South Africa responded swiftly to the COVID-19 pandemic, but the sharp drop in activity adds to long-standing challenges and raises the urgency of structural reforms, according to a new OECD report released today.
In the latest Economic Survey of South Africa, the OECD indicates that the nationwide lockdown enacted in March 2020 reduced activity in mining and industry while bringing the tourism, entertainment and passenger transport sectors to a near-standstill. Growth has collapsed, unemployment is rising and more will need to be done to strengthen responses to the crisis and ensure that the recovery brings about sustainable and more inclusive development.
The Survey recommends a wide range of measures to improve the quality of and access to health care and support businesses and people. This includes lowering interest rates; providing temporary financial support to households and businesses; and extending financial relief in sectors hard hit by the crisis, particularly if there is a renewed virus outbreak later in the year.
The pandemic adds to South Africa’s long-standing challenges, the Survey says. Under a so-called double-hit scenario, a new outbreak affecting South Africa and its trading partner countries will curtail exports, deepening the recession to -8.2% in 2020, and limiting the recovery in 2021 to GDP growth of just 0.6%. In the single-hit scenario, where a second wave of the virus is avoided, economic activity will still fall by 7½percent in 2020 before picking up progressively to growth of 2½percent in 2021.
Presenting the Survey today, OECD Economics Department Country Studies Director Alvaro Pereira said: “South Africa cannot afford to delay reforms. It is essential to undertake reforms to restore long-run fiscal sustainability and growth, while continuing to support the economy in the short run.”
Macroeconomic and structural policies are needed to put growth on a sound footing going forward. Bold fiscal measures are needed to curb spending pressures and restore fiscal sustainability, including taking steps to reduce the government wage bill and transfers to state-owned enterprises. Structural policy reforms to boost competition, restructure state-owned enterprises, improve the regulatory framework and improve public investment in transport infrastructure, skills and education are also called for.
The pandemic has demonstrated that further action is needed to build an inclusive social protection system. The Survey suggests South Africa consider additional means-tested support for households below the food poverty line, better coverage for informal workers and a gradual increase to the public financing of health care, through a form of public insurance.
The tourism sector was hit hard by the pandemic and resulting containment measures, yet it has good potential to contribute to the economy and future employment growth, the Survey said. Implementation of electronic visa programmes for emerging target markets and increasing the number of countries falling under the visa-waiver agreement will boost arrivals, while a reduction of red tape and regulatory burden for entrepreneurs and small enterprises will improve market access. Investments in transport and tourism infrastructure have to be aligned to connect tourists to places.
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Humanitarian catastrophe in northern Mozambique ‘beyond epic proportions’
The UN and partners are “following with deep concern” new reports of violations against civilians in northern Mozambique, the UN Spokesperson said on Thursday.
Citing reports of atrocities carried out by child soldiers, alleged beheadings during attacks by non-State armed groups, and clashes in the Cabo Delgado region, Stéphane Dujarric told journalists at the regular daily briefing that although verifying information was extremely difficult, “we are concerned about the situation of civilians who fled the violence and those who remain in Palma”.
The coastal town just south of the border with Tanzania, was reportedly overrun by militant extremists on 24 March, but three days ago, Mozambique’s military reported that it had regained control.
According to the UN Office for Coordination of Humanitarian Affairs (OCHA), attacks in and around Palma uprooted many who had been sheltering there after having fled conflict in other parts of the province.
Prior to that, nearly 670,000 – including some 160,000 women and adolescent girls as well as 19,000 pregnant women – were internally displaced in Cabo Delgado, Niassa and Nampula provinces, the vast majority of them reliant on host families, whose scarce resources are being exhausted.
On the ground
The UN spokesperson said that nearly 12,800 people, 43 per cent of whom are children, have arrived in the districts of Nangade, Mueda, Montepuez and Pemba since violence erupted.
“Many more are expected to still be on the move in search of safety and assistance”, he added.
Humanitarian partners in Mozambique are assisting displaced people at arrival points and scaling up the ongoing humanitarian response in Cabo Delgado.
“So far in 2021, more than 500,000 people in the province have received humanitarian assistance”, he said.
On top of conflict in Cabo Delgado, in the first months of 2021 and prior to the Palma attacks, the humanitarian community in Mozambique was already stretched, having responded to multiple climate emergencies.
Yet, the humanitarian appeal for the current crisis is currently just one per cent funded.
“More resources are immediately required to meet the needs of people fleeing the violence in Palma”, underscored the UN spokesperson.
“The United Nations calls on all parties to the conflict in Cabo Delgado to protect civilians.”
Trapped and displaced
Earlier in the week, the UN Refugee Agency (UNHCR) said the insurgent attack on Palma had forced at least 11,000 people to leave their homes and reportedly rendered thousands of others trapped as it “continues to work around the clock” to assist them.
