South Africa flag
Economic cooperation is the linchpin of the US-SA bilateral relationship. Shutterstock

South Africa has continued to suffer adversely as a result of COVID-19, with the number of new cases having increased of late and the country currently recording the highest death rate on the continent (there have been 5,033 fatalities to date).

This is continuing to take a socio-economic toll on the nation’s economy, which is expected to shrink by 6.9% in 2020 according to the S&P Global Ratings.

The government is looking to combat this loss with a number of planned policy changes, as it looks to optimise growth potential in the near and medium-term. We’ll break these down below, while asking how they’re likely to impact on the economy and the South African rand.

What Changes Have Been Proposed?

Interestingly, some of the proposed measures have been in the pipeline for a number of years, but their implementation has been accelerated following the significant impact of the coronavirus pandemic.

The first of these is a change to voting measures, with the country’s Electoral Commission (IEC) having pushed through its plans to introduce electronic voting. The initial objective behind this measure was to increase the efficiency of the electoral process in SA, but it offers additional value and even greater value in an age where COVID-19 can spread so easily.

From an economic perspective, we’ve also seen changes to the management of pensions and prescribed assets in South Africa.

This reform will follow the publication of the parliament’s full report on SA’s special adjustment budget, which recommended higher levels of engagement on the feasibility of prescribing assets for pension funds. More specifically, the ANC is known to support changes that will enable cheaper access to finance for development, which is seen as being crucial to the restoration of fiscal stability in the region.

Financial sustainability is pivotal to this, as are the wider macroeconomic policies adopted by the government in question.

On a similar note, the government has recognised the pressing need to support businesses and income streams, following the disruption caused by coronavirus. The Department of Social Development has subsequently introduced the R350 COVID-19 Social Relief of Distress (SRD), which is promising the delivery of a basic income grant in South Africa.

Boosting the Rand and the Nation’s Economic Stability

These measures are important, although it’s interesting to note that the South African rand (ZAR) has been largely unshaken throughout the COVID-19 outbreak.

It has also remained relatively consistent following the introduction of new lockdown measures, with the ZAR continuing to perform relatively well against the USD and other major currencies.

However, the future of the ZAR and emerging currency market remains increasingly fragile against a backdrop of mounting debts and dwindling investments, and in this respect, the new measures imposed by the SA government will help to safeguard the country’s currency for the future.

The announcement of the measures certainly helped to arrest a marginal drop against the USD, while the GBP/ZAR exchange rate was also recently quoted half a percent lower at 21.17 in comparison with last week’s figures.

This trend could well continue in the near-term, although more measures may be required to manage the situation and boost the South African economy over an extended period of time.

Leave a Reply