the things we need to get out of this bad economy,  but it is so much more urgent than it was a year ago.”

 Gqubule believes government needs to inject new money into the economy.  

"The new money, half of it must go to households in term of new grants. I support a basic income grant, as most South Africans do, at an upper poverty of R1 268.  

“We need to pay a basic income grant to all South Africans, to people between the ages of 18 and 59 because we have a hole in our social security system of working-age people who do not have any benefits because they are unemployed.”

He also wants government to invest in infrastructure that will help the economy grow.  

Stofberg, on the other hand, believes government dropped the ball by not supporting small businesses during the height of the Covid-19 pandemic. 

"That is very unfortunate because they are the lifeblood of our economy, even the informal sector types which are very large in South Africa.  

"You need to support the small businesses so they can come to the table and contribute to the economy.”