Unrest will continue in SA without economic reforms, says World Bank

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The World Bank has warned of continued social unrest in South Africa if the government does not speed up the implementation of economic reforms to address inequality.

The country has been engulfed by unprecedented unrest, accompanied by the destruction of industrial parks and shopping malls, since the arrest of former president Jacob Zuma.

The 13th edition of the bank’s South Africa Economic Update released recently, said the Covid-19 crisis was widening inequality by contributing to severe and unequal job losses.

The report has a special focus on South Africa’s employment performance, particularly as impacted by the Covid-19 pandemic.

It found that low-wage workers suffered almost four times more job losses than high-wage earners.

At least 1.4 million people had lost their jobs by the end of last year, representing an 8 percent contraction in aggregate employment.

World Bank country director for South Africa Marie Francoise Marie Nelly said South Africa needed to review its policies to address unemployment, which was at 32.6 percent.

“This review calls for policies that address long-standing structural constraints to accelerate growth,” MarieNelly said.

“Supporting young entrepreneurs is South Africa’s best hope of solving the jobs crisis, especially in relaxing constraints and rules to the start-up community.”

The report said that young people, in particular, faced acute unemployment. The bank proposed strengthening labour market linkages of the social transfer system, including expanding the employment tax incentive to enhance access to jobs.

It also proposed considering a negotiated moratorium on specific labour regulations that increase the real cost of labour and make job recovery more difficult.

Last, it suggested relaxing constraints to entrepreneurship and self-employment and scaling up programmes that provide entrepreneurial training and start-up grants to address other barriers to entry.

The World Bank said South Africa is set to emerge from the Covid-19 crisis weaker than when it entered it, despite its solid response to the pandemic.

The bank projects the country’s gross domestic product (GDP) growth to rebound to 4 percent this year, propelled by the strong global recovery and favourable commodity prices.

However, it said the country’s growth outlook was uncertain, with major risks around the path of the pandemic.

GDP growth was projected to slow to 2.1 percent next year and to 1.5 percent in 2023, suggesting that the average South African would be worse off in 2023 compared to 2019.

However, Marie-Nelly said the global recovery presented an opportunity for the government to address the well known structural constraints to growth and to lift the country on to a higher and dynamic growth path.

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