Will 2021 be a game changer for SA?

Most South Africans are understandably keen to see the end of 2020 and are hoping for better times in 2021, after what has been a roller-coaster year for SA’s political economy.

“Good riddance” is how one leading commentator put it. Yet this is also a time to look forward. What is likely to be the lay of the land next year and what should be done about it?

It is clear that, in the face of the recent renewed surges in the pandemic, Covid-19 exit strategies are, more than ever, a complex process of balancing trade-offs, handling fears and maintaining trust – all on the basis of shifting evidence and imperfect information, but with profound economic implications.

It is a race against time to get effective vaccines distributed throughout the world as rapidly as possible and on an equitable basis.

Whereas for many other countries the original shock of Covid-19 early this year interrupted a positive growth cycle, the SA economy was already vulnerable when the pandemic hit.

The economic devastation showed up vividly in high-frequency data and in negative growth and employment trends as the year progressed.

So far, SA has been long on negotiation but short on implementation. Next year will therefore inherit many of the socioeconomic challenges of this year in the form of a substantial “unfinished business” agenda.

• The twin policy pillars on which hopes of sustainable future growth now rest are the urgent implementation of the Economic Reconstruction and Recovery Plan (the growth plan) and the Medium-Term Budget Statement (the fiscal plan). Efficiency, stability and consistency must be more visible in SA’s macroeconomic framework if the country is to successfully break out of its low-growth trap without falling into a debt trap.
• The State of the Nation Address and the main budget in February must build credibility.
• SA is in urgent need of a strong, “implementation-led” economic recovery. This will require extraordinary discipline and persistence next year.
• Tough decisions, such as what to do about the inflated public-sector wage bill, need to be taken soon. Troubled and costly state-owned enterprises must be decisively restructured and the country’s energy supply secured.
• Collaboration with the private sector must be enhanced in ways that strengthen investor confidence, boost economic performance, and maximise job creation efforts and results.

Less than 2% of investment in public infrastructure has been the result of public–private sector partnerships.

SA has inevitably ended the year on a very sour economic note. But 2020 has also demonstrated the remarkable capacity of the SA economy so far to take heavy punishment, which is a tribute to many of its core institutions.

It is still within SA’s power to rebuild the economy and start clearing the obstacles in the way of desperately needed, job-rich growth.

But time is not on SA’s side as Covid-19 continues to exact a heavy toll on lives and livelihoods, while the latest tightening of restrictions will complicate economic recovery efforts.

Firmer political leadership and a much clearer economic narrative are needed to make more things possible in 2021.

Next year must demonstrate that SA’s “unfinished business” agenda can be decisively implemented and that a bigger, stronger and better economy is feasible.

Next year needs to be the game-changer, when crisis is turned into hope, and words and promises are turned into action.

Parsons is an economist and professor at the North-West University School of Business

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