A socio-economic impact of COVID-19 on households in South Africa conducted by the UN Development Programme (UNDP) has warned the government to not underestimate the role of the private sector and SMMEs in economic recovery.
The UNDP explained in a report that support for small businesses should include supporting the transition to digital technologies and improving digital skills. “For sectors, a particular focus should be on those designated as non-essential, specifically in textiles, glass products, footwear, education services, catering and accommodation, beverages and tobacco sectors,” says the report
“For the SMMEs in these sectors to recover and play a role in economic recovery, support in terms of increasing liquidity through either direct fiscal support or tax breaks will help.” The UNDP further issued a grim outlook for South Africa’s economic prospects, warning that it may take at least five years for the economy to return to the pre2019 levels unless innovative actions were implemented.
Ayodele Odusola, the UNDP representative in South Africa, said that apart from the fact that about 54% of households pushed out of permanent employment to informal jobs are likely to fall into poverty, about 34% of those categorised as middle class are also likely to fall into vulnerability or poverty. Odusola said the government still had an opportunity to use COVID-19 to build a new economic order.
“With strong leadership and an understanding followership, this crisis could be turned to an accelerated, inclusive-growth economic strategy through local production of PPEs, medical devices, and diagnostic equipment through strategic support to small-scale enterprises and creating enabling environments that allow small and medium enterprises to thrive.”
Jeff Schultz, senior economist at BNP Paribas in South Africa, said that the return of load-shedding episodes would spell doom for the already battered economy.
“We hold onto our view that gross domestic product levels are still unlikely to recover to pre-pandemic levels until 2024, particularly as the weak structural factors [power cuts] the economy struggled with before the current crisis are already returning [as part of our lives],” Schultz said
