Perspectives #03/2009: The Global Economic Crisis and South Africa

South Africa officially entered recession in May 2009, its first in 17 years. As the global economic crisis has hit key drivers of growth - trade, investment, mining and manufacturing sectors - South Africa’s economy has been expected to shrink by 2% in 2009. In the first three quarters of this year alone, the economy shed a staggering 959,000 jobs. How the recession in South Africa further develops will depend on the economic performance of its key trading partners such as the United States, the European Union and China. While there is encouraging evidence that the worst impacts of the global downturn could be over as a number of advanced economies show signs of recovery and certain emerging economies report higher growth rates, the reality of a quick upturn should not be counted on.

In South Africa, like in many other countries across the world, the global economic crisis has spurred government to play a more active role in the national economy. Efforts to counter the crisis have seen the South African government commit to bailouts and maintain extensive stimulus packages such as the public infrastructure investment programmes. In addition, government established a training layoff scheme as part of its national ‘framework response’ to the global economic crisis.  More recently, the imminent release of an Industrial Policy Action Plan was announced. Scheduled for presentation in January, the plan would target certain economic sectors for relief, while incentivising product innovation in the clothing, vehicle manufacturing and green industries to stimulate job creation. 

However, the implementation of even the actions articulated in the ‘national framework response’ has been slow and it has already become apparent that it is especially the poor who are most vulnerable to the economic storm. Extreme levels of unemployment have long characterised South Africa’s economy, and so it is clear that the recession’s impact will be to escalate poverty and inequality, both issues with major implications for the consolidation of the country’s democracy.

This issue of Perspectives discusses the implications of the global economic crisis for South Africa, and analyses the government’s responses in relation to social justice, gender equity and sustainable development principles.

Introducing the relationship between the state and national economy, political commentator and Head of the Living Planet Unit at the World Wildlife Fund South Africa, Saliem Fakir, discusses the challenges of a more activist role for the state in South Africa’s economy. In the context of now exacerbated levels of unemployment and inequality Fakir argues for greater state involvement in the country’s industrial development.

In the second article, Isobel Frye, Director of the Studies in Poverty and Inequality Institute, analyses the South African government’s response to the crisis. Arguing that a crisis in South Africa existed long before the global downturn, Frye offers some recommendations as to how the state can ensure that any economic rebound addresses the needs of the poor and vulnerable.

It is important, however, to recognize that the financial downturn intersects with another global crisis: environmental concerns need to be addressed if the disastrous impacts of climate change are to be halted.  Regrettably, countries that have utilised their stimulus packages to encourage growth in green industries remain few. With its economy heavily reliant on carbon-heavy low-priced coal energy, and facing critical electricity supply shortages, solving power supply challenges should be at the heart of South Africa’s growth and development policy. While concrete steps are yet to be taken, in late October 2009 Economic Development Minister Ebrahim Patel told media that a ministerial team was considering how to create more green jobs. In their article Prof. James Blignaut and Leandri van der Elst offer a reflection on what the basic ingredients of an inclusive economic development package could be that would re-direct South Africa’s economy on a sustainable development path.

In the final article Fatima Shabodien, Executive Director of the Women on Farms Project, looks at global economic crisis from the perspective of a female farm worker. Ironically, while the provision of labour rights has expanded, since 1994 the working and living conditions of farm workers have deteriorated as a result of the liberalisation of the agricultural sector in South Africa. Trends such as the casualisation and feminisation of labour or evictions of workers from farms, concludes Shabodien, are likely to be accelerated by the economic downturn, further deepening the livelihood crisis faced by the farm worker community in general and women in particular.

We hope that the collection of views gathered here will contribute to debate and reflection on both the threats and opportunities the global crisis holds for Southern Africa’s most important economy.