No society can survive with 50% unemployment, yet that is exactly what South Africa may be facing by the end of this year. Joblessness alone, exacerbated by the Covid-19 pandemic, has forced the country into a state of economic emergency.
Zuma’s central purpose was to pursue a cynical project of state capture that hollowed out public institutions and crippled many state-owned enterprises. As a result, average annual GDP growth fell by half over the 2008-2019 period, and South Africa’s people grew poorer. Instead, the country has reached the limits of personal and household borrowing. While President Cyril Ramaphosa’s administration is unwinding Zuma’s toxic legacy of state capture, the state cannot afford above-inflation public-sector wage gains. Trend GDP growth is below population growth, and now the Covid-19 pandemic is devastating jobs and incomes.
Based on the international poverty benchmark of $2 per day , a BIG for the country’s 10.8-million unemployed people aged 18-59 would cost around R140-billion per year before inflation. Alternatively, one could take that pool and pay all 32-million adults R365 per month, or all 23.4-million labour-force participants R500 per month. Experts should be appointed to weigh the administrative simplicity, cost, speed, and effectiveness of these options in terms of helping those most in need.
Owing to the pandemic, there is also an urgent need to protect households and preserve the productive capacity of businesses. These twin priorities should guide the emergency fiscal response and any adjustments to the president’s announced R500-billion pandemic response package. Needless to say, the proposed BIG programme would help households significantly.
Third, South Africa should be investing in “e-government” technology. This is the wave of the future. And given South Africa’s administrative failures – not to mention the prohibitive cost and low returns of raising public-sector wages – e-government is a practical way to modernise public services. The goal should be to invest in a digital platform that is available to all citizens on their mobile devices.
As a quid pro quo, the government could simultaneously negotiate lower-cost coal supply contracts and wage restraint with Eskom workers, to put the utility’s cost structure on a sounder footing. These changes would free the company to concentrate on its core function of providing low-cost, secure, reliable energy.