British media have focused on the UK entering its worst recession in 11 years in the second quarter, when the country shut down as the Covid-19 virus made its way stealthily through hospitals and care homes. But the UK has already started bouncing back, growing by nearly 9% in June following a 20% contraction, data from the National Institute of Economic and Social Research suggests.
Those percentage jumps are off a low base, and we can expect South African statistics that gauge economic activity to similarly indicate a marked improvement as soon as people get back to work. The longer-term picture remains at best “precarious” for the UK, warns the NIESR; for SA it is bleak.
Unlike the UK before the pandemic, SA was already in trouble. Finance Minister Tito Mboweni warned in June that there are two scenarios. He used a graph he described as a hippo mouth to explain the situation. The upper jaw showed debt spiralling upwards, the rand weakening and capital flight; the lower jaw represented government stabilising debt, increasing revenue collection and stimulating business activity.
Mboweni said the government was committed to the latter. But the ongoing bans on cigarette and alcohol sales – which have decimated tax revenues – the depreciating rand and the huge appetite for offshore investing tell us that we need to hold on tight to the upper jaw.
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