It’s been three weeks since the looting and rioting took place in South Africa, with over 200 malls damaged to varying degrees of severity and the loss of thousands of jobs that will take months, if not years, to recreate. Speaking of losses, as we start taking stock, statistics suggest July’s civil unrest cost our economy approximately R50 billion – a preliminary figure, but alarming enough for huge concern. As the months to follow pass, it is expected this cost will increase tremendously as businesses attempt to rebuild what they once had. To worsen matters, a taxi war has erupted in the Western Cape and has had a very similar impact on businesses and consumerism as that of the looting and rioting in previous weeks, but it wouldn’t be a crisis without Eskom adding salt to the wound by implementing a brief period of load-shedding.
Taxi wars are not unheard of in South Africa, but to have uninterrupted civil unrest occur over the last three weeks has been devastating to our country’s prosperity. The war erupted over a taxi route dispute and – in an effort to maintain business activity – the public sector had put several mechanisms in place to ensure people still have access to transportation whenever necessary. However, despite governmental efforts to alleviate the economic pressure, businesses located in hot-spots have taken a big hit, with several businesses deciding to temporarily close to protect the lives of their customers and their employees. Thankfully, the war seems to have eased this week, with the Western Cape Department of Transport making the decision to close the disputed route after several attempts to negotiate alternatives with the Cape Amalgamated Taxi Association (CATA). Cape Town is not out of the woods just yet as the Department of Transport has since suspended funding to CATA, which has done nothing to relieve tensions and bad blood between the two organisations.
The recent civil unrest in combination with a weakened socio-economic state has prompted the SARB to maintain the repo rate at 3.5%. The Monetary Policy Committee (MPC) has stated that the looting and rioting has ruined any headway made in recovering our economy since the harsh lockdown in 2020. Our country’s 2021 1st quarter growth forecast was higher than expected and a notable indication that South Africa’s economy was on the path to recovery, however those estimates are no longer reliable due to the recent social unrest. The SARB had been planning to revise their growth forecast for a more positive trajectory for the year of 2021, but the disruptions in domestic and global supply chains this month has prompted the reserve bank to change their plans accordingly. It’s important to note that the current societal distress was not the only factor in the MPC’s decision to maintain the repo rate; the SARB announced their decision a day after the StatsSA CPI data indicated that consumer inflation had dropped to 4.9% in June after experiencing an all-time high of 5.2% in the previous month.
In other news, this weekend, President Cyril Ramaphosa addressed the nation to announce the country will be moving to adjusted level 3 lockdown, effective as on Monday, 26 July. This comes after the Department of Health reported South Africa had reached the peak of the third COVID-10 wave. As a result, this new lockdown level allows leisure travel to resume, all non-essential businesses to re-open, and alcohol sales to return between 10:00 to 18:00 from Mondays to Thursdays only. These lighter restrictions will offer some relief to sectors feeling the strain of this month’s turmoil. Additionally, the South African government will be offerings a range of relief mechanisms to assist businesses and employees affected by the rioting and third wave this month. More specifically, President Ramaphosa intends to reinstate the monthly social relief grant of R350 and include unemployed caregivers as one of their many recipients until March 2022. The liquor sector will also be allowed a suspension of excise taxes for 3 months, an additional measure taken in an attempt to lessen economic costs and relieve some pressure for this market.
All in all, the South African government is acting swiftly and intervening as proactively as possible to ensure our socio-economic situation improves in the months to come. But the question is: will it be enough to revive our economy to a sustainable level? Thousands of jobs have been lost in recent weeks, with a high probability that several affected businesses will choose to shut down permanently. Employment has been a macroeconomic conundrum for South Africa prior to COVID-19, however, the impact of lockdown in 2020 and the current rising societal tensions has pushed our economy to the brink of destruction. The interventions our government plans to provide might not suffice to reverse South Africa’s current economic trajectory. With this being said, however, this is not the end of South Africa’s fight for survival. Both public and private sectors have banded together in unison to provide assistance and protection to any affected businesses and vulnerable persons. As an example, Nahana Communications Group has recently launched a Small Business Funding Online, geared towards protecting the SME sector in our country from further damage. In the face of adversity, it is heart-warming to see how united the South African people have become. Hardships are bound to re-emerge and dwindle for longer than we expect, but South Africa will weather this storm and come out stronger on the other side. If you or your organisation has been affected by the civil unrest, please reach out to the COBRA Initiative for assistance and business support.