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South Africa’s anxiety and measures against Covid are beginning to upset its economic recovery

South African flag-raising religious leaders are plundered in a shopping mall on July 14, 2021 in Vosloorus, South Africa, as the country deploys troops to calm the anxieties associated with the imprisonment of former South African President Jacob Zuma. Walk near.

Siphiwe Sibeko | Reuters

This year’s strong start in South Africa’s economy can be spoiled by the following combinations: Updated Covid-19 containment Measures and Recent public anxiety, Experts warn.

Due to the third wave of infection, the government implemented a strict blockade towards the end of June. President Cyril Ramaphosa announced last week that alert levels were downgraded from level 4 to level 3, new daily cases consistently declined from their peak on July 8, and vaccinations are accelerating.

However, some measures have been taken to limit economic activity, and the impact of the blockade for about a month has recently been hit. Riot and looting week Beyond the economic centers of Houten and KwaZulu-Natal, they are apparently protesting the arrest of former President Jacob Zuma.

Zuma left himself to the South African police July 7 after being sentenced to 15 months in prison for not appearing before an investigation into corruption during his tenure from 2009 to 2018.

Much of the anxiety has subsided in the last few weeks after the military deployment, but at first glance short-term economic damage seems less of a concern than initially feared, but analysts are moving to a wider economy. I am worried that it underlies the long-term effects of.

On July 13, 2021, Camps Drift Park, which houses Macro and China Mall, was involved in a fire following a predatory protest in Pietermaritzburg, South Africa. This screenshot was taken from a video obtained from social media.

Shibone Rosung | Reuters

“Overview, retail and production account for about 20% of GDP, or about $ 70 billion, of which $ 14 billion,” said Robert Besseling, CEO of Political Risk. It may have been lost. ” Consultancy firm Pangea-Risk told CNBC on Friday.

“In addition, most of the looted shops and malls are near the town, which imbalances the impact on poor communities, despite the ongoing blockade of Covid-19. I have a hard time finding groceries and supplies nearby. “

Mr Besseling said three refineries in the country are currently closed, two of which are closed for maintenance reasons, and the possibility of future fuel shortages cannot be ruled out. There is only one refinery operating in Free State, but he added that panic buying puts extreme pressure on the supply chain.

“Therefore, the medium- to long-term effects of economic instability are expected to be more significant than the immediate effects of violence, which lowers the outlook for economic recovery and at a higher rate, including imitations of looting. It can cause crime and anxiety, “Besseling said.

Zuma’s arrest deepened the division within the ruling ANC party between supporters of the former president and those on the agenda of his successor, President Lamaposa. Besseling suggested that Ramaposa should take this opportunity to drive Zuma’s supporters out of the party and governance structure in order to realize the promised economic reform agenda.

The riot “couldn’t come at the worst time”

The International Monetary Fund expects South Africa’s economy to grow 4% in 2021, and all previous indicators show a sharper recovery than expected from Covid’s recession.

While GDP increased 1.1% in the first quarter and increased 4.6% annually, the increase in mobility and business confidence data in the second quarter is also optimistic.

However, KwaZulu Natal and Houten, where many abandoned businesses are expected to take years to rebuild, account for half of the country’s GDP and nearly half of the total population. The port of Durban in KwaZulu-Natal serves as a gateway to trade to the South African continent, accounting for about 70% of South Africa’s imports.

Economists estimate that the cost to the national economy of the destruction caused by protests by Zuma supporters is estimated at R50 billion ($ 3.43 billion).

In a research note last week, NKC African economics pointed out that other major concerns include a threat to food security, as well as further disruption to the supply chain, in addition to those caused by the pandemic. ..

“What happened in KwaZulu-Natal and Houten couldn’t have happened in the worst of times,” said Pietel Duprez, senior economist at NKC.

Members of the South African Police Service (SAPS) arrested a predator at the Gold Spot Shopping Center in Vosloorus, southeast of Johannesburg, on July 12, 2021.

Guillem Sartorio | AFP | Getty Images

NKC has lowered its 2021 South Africa economic growth forecast from 4.3% to 3.8%, hampering its medium-term outlook due to lower investor confidence and lack of financial space, which is expected to put pressure on capital investment. Said that.

“Early estimates of damage are alarming, affecting 50,000 informal traders and 40,000 businesses and endangering 150,000 jobs,” Duprez said. ..

“Approximately 3,000 stores were looted, 100 shopping malls were severely damaged by fire, and approximately 1,200 retail stores were affected and damaged.”

He added that this all happened in addition to the third wave of Covid-19, which was hit harder than expected due to the infectivity of the Delta variant.

“The resulting four-week adjusted Level 4 blockade will affect the third quarter, but the current adjusted Level 3 measures will continue to impede activity somewhat,” Duprez said. rice field. “Generally, in the third quarter, before the rebuilding begins, we expect a further recession in the fourth quarter.”

South Africa’s anxiety and measures against Covid are beginning to upset its economic recovery South Africa’s anxiety and measures against Covid are beginning to upset its economic recovery

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