Farmer's Weekly (South Africa)
Road to recovery needs a marathon approach, not a sprint
The coronavirus disease (COVID-19) pandemic is far more than a health crisis. It has and continues to affect every sector of the economy, bringing havoc and threatening the livelihoods of many, especially in poor communities.
To pull the South African economy out of the great economic depression it finds itself in, government has decided to move from Level 4 of the national lockdown to Level 3 on 1 June.
The decision to opt for a lockdown, in an effort to protect lives over livelihoods and ease the burden on healthcare facilities, must have been a difficult one for the government, especially given the fact that the country’s economy was already in slowdown mode. The business community, academics and society at large hold different views about the lockdown restrictions and the success thereof.
Some are of the opinion that government is failing because the lockdown is not working and was not necessary in the first place. However, many agree that the lockdown is in fact working, and that it is necessary to continue to have some level of restrictions in place, as we battle the spread of the pandemic.
RAPID DOWNWARD SPIRAL
With the economy having been in a very fragile fiscal position prior to lockdown, the implementation thereof accelerated the downward spiral even further. Unfortunately, the combination of the two factors triggered the downgrading of the country’s sovereign credit rating to subinvestment grade by Moody’s Investors Service (Moody’s) just two days after implementation of Level 5 lockdown.
Moody’s decision had been widely expected, and the market had already adjusted to the potential downgrade before it happened. However, the markets did not anticipate the COVID-19 pandemic, and so far, its impact is hammering every economy in the world, and South Africa has not been spared.
In fact, some analysts predict that the impact of COVID-19 on South Africa’s economy will be exponentially worse than that of its trading partners. So much so, that Business Unity South Africa is now forecasting that South Africa’s GDP could shrink between 10,3% and 16,7%. This is significantly higher than the forecast from the South African Reserve Bank, National Treasury, Moody’s, and the IMF of around 6%.
LONG-TERM RECOVERY PLANS
Given that the pandemic is confronting every level of our economy with an unprecedented challenge, government has begun to enact long-term recovery plans for the country by opening up the economy for most sectors from 1 June.
The recognition of agriculture’s important role as an essential sector, as well as its forward and backward linkages, is an important moment, as was highlighted by the Western Cape Department of Agriculture. As the government and some sectors of the economy now face an enormous task of restarting the economy, one thing is clear, the road to recovery will be long and hard and requires a marathon approach, of which agriculture has tried-and-tested experience.
While agriculture has been affected less by the pandemic than other sectors, the domestic challenges it faced before COVID-19 have not gone away. These range from policy-related issues to weather conditions. These issues (not to mention those driven by international factors) remain major risks for the agricultural economy in the foreseeable future.
That said, the resilience of the agriculture sector is what makes it better positioned to support South Africa’s economic recovery during and post-COVID-19 pandemic. Our farmers and other role players in the agriculture value chain continue to ensure that the current COVID-19 crisis does not result in a food and poverty crisis.
As a result, the current stock levels of farm produce for most commodities is well above those we had during the 2008 to 2010 financial crisis.
Moreover, the exchange rate will support exports and limit the negative impact of the lockdown challenges.