Plunge in South Africa’s GDP reflects COVID-19 impact on economy: President

“Now is the time to act quickly and boldly to place South Africa on a rapid growth trajectory. We cannot continue with business as usual. We will use this moment of crisis to build a new economy, and unleash South Africa’s true potential,” said President Ramaphosa.

President Cyril Ramaphosa says the plunge in South Africa’s gross domestic product during the second quarter of 2020 reflects the severe impact of the global Coronavirus pandemic on the economy and should spur all South Africans to do all they can to help rebuild the economy.

While the 16.4% contraction in the second quarter or 51% on an annualised basis represents an anomaly due to the lockdown imposed at the end of March, the President said these figures nevertheless reinforce the importance of enabling a strong rebound in subsequent quarters.

“Now is the time to act quickly and boldly to place South Africa on a rapid growth trajectory. We cannot continue with business as usual. We will use this moment of crisis to build a new economy, and unleash South Africa’s true potential,” said President Ramaphosa.

Countries across the world are facing significant economic disruption as a result of the pandemic, leading to the worst global downturn in decades. South Africa has not been spared these realities.

The Coronavirus represents a once-in-a-century social and economic crisis, with disruptions to production, a synchronised decline in export markets and a prolonged decrease in demand for many service industries. The economic circumstances created by the pandemic have caused hardship for many South Africans, and threaten the survival of businesses in sectors that are worst affected.

Having acted swiftly and decisively to save lives and bring the epidemic under control, government’s focus now is on economic recovery.

The R500 billion emergency relief package announced by the President in April has prevented the worst effects of the pandemic.

Over R40 billion has been paid to more than 4 million workers through the Unemployment Insurance Fund to prevent retrenchments, and more than 5 million beneficiaries have received the Special COVID-19 grant for social relief of distress. 

A total of R25 billion has been paid through top-ups to existing social grants, as well as an additional caregivers allowance for recipients of the child support grant. 

Moreover, tax relief worth over R70 billion has been extended to businesses in distress. These and other measures have provided necessary relief to vulnerable individuals and businesses across the country.

As the epidemic continues to stabilise, the President said a strong recovery is possible through targeted actions to restore economic growth and protect people’s livelihoods. 

To support economic recovery, the Presidency highlighted that three processes are underway.

First, social partners will soon present a Social Compact on Economic Recovery to the President following discussions at the National Economic Development and Labour Council. This social compact identifies areas of convergence and provides a basis for joint action by all partners.

Government will thereafter finalise its Economic Recovery Strategy, which will draw on this social compact and outline a clear, action-oriented plan to stimulate economic growth and enable a rapid rebound.

“This strategy will include fast-tracking urgent structural reforms, expanding employment programmes, facilitating large-scale investment in infrastructure projects, and implementing measures to promote localisation and enhance regional and continental trade. 

“Finally, the Presidential Employment Stimulus will commence implementation within the next month, and will expand opportunities through public and social employment to counteract job losses,” said the Presidency.

The President will make further announcements in this regard in due course and the President calls on all sectors of society to act with unity and purpose to rebuild the economy for the benefit of all South Africans. 

(With Inputs from South African Government Press Release)