STRATEGIC REVIEW OF UNISA BY MEANS OF DATA-BASED …

“Macroeconomic Doom, Gloom or Boom: Pre-, amid-and post-COVID 19”.

Chamber Session – Virtual Event

Bureau of Market Research (Pty) Ltd

05 November 2020

Table of Contents

• Pre-Covid-19 Global, Continental and National Economic Challenges

• Pre-Covid-19 Global, Continental and National Economic Performance

• Pre-Covid-19 Global, Continental and National Economic Projections

• Amid-Covid-19 Global, Continental and National Economic Challenges

• Amid-Covid-19 Global, Continental and National Economic Performance

• Post and Amid Covid-19 Global, Continental and National Projections

• Post and Amid Covid -19 Government Economic, Legal and Financial Policy Interventions

• Conclusion of Transmission Channels of the Economic and Financial Impact of the Covid-19 Pandemic

• Conclusion Summary of Policy Measures to Address the Economic and Financial Impact of the Covid-19 Pandemic

“Macroeconomic Doom, Gloom or BoomPre-, COVID 19”.

Economist Intelligence Unit Bureau of Market Research Investec South AfricaStatistics South Africa TransUnion LLC World Health OrganisationEXX Africa Business Risk Intelligence African Development Bank South African Reserve BankWorld Bank International Monetary Fund OECD

Pre-Covid-19 Global, Continental and NationalEconomic Challenges

Global Economic Challenges• The US-China trade war impacting trade tariffs• The Russia -Saudi Arabia oil conflict leading to a reduction in global oil prices• The US-Iran conflict with a potential to spike global oil prices• Climate change and environmental fragilities• Cyber insecurity and technological instabilities (EIU, 2019)

Sub-Saharan Africa Continental Economic Challenges• Unemployment and under employment• Underinvestment in infrastructure• Climate change impacts – hurricanes, floods, draught and famine• Public debt burden leading to recessions in some economies• Poor governance and corruption (EX Africa, 2019)

South Africa National Economic Challenges• Low economic growth• Downgrade by Moody’s rating agency• Low consumer and investor confidence• High sovereign debt to GDP ratio• Persistent energy disruptions (BMR & Investec, 2020)

Pre-Covid-19 Global, Continental and National Economic Performance

Global Economic Performance

• In 2019 the global economy grew by 2.3%• Achieving an average consumer price inflation of 8.8%, and• Maintaining a public debt to GDP ratio of 69%

Source; (EIU, 2019)

Continental Economic Performance

• Sub-Saharan Africa grew at 2.1% in 2019• Recording an average price inflation of 8.5%• The public debt to GDP ratio stabilized at 47%, and• Registered a trade balance of 0.2% of GDP

Source; (EIU, 2019)

National Economic Performance

• Annual economic growth of 0.2% in 2019• Average consumer price inflation of 4.1%• Public debt as a percentage of GDP of 60%• A trade balance of 0.3% of GDP

Source; (EIU, 2019)

Pre-Covid-19 Global, Continental and National Economic Projections

Global Economic Projections

• The global economy will grow by 2.4% & 2.7% in 2020 & 2021 • Achieving average consumer price inflations of 5.4% & 4.1%, and• Rising public debt to GDP ratios of 70% & 71% respectively

Source; (EIU, 2019)

Continental Economic Projections

• Sub-Saharan Africa will grow at 2.5% & 3.4% in 2020 & 2021• Recording average price inflations of 9.6% & 7.9%• A stable public debt to GDP ratio of 47% for both years, and• Registering declining trade balances of 0.3% and 0.2% of GDP resp

Source; (EIU, 2019)

National Economic Projections

• Annual economic growth of 0.6% & 1.3% in 2020 & 2021• Average consumer price inflations of 4.3% & 5.1%• A rising Public debt as a percentage of GDP of 63% & 66% , and• A declining trade balance of 0.4% and 0.3% of GDP respectively

Source; (EIU, 2019)

“Macroeconomic Doom, Gloom or BoomAmid-, COVID 19”.

Amid-Covid-19 Global, Continental and National Economic Challenges

High conc. in Americas, China, India and SA

Amid-Covid-19 Global, Continental and NationalEconomic Challenges

Global value chains have gone through massive shock and disruption across all continents

Amid-Covid-19 Global, Continental and National Economic Challenges






Amid-Covid-19 Global, Continental and National Economic Performance

Globally economic growth slowed to less than – 3% in most of the countries of the world Amid the Covid-19 pandemic


The distribution remained the same by April 2020 amid the onslaught of the pandemic with

Southern Sudan and Eritrea highest in Africa.


