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.
ADB Endorses New 5-Year Partnership Strategy for Indonesia
The Asian Development Bank (ADB) has endorsed its 2020–2024 country partnership strategy for Indonesia, which aims to apply the full range of financing support and solutions through ADB’s sovereign and private sector operations along with its technical know-how to catalyze investments, support sustainable development, and help Indonesia emerge stronger from the coronavirus disease (COVID-19) pandemic.
Under the new 5-year strategy, ADB’s operations will support Indonesia’s inclusive economic development by focusing on people’s well-being, economic competitiveness, and the environment, while helping build resilience to climate and disaster risks. ADB will assist in Indonesia’s sustainable economic development, including the recovery from the pandemic, with a combination of knowledge, technical, and financial support. ADB will help the country strengthen health care, expand social protection, improve education quality, and develop job skills. ADB will also focus on helping Indonesia tackle climate change and strengthen its resilience to natural disasters and pandemics.
“The new country partnership strategy reflects ADB’s strong commitment to helping Indonesia boost human development, improve economic competitiveness, and address disaster risks and environmental sustainability amid heightened economic uncertainty and rising global threats such as climate change,” said ADB President Masatsugu Asakawa. “The strategy provides a flexible and agile framework for ADB to help Indonesia incorporate green recovery and other sustainable development options, while strengthening domestic resource mobilization to support the recovery efforts.”
The strategy is in line with Indonesia’s National Medium-Term Development Plan (2020–2024) and the United Nations’ Sustainable Development Goals, as well as ADB’s corporate strategy, Strategy 2030.
“We greatly appreciate ADB’s strong support to Indonesia over the years, especially the speed of ADB’s response and its close and active engagement with the government during the COVID-19 pandemic,” said Indonesian Finance Minister Sri Mulyani Indrawati. “The partnership strategy positions ADB as a key partner with innovative solutions to complex development challenges. We welcome ADB’s focus on inclusive, competitive, and sustainable development.”
Indonesia’s economy is the largest in Southeast Asia and the seventh-largest in the world based on purchasing power. The country had reduced poverty by more than half, to 9.2% of the national poverty line in 2019 from 23.4% in 1999, but the progress risks being reversed due to the adverse impacts of the COVID-19 pandemic.
Under the strategy, ADB’s sovereign lending to Indonesia is expected to reach $10.7 billion from 2020–2023. ADB’s country operations will seek to mobilize cofinancing from development partners and investments from the private sector to help the government better respond to increased demand for financial support amid the COVID-19 pandemic. For example, ADB will help Indonesia attract more private investments in infrastructure by promoting public-private partnerships. It will support Indonesia’s Sustainable Development Goals by designing innovative financing options to reduce the risk of green infrastructure projects and help catalyze private sector investments.
ADB will support the government’s policy reforms in human capital development, financial inclusion, business competitiveness, state-owned enterprises, and clean energy. ADB operations will seek to advance gender equality in Indonesia by helping increase women’s access to formal banking, strengthen female graduates’ job skills, and boost their participation in rural enterprises, as well as improving vulnerable women’s access to social services.
ADB-financed projects will promote the application of technology to maximize development results. For example, ADB will use big data analytics, financial technologies, satellite technology for flood mapping and urban development, smart grids and meters, geothermal, waste-to-energy, and remote-sensing systems to improve survey and planning processes for the operation and maintenance of assets.
ADB’s country program will support Indonesia’s participation in regional cooperation and its contribution to the development of regional public goods. That includes international tax cooperation, trilateral cooperation with the Pacific island countries on ocean health, partnership on reducing environmental pollution from plastic waste, and the development of border towns to reduce regional disparities.
Violence leaves more than 300,000 ‘completely reliant’ on assistance in northern Mozambique
Worsening conflict, combined with a precarious humanitarian situation, has forced more than 300,000 people to flee their homes and villages in Mozambique’s Cabo Delgado province, leaving them completely reliant on humanitarian assistance, the UN World Food Programme (WFP) has said.
“We are deeply concerned about the unfolding humanitarian situation in Cabo Delgado where conflict and violence have left people without access to food and livelihoods,” Antonella D’Aprile, WFP Representative for Mozambique, said in news release, on Tuesday.
