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South Africa: COVID-19 pandemic raises the urgency of structural reforms

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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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Human Rights

UNRWA condemns demolition of Palestinian home in East Jerusalem

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The Salhiyya family's personal belongings after the demolition of their home in East Jerusalem. © UNRWA

The UN agency that supports Palestinian refugees, UNRWA, on Thursday urged Israeli to immediately halt all evictions and demolitions in the West Bank, including East Jerusalem, after an entire family was forced out of their long-term home the previous day.  

Israeli police evicted the Salhiyya family from their two adjacent houses, according to news reports, in the Sheikh Jarrah neighbourhood in East Jerusalem early on Wednesday, and later tore down the structures – a move which UNRWA’s West Bank field office has condemned. 

Staff who visited the scene on Thursday morning observed the total destruction of the property, with school bags, clothes and family photos still partially visible beneath the rubble. 

Against international law 

“Under international humanitarian law, the forcible transfer of protected persons, as well as the destruction of real or personal property belonging individually or collectively to private persons by Israel, as the occupying power, is strictly forbidden, except where such measures would be rendered absolutely necessary by imperative military reasons, or for the security of the population under occupation,” the agency said. 

The 15-member Salhiyya family, who include an older woman and young child, had been living in Sheikh Jarrah for nearly 40 years, according to UNRWA.   

The neigbourhood and tensions surrounding evictions, and attempted evictions, was at the heart of brutal fighting that erupted last year in Gaza, between Israel and the militant group, Hamas. 

Arrests and injuries 

Israeli forces raided the two Salhiyya houses on the property, at 3am on Wednesday, while the family was sleeping.   

In a matter of hours the homes, as well as their possessions, were destroyed, UNRWA said, adding that Israeli forces injured several family members during the eviction operations. 

The head of the family, Mahmoud Salhiyya, along with other relatives, was also arrested.  Mr. Salhiyya had threatened to set himself on fire two days ago after Israeli forces demolished his business, located next door. 

Other families at risk 

UNRWA stated that sadly, cases like the Salhiyya’s are not unique as scores of Palestine refugee families in different areas of Sheikh Jarrah alone – over 200 persons, many of them children – currently face imminent threat of eviction.  

Across East Jerusalem, an estimated 218 Palestinian households are at risk of displacement by the Israeli authorities, the agency said, citing 2020 data from the UN humanitarian affairs office, OCHA

These households comprise some 970 people, including 424 children. 

UNRWA called on the Israeli authorities to abide by international law and, as the occupying power, to ensure the protection of Palestine refugees and civilians in the West Bank, including East Jerusalem.  

“All individuals have a right to safe and secure housing and to live in peace and dignity,” said the agency. 

Agencies call for release of seriously ill child 

In another development in the region, UNRWA and two other UN agencies are calling for the immediate release of a seriously ill Palestinian child detained in Israel. 

Amal Nakhleh, now 18, has been held without charge for more than a year, a measure known as administrative detention.  He has a rare neuromuscular disorder, according to media reports. 

Israel has extended his detention until 18 May, according to a statement issued on Thursday by the UN Children’s Fund (UNICEF), UNRWA, and the UN human rights office, OHCHR

“Neither Amal nor his lawyers or family have been informed of the reasons for his arrest and detention. Amal suffers from a severe autoimmune disease that requires continuous medical treatment and monitoring,” they said. 

Not an isolated case 

The UN agencies called for his “immediate and unconditional release”, in line with international human rights law. 

This is not an isolated case, they added, as currently at least three Palestinians are in administrative detention who were under age 18 when they were first detained. 

“We echo the calls of the UN Secretary-General who in his Report on Children and Armed Conflict has, every year since 2015, urges Israel to end the administrative detention of children. This practice deprives children of their liberty and must immediately end.” 

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Development

Widodo emphasizes importance of G20 focus on resilient health systems,

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The G20 and advanced economies must work together to create a more resilient and responsive global health architecture to face future threats and pandemics, said President Joko Widodo of Indonesia in his address to the Davos Agenda 2022.

He said the International Monetary Fund should be tasked to mobilize resources to revitalize global health architecture. This should include a global contingency fund for medical supplies, building capacity in developing countries to manufacture vaccines and the creation of global health protocols and standards.

“The costs will be much lower than the losses we sustained due to the vulnerability of the system during the pandemic,” he said.

In discussion with Klaus Schwab, Founder and Executive Chairman of the World Economic Forum, Widodo highlighted that “the G20 will play an important role in mobilizing the development of this global health architecture” and added: “I trust that advanced economies will not object to supporting such initiatives.”