Africa

The AFDB indicates that growth decline and recovery has varied across the different regions of Africawith the least in the agriculture dependent East and the greatest decline in commodity dominatedSouthern Africa economies


The pandemic has already triggered an increase in inflation in the continent in some cases by more than 5% in the Q1 of 2020 in Angola, Zambia and Ethiopia due

mainly to the disruption in the supply of food and energy most of which is imported. But in many other countries a drastic fall in aggregate demand due to lockdown

and containment has eased inflation pressures.


Africa Africa

Africa’s debt to GDP ratio has increased to above 70% and the fiscal deficits doubled at least amid Covid -19

Amid-Covid-19 Global, Continental and NationalEconomic Performance

South Africa Quarter on Quarter Real GDP & Sector Growth (%) 2018/2020

The SA economy had begun its downturn in 2018 already but the Covid-19 pandemic exacerbated it in the Q2 dissipating mostly the construction, manufacturing and the mining sectors.

Amid-Covid-19 Global, Continental and NationalEconomic Performance

SA consumer inflation declined to 3.1% in August 2020 but due to the drastic drop in aggregate demand BMR projects a contraction in real trade sales in all types of retail outlets.


SA economy shed 2.2 million jobs in Q2 but unemployment levels dropped to 23.3% mainly due to an increase in the number of NEA population due to Covid-19


Survey 1/Lockdown 5 Survey 2/Lockdown 5 Survey 3/Lockdown 4

(30 March-13 April) (14 April-30 April) (01 May – 31 May)

Turnover below normal

range85.4 89.6 84.3

Can survive less than a

month without turnover30.6 29.7 23.3

Temporary closure or

paused trading activity46.4 47.9 20.2

Laying off staff in the

short-term19.6 36.4 25.8

Expected their workforce

size to decrease36.8 45.6 26.8

The workforce was unable

to meet business demands43 50.4 30.2

A decrease in access to

financial resources23.8 38.3 20.3

Unable to get access to

materials, goods or

services

37.7 52.9 28.1

Prices of materials, goods

or services increased

more than normal

19.1 32.9 39

Their businesses will be

operating during the level

4/3 lockdown period

- 56.3 74.6

They would use

government relief schemes38.2 30 39.8

Variable Reported by the

Business Sample (%)

Summary Results of the Stats SA Business Impact Survey of Covid-19 Pandemic in South Africa

Number of Survey and Level of Lockdown in 2020

Amid Covid-19 on average 84% of businesses experienced turn over below normal ranges, 39% more than normal increased prices for materials and 40% required government relief scheme

“Macroeconomic Doom, Gloom or BoomPost-, COVID 19”.

Post and Amid Covid-19 Global, Continental and National Projections

Global Economic Projections

• The global economy will contract by -5.0% in 2020 but recover to 4.4% in 2021

• Achieving average consumer price inflations of 3.3% & 3.6%, and• Rising public debt to GDP ratios of 81% for the respective yearsSource; (EIU, 2020)

Continental Economic Projections

• Sub-Saharan Africa will shrink by -4.8% in 2020 & recover to 1.8% in 2021

• Recording average price inflations of 10.4% declining to 9.3% • A stable public debt to GDP ratio of 80% for both years, and• Registering declining trade balances of slightly above -0.2% and -

0.1% of GDP for 2020 & 2021 respectivelySource; (EIU, 2019)

National Economic Projections

• Annual economic contraction of -8.0% in 2020 & a recovery to 1.8% in 2021

• Average consumer price inflations of 3.3% & 4.0%• A rising Public debt as a percentage of GDP of 80% & 82% , and• A rising trade balance of 1.4% and 1.6% of GDP respectivelySource; (EIU, 2019)

Post and Amid Covid-19 Differentials in National Growth Projections

There are glaring differentials in the 2021/22 growth projections among the eight institutions but consensus that on average SA economy will contract by about -7.0% in 2020 but recover to pre- corona levels in 2021/22

2020 2021 2022

Statistics South Africa 1,3 1,8 2,3

National Treasury -7,8 3,3 1,7

South African Reserve Bank -7,3 3,8 2,9

World Bank -7,1 2,7 1,9

Economist Intelligence Unit 0,7 1,2 2,2

IMF -7,2 4 -

OECD -8,0 0,6 3,3

AFDB -7,5 1,3 -

Projected Growth of the South African Economy 2020-22 : The level of Impact of Covid-19

