High growth scenario ‘still achievable’

WITH the same commitment to combating the Covid-19 pandemic, a high-growth economic scenario could still be achieved in the country.

That was according to Jakkie Cilliers, head of African Futures and Innovation at the Institute for Security Studies. Cilliers said South Africa had been caught in a classic middle-income growth trap and was steadily falling further behind the average for highgrowth, middle-income countries.

Looking to the future, he said the constraining impact of electricity production was factored in, which according to the Council for Scientific and Industrial Research will ease in 2023.

He said that limited economic growth in the medium term to the 1% Finance Minister Tito Mboweni cited in his Budget speech.

Mboweni delivered his Budget speech in Parliament on February 26, where he predicted that the country would grow by 0.9% in 2020 and at an average of just over 1% for the next three years. Global economic growth would come in at 3.3% for this year, in line with the October 2019 International Monetary Fund (IMF) forecast.

Cilliers said the Economist Intelligence Unit expected that the global economy would contract to -2.2% in 2020, a difference of more than five percentage points compared to the IMF’s forecast quoted by Mboweni.

The UN Department of Economic and Social Affairs expected a more modest contraction to -0.9%.

Stellenbosch University Business School visiting lecturer in Corporate Finance Brett Hamilton said it was clear that the Covid-19 pandemic would lead to business failures, with the SA Reserve Bank predicting an additional 1 600 business insolvencies this year, while those with the strongest cash reserves would probably survive.

Hamilton said: “We find ourselves in one of the most uncertain periods of human history… Policymakers are confronted with an unprecedented and impossible trade-off between public health and economic growth.”