Widodo – whose country holds the presidency of the G20 during 2022 – invited all global business leaders to contribute their ideas to the G20’s three key goals for 2022: creating a more resilient global health system; optimizing digital technology to support societal transformation; and driving a fair and affordable transition to clean energy and a circular economy. “The benefits must be felt by wider society,” he said, adding that six of Indonesia’s sectors are “wide open” for foreign investment – export-oriented labour-intensive industries (including health), renewable energy, infrastructure, automotive (especially electric vehicles), tourism and value-added mining.

In response to a question on how Indonesia – a nation heavily dependent on coal-fired power – could accelerate its own energy transition, Widodo said that developing countries need technology transfer and financial support from advanced economies to ensure the transition does not burden their citizens. Indonesia needs $50 billion for its renewable power sector and a further $37 billion for forestry, land use and marine sectors. “Concrete outcomes can only be achieved through strong cooperation,” he said. “Technology and financing will be key.”

The president pointed out that, as part of its roadmap to reach net zero by 2060, Indonesia had slashed the coverage area of forest fires sevenfold, from 1.7 million hectares in 2014 to 229,000 hectares in 2021. The number of hotspots fell over the same period from 89,000 to just 1,300. The country has restored 3.74 million hectares of peatlands since 2016 and rehabilitated 50,000 hectares of mangrove forests in the past year. Its mangrove-rehabilitation target is 600,000 hectares by 2024 – the most ambitious such programme in the world, providing, he said, a “carbon sink equivalent to four tropical forests”.

To finance the green transition, Widodo has initiated a carbon trading system that will deliver “results-based payments” for actions that reduce carbon emissions as well as a carbon tax on coal-fired power plants, due to start in April.

“Indonesia has the potential to be a global market leader in carbon trading and is predicted to surpass the carbon trade potential of Peru, Kenya and Brazil, as countries with the same tropical forest cover,” he said. The government also plans to raise capital by issuing environmental and social bonds, and through REDD+ projects that reduce deforestation and promote sustainable forest management.

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Davos Agenda Session on Space and Climate Opens Up New Frontiers

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European Space Agency astronaut Matthias Maurer connected live to a session on Thursday at the Davos Agenda 2022 from the International Space Station, somewhere high above the Pacific, to discuss how space research can improve life on Earth.

While in orbit on a six-month mission with the European Space Agency (ESA), Maurer will support a wide range of science experiments and technological research, including those that address transmissions of disease, the reduction of carbon emissions and human health-related activities. Knowledge gained through his mission will contribute to development that benefits life on Earth.

“We have worked hard in the past few weeks and months to send back cargo that we harvested for scientists to analyse all these samples that we produced in space, and to produce science and knowledge for humanity out of it,” he said.

He added that the cross-country and international collaboration aboard the space station should also be a model for how the world tackles major challenges, such as climate change. From his view, Maurer described the beauty of the planet, but also pointed out that he could see the impact of climate change from space.

“When we fly around the Earth (16 times a day), we cross over areas that are very arid and dry and I can see scars on the planet where people are digging deep to extract resources. So we are actively reshaping the planet. We are cutting down trees and burning down rainforests. I see the flames. I also see the flooding.”

Back on Earth, Al Gore, Vice-President of the United States (1993-2001); Chairman and Co-Founder, Generation Investment Management, explained how space technology and artificial intelligence can help address climate action. He highlighted the work of Climate TRACE, a global coalition created to make meaningful climate action faster and easier by independently tracking greenhouse gas emissions with unprecedented detail and speed.

“Some things you can see directly from space, like methane, but the difficulty of measuring CO2 emissions against a highly varied CO2 background on the Earth make it necessary to use AI to get precision we need,” he said. He added that if you consider something like GPS, it is clear how quickly the opportunities offered by space tech and space exploration can become integrated into our lives.

But the data and knowledge that is gained from space should not be limited to those who own satellites, said Sarah Al Amiri, Minister of State for Advanced Technology, Ministry of Industry and Advanced Technology of the United Arab Emirates. “If only countries with access to satellites get access to the data, we deny other countries the opportunity to benefit from that knowledge,” she said.

According to the World Economic Forum’s Global Risks Report 2022, space is increasingly crowded and commercialized. While the diversification of actors is for many an exciting development, dated space governance frameworks are coming under considerable pressure, exposing fault lines between the ambitions of different players and the acceptability of their actions.

Echoing this message, Josef Aschbacher, Director-General of the ESA, noted that the volume of satellites indicates that regulation is important.

However, it will have to keep up with a fast-changing industry, which, according to Chris Kemp, the Founder, Chairman and Chief Executive Officer of Astra, is currently seeing a revolution of sorts. “Access is increasing all the time thanks to significant falls in the cost of putting satellites into space and this has enabled a new generation of entrepreneurs to build companies, to take these companies public and provide new capabilities.”

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