“The growing insecurity and poor infrastructure have meant that reaching out to people in need has become harder and now with COVID-19 the crisis becomes even more complex,” added the WFP official.
Any additional shocks could rapidly worsen the situation, especially for women and children, according to the UN agency.
The situation is even more worrisome given that Cabo Delgado has the second highest rate of chronic malnutrition in the country, with more than half of children under the age of five chronically malnourished. In addition, with the province currently recording the second-highest number of COVID-19 cases in Mozambique, population displacements have the potential to accelerate the spread of coronavirus.
Resources urgently needed
WFP said it urgently needs $4.7 million per month to assist the internally displaced in northern Mozambique, and that without additional funding it will be forced to reduce food rations as early as December.
Despite significant operational challenges, the UN agency, in collaboration with the Government, plans to reach 310,000 people each month in the provinces of Cabo Delgado, Nampula, and Niassa with food, vouchers and nutrition support.
Since 2017, Cabo Delgado had been experiencing attacks by non-State armed groups, leading to gradual displacement of communities. The attacks also resulted in loss of lives and severely damaged infrastructure, causing disruptions in the access to those most in need.
With the latest violence forcing thousands of refugees across the border, into neighbouring Tanzania, concerns over the regionalization of the conflict are deepening, added WFP.
Global solution to COVID-19 in sight, ‘we sink or we swim together’
COVID-19 is an “unprecedented global crisis that demands an unprecedented global response”, the chief of the UN health agency said on Monday, unveiling a plan to have two billion doses of coronavirus vaccine available by the end of 2021.
Roughly 64 per cent of the global population lives in a nation that has either committed to, or is eligible to join, the coronavirus Vaccines Global Access Facility, or COVAX, which enables participating Governments to spread the risk and costs of vaccine development and provide their populations with early access to vaccines.
Working together through the COVAX Facility “is not charity, it’s in every country’s best interest. We sink or we swim together”, said Tedros Adhanom Ghebreyesus, head of the World Health Organization (WHO).
‘Vaccine nationalism’ will prolong pandemic
Speaking at a press briefing with the international vaccine alliance GAVI, and the Coalition for Epidemic Preparedness Innovations (CEPI), the WHO chief said that commitment agreements have been secured and the COVAX Facility would begin signing contracts with vaccine manufacturers and developers.
The overarching goal of the COVAX Facility is to ensure that all countries have access to vaccines at the same time, and that priority is given to those most at risk, according to the WHO chief.
“The COVAX Facility will help to bring the pandemic under control, “save lives, accelerate the economic recovery and ensure that the race for vaccines is a shared endeavour, not a contest that only the rich can win”, he upheld. “Vaccine nationalism will only perpetuate the disease and prolong the global recovery”.
More commitment needed
So far, $3 billion have been invested in the ACT Accelerator – only a tenth of the required $35 for scale-up and impact.
Tedros stressed that $5 billion is needed “immediately to maintain momentum and stay on track for our ambitious timelines”.
“Our challenge now is to take the tremendous promise of the ACT Accelerator and COVAX to scale”, he said, adding, “we are at a critical point and we need a significant increase in countries’ political and financial commitment”.
The WHO chief cited estimates suggesting that once an effective vaccine has been distributed, and international travel and trade is fully restored, “the economic gains will far outweigh” the $38 billion investment required for the Accelerator.
“This isn’t just the right thing to do, it’s the smart thing to do”, he spelled out.
“COVAX is now in business”, said Gavi CEO Seth Berkley. “Governments from every continent have chosen to work together, not only to secure vaccines for their own populations, but also to help ensure that vaccines are available to the most vulnerable everywhere”.
“With the commitments we’re announcing today for the COVAX Facility, as well as the historic partnership we are forging with industry, we now stand a far better chance of ending the acute phase of this pandemic, once safe, effective vaccines become available”.
‘Great leap’ forward
Meanwhile, CEPI CEO Richard Hatchett called the international community’s coming together to tackle the pandemic “a landmark moment in the history of public health”.
“The global spread of COVID-19 means that it is only through equitable and simultaneous access to new lifesaving COVID-19 vaccines that we can hope to end this pandemic,” he said. “Countries coming together in this way shows a unity of purpose and resolve to end the acute phase of this pandemic. Today, we have taken a great leap towards that goal, for the benefit of all”.
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