UNHCR said that its teams in Pemba were following up on worrying reports that more than 1,000 displaced people were prevented from crossing the border into Tanzania and called on Mozambique’s neighbours to provide access to territory and asylum for people escaping violence.
This is a humanitarian catastrophe beyond epic proportions — WFP Representative
‘Saving lives’ priority
At the same time, the World Food Programme (WFP) said that the deteriorating security situation has caused evacuation flights to be suspended and left UN agencies struggling to get into Palma with food assistance.
“This is a humanitarian catastrophe beyond epic proportions”, said Antonella D’Aprile, WFP Representative and Country Director for Mozambique, on Tuesday.
The UN food relief agency warned that hunger is rising in Palma, with some arrivals into Pemba saying they had not eaten for weeks.
“People fleeing Palma are completely traumatized by the violence they’ve witnessed in the past few days, and now, more than ever, they need our help”, said Ms. D’Aprile. “Our priority is saving lives and making sure emergency assistance reaches those who need it most”.
26 million jobs lost in Latin America and the Caribbean during a year of the pandemic
The Latin American and Caribbean region lost 26 million jobs as a result of the pandemic, and started 2021 with a complex employment landscape aggravated by new waves of contagion and slow vaccination processes that make the prospects for recovery in labour markets more uncertain, says a new technical note from the International Labour Organization (ILO).
“The quest for better normality will require ambitious action to recover from setbacks in the world of work”, warned Vinícius Pinheiro, ILO Director for Latin America and the Caribbean, when commenting on the note, which presents the latest data on the impact of COVID-19 over the past year.
“It is now time to rebuild the jobs lost by the pandemic and create new decent work opportunities,” Pinheiro said, noting that despite adversity, action must be taken and consensus reached so that “2021 is the year of vaccination and economic recovery with more and better jobs”.
However, the ILO Regional Director highlighted that “in the pursuit of recovery, addressing pre-existing conditions in the region will be unavoidable and those conditions are key to understanding why the impact of the pandemic on employment was so strong. Many of the challenges we had before the pandemic remain in place, although they are now more urgent”.
“High informality, small fiscal spaces, persistent inequality, low productivity and poor coverage of social protection, coupled with problems that still persist such as child labour and forced labour, are part of the ongoing challenges in the region”, he added.
The ILO regional technical note, “The employment crisis in the pandemic: Towards a human-centred job recovery”, emphasizes that the labour impacts were devastating in the second quarter of 2020 when the employment and participation indicators plummeted, and then partially recovered.
However, by the end of 2020 the region’s average employment rate had fallen from 57.4 per cent to 51.7 per cent, a sharp drop equated to the loss of around 26 million jobs, of which 80 per cent, or more than 20 million people, left the workforce.
This significant exit from the workforce was unprecedented and has been characteristic of 2020. By comparison, the unemployment rate has only partially reflected the magnitude of the difficulties faced by labour markets in the region, increasing by just over 2 percentage points between 2019 and 2020, from 8.3 per cent to 10.6 per cent.
This situation would have begun to change, explained Roxana Maurizio, ILO Regional Labour Economics Specialist and author of the technical note, who commented that in 2021 there could be “a significant increase in the employment rate when millions of people who had ceased to participate in the labour force return to the workforce”.
In addition to lost jobs, the region experienced a sharp contraction in working hours, as well as a reduction in labour incomes, which account for 80 per cent of what people in Latin America and the Caribbean earn. The region has recorded the largest losses in hours worked worldwide.
The ILO’s technical note indicates that during the crisis both formal and informal employment experienced very pronounced contractions, but with greater intensity for the latter and for this reason the informality rate was reduced (temporarily), in the context of the widespread collapse in employment demand, especially in the early months of the pandemic.
But that situation has already started to change.
“There is a high risk of informalization that adds to the already high levels of labour informality that countries had before the pandemic”, said Maurizio.
According to available data from seven countries, employment recovery in the second half of 2020 has been almost entirely contracted by informal employment growth. These occupations account for more than 60 per cent of the total increase in employment.
“The formal work deficit, in turn, is likely to become more apparent to certain types of workers such as young people, women and adults with lower qualifications – groups that traditionally experience greater difficulties in accessing formal employment”, she added.
“The macroeconomic collapse has disproportionately impacted some segments of the population, amplifying labour and social gaps – especially gender gaps – that characterize the region”, she continued.
“The outlook for economic recovery by 2021 is modest and still very uncertain, so expectations about a possible reversal of the critical labour market situation should be very cautious”.
The ILO has proposed developing recovery strategies based on a Policy Framework with four main pillars: stimulating the economy and employment; support businesses, jobs and incomes; protect workers in the workplace; and resort to social dialogue to find solutions.
The technical note highlights that in a scenario as complex as the current one “social dialogue and the building of new consensuses, pacts or agreements are more relevant than ever” to advance the recovery of employment.
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