Life in the Time of COVID with economist Dr Thabi Leoka
In this difficult time, as we face the reality of COVID-19, uncertainty abounds. The economy has been adversely affected as many industries have come to a halt due to the lockdown and other efforts to curtail the spread of COVID-19. Even though there are economic recovery measures being conceived and put in place, it could take us a while to recover from the economic blow of COVID-19. On the 28th of April, Third Way Investment Partners, together with Mergence Investment Managers, Aluwani Capital Partners, and Mazi, hosted a webinar in which renowned economist Dr Thabi Leoka shared her insights on what post-COVID-19 South Africa will look like. Dr Leoka is a member of the Presidential Economic Advisory Council, therefore, her insights were most welcome.
As a member of President Ramaphosa’s Economic Advisory Council, Dr Leoka is tasked with advising the President on the impact of COVID-19 on the South African economy; her area of expertise is in all matters that concern fiscal and monetary policy. Dr Leoka’s knowledge and experience make her a reliable source for expert insights on how COVID-19 will affect the South African economy and the fiscus. “There is a lot of pressure on the government to find solutions and steer the country in the right direction. While this is a crisis, we also see it as an opportunity to correct some of the things we should have done and to build a better South Africa, going forward,” she said.
Dr Leoka’s presentation was insightful, candid and informative, looking at South Africa within a global context, with a specific focus on how global events are affecting our various sectors. She also spoke to the economic ramifications of the national lockdown, the challenges faced by the government and the President, and the issues that the Council and Cabinet are faced with in terms of policymaking.
The IMF has estimated a -3.0% contraction in global GDP and, according to Dr Leoka, this projection is optimistic. “There are a lot of things that are unfolding and it is currently difficult to forecast during this period. The shock is very large and output loss is more severe than in the global financial crisis.” Dr Leoka shared South Africa’s experience with forecasting and getting data from Stats SA.
Dr Leoka also spoke to the actual health crisis, mentioning the fact that loosening lockdown restrictions too early had, in some countries, increased the rate of infections. In her opinion, to “tackle the health crisis, policymakers have to do the opposite of stimulating aggregate demand. This time the crisis requires us to stop economic activity until it is safe to open up the economy.” How will this affect our sectors and employment in SA, especially considering the fact that even before the lockdown, our economy was in a depression of sorts? What reforms are required and how effective will they be? How can jobs be retained to ensure consumer spending, which will provide a much-needed boost to the economy? Dr Leoka sheds light on these matters.
In light of the current COVID-19 crisis, the picture is not completely grim as there is hope for the post-COVID-19 socio-economic landscape. Dr Leoka noted that service delivery in South Africa has improved, and reforms have been put in place to transform the economy. She made suggestions regarding the allocation of funds to government departments, suggesting that priority should be given to departments such as transport, health, education and mining. Since global value and supply chains have been hard hit by COVID-19, there is an opportunity for companies localise, which will ensure that they accelerate their growth and contribute to the speedy recovery of the economy.
To ensure a relatively steady post-COVID-19 economy, Dr Leoka and her team have been working towards putting in place fiscal support and relief measures. The relief fund has funds that amount to over 10% of the GDP. The stimulus package currently has R800bn, which could be increased to R1trn, in line with the President’s request. The National Treasury has cut 20% from national and provincial governments, and local government will receive R20bn. External funding is yet to be signed off, however, South Africa is still in talks with the International Monetary Fund, the World Bank, and the New Development Bank.
Overall, in her presentation, Dr Leoka addressed the following:
- The current state of the economy
- Various monetary and fiscal stimulus packages government is and should be implementing (and their likely effectiveness)
- The post-COVID-19 economy and stumbling blocks to economic recovery
- Potential structural changes to government that could impact SA’s growth and debt trajectory
- What asset managers are doing and can do to protect investors
Download webinar presentation to see Dr Leoka’s insights on COVID-19 and the South African economy.