InstitutionProjected Rate of Growth

Post and Amid Covid -19 Government PolicyInterventions (1)

Item Government Policy Measure

1 Containment measures

2 Fiscal measures

3 Monetary policy and prudential regulation

4 Measures to promote burden-sharing within the private sector

5 Regionalisation/localisation of global supply chains and production

Source: OECD, 2020


Item Containment Policy Measures Detailed Execution Activities

1 Confinement & lock-downs Policies that limit residents' movements and activities.

2 Travel bans & restrictions Policies that limit movements in and out of a country or between major regions

3 Closure of schools Policies affecting all levels of education, from early childhood education and care through to universities

4 Cancellation of public events/closure of public places

Policies that prohibit certain types of public gatherings or access to certain public areas

5 Obligatory shut-down of economic activities

Policy listing activities or sectors that are ordered to temporarily stop operating, and dates of closure and scheduled re-start

Source: OECD, 2020

Post and Amid Covid -19 Government Policy Interventions (3)

Item Fiscal Policy Measures Detailed Execution Activities

1 Overall fiscal measures Policies that provide an overview of the total measures that affect the 2020/21 budget (national accounts definition).

2 Health system measures Policy measures to support the health system and immediate response to the pandemic

3 Income support measures for individuals and households, excluding tax and contribution changes

Policies such as short-time work schemes and wage support other than taxes and contribution policy changes or deferrals.

4 Tax and contribution policy changes Policy changes that lead to revenue gains or losses.

5 Public sector subsidies to businesses Transfers to firms. These are on balance sheet measures which do not create an asset for the public sector.

6 Deferral of taxes and social security contributions and bringing-forward expenditures within current fiscal year

Covers delays in tax, social contribution and other payments to the government, and bringing forward of government payments and transfers, within the current fiscal year

7 Public sector loans or capital injections to businesses

Off-balance sheet measures. Distinguishing acquisition of equity from loans.

8 Loan guarantees by the state, benefiting private borrowers

Policy mechanisms to provide the loan guarantees, and any capital injections or fiscal outlays associated with these measures. Reporting the value of loans covered by the full use of the guarantees.

Source: OECD, 2020

Post and Amid Covid -19 Government Policy Interventions (4)

Item Monetary Policy and Prudential Regulation Measures

Detailed Execution Activities

1 Monetary policy Policies that impact interest rates payable or the money supply.

2 Prudential regulation Policies that set limits for financial firms capital adequacy and liquidity requirements, the related reporting and public disclosure

Source: OECD, 2020


Item Measures to promote burden-sharing within the private sector

Detailed Execution Activities

1 Support to individuals & households policy

Policies of other measures which do not have a direct fiscal cost or identified contingent liability - for example, moratoria on paying rent or utility bills, interest payments, etc.

2 Support to firms policy Policies of other measures which do not have a direct fiscal cost or identified contingent liability - for example, moratoria on paying rent or utility bills, interest payments, etc.

Source: OECD, 2020


Item Policy towards regionalising/localising global supply chains and production

Turning inwards Asia’s self sufficiency measures

1 China’s dual circulation policy Policy calling for China to move towards greater economic self-sufficiency by reducing China’s exposure to the vagaries of the global economy whether in terms of supply or demand.

2 India’s self-reliance policy The policy focuses on India’s economy. The self-reliance prioritises weaning India-off Chinese imports and at the same time exploiting a reassessment of relations with China around the world to attract supply-chains shifting out of the country.

3 Indonesia’s import substitution policy

Import substitution policies are showing signs of making a comeback in Indonesia. The Indonesian President has expressed concerns about the country being a destination for exports from other ASEAN members once the AEC is finalised.

Source: OECD, 2020

“Macroeconomic Doom, Gloom or BoomConclusion”.

Conclusion of Transmission Channels of the economic and financial Impact of the Covid-19 Pandemic

Conclusion Policy Measures to Address the Micro-financial Impact of the Covid-19 Pandemic

• Covid -19 pandemic has increased government health related spending prompting governments to put in place system-wide liquidity and term funding support plus accommodative monetary and fiscal policy including tax deferral and relief.

• The SA government has in this regard unveiled the long-awaited Economic Reconstruction and Recovery Plan, committing to cut spending and reduce the government debt as part ofreforms to boost economic growth. The government is targeting 3% average annual economic growth over the next decade. The MTBPS outlined a supportive macroeconomic framework of fiscal consolidation, debt reduction and the re-prioritisation of funds.

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STRATEGIC REVIEW OF UNISA BY MEANS OF DATA-BASED …