SA has to fix Eskom to survive the Covid-19 aftermath, the OECD says
- South Africa's quick monetary and fiscal response to the coronavirus disaster helped, the Organisation for Economic Co-operation and Development says.
- But what SA's Covid-19 economic response really needs, the OECD says, is a focus on state-owned enterprises.
- Starting with Eskom.
- For more stories go to www.BusinessInsider.co.za.
South Africa's quick monetary and fiscal policy responses to the coronavirus disaster has helped mitigate the impact of the crisis, the Organisation for Economic Co-operation and Development (OECD) says – but there is one area that really needs attention.
Funding and expanding the national rescue plan, with its additional social grants, support for small business, and measures to keep consumers afloat, is possible through borrowing domestically and "partnering with international financial institutions", the OECD says in the first issue of its 2020 economic outlook, published on Wednesday.
"However, the paramount reform needed to unlock the potential of the economy and bring back confidence is to tackle the challenges of key state-owned enterprises, particularly Eskom, the monopolistic national electricity company. Such reforms are urgently needed to create conditions for the return of investment and growth and to restore fiscal sustainability."
The organisation predicts that high production costs will continue to weigh on economic activity in South Africa, while load shedding "remains a key domestic risk".
It does, however, have some hopes that a faster recovery in China could "have growth spillovers for South Africa, including through higher demand and prices for commodity exports."
The OECD has presented what it describes as "two equally likely scenarios - one in which the virus is brought under control, and one in which a second global outbreak hits before the end of 2020."
In the "single hit" scenario, it predicts SA will see a 7.5% contraction in economic activity in 2020, with 2.5% growth in 2021. In the case of a "double hit", its predicted contraction this year rises to 8.2%, with a bare 0.6% growth in GDP next year.
(Compiled by Phillip de Wet)
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