OECD: South Africa should improve social protection schemes amid pandemic

31 Jul 20

Covid-19 has shown that South Africa needs to improve its social protection system to ensure everyone living in poverty is supported, economists have argued in a report into the country.

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Cyril Ramaphosa

South African president Cyril Ramaphosa

 

After the government imposed a tough lockdown in March, major parts of the economy, such as mining and industry, contracted, while other sectors such as tourism, entertainment and passenger transport were brought to a “near-standstill”, the OECD said in its latest Economic Survey of South Africa.

Unemployment is projected to reach 34% this year (up from 28.7% in 2019 – already historically high), leaving the government with huge numbers of people to support.

Early on during the lockdown, poor communities faced food shortages and many resorted to looting shops to acquire food. Violent protests took place over access to food parcels handed out by the authorities, the report stated.

“The pandemic has demonstrated that further action is needed to build an inclusive social protection system,” the OECD said in a statement accompanying its report.

“The survey suggested that South Africa consider additional means-tested support for households below the food poverty line, better coverage for informal workers and a gradual increase to the public financing of healthcare, through a form of public insurance.”

Pension coverage is also “not satisfactory”, according to the report, which states only around 40% of workers contribute to pension schemes, and most informal workers are not covered.

“South Africa cannot afford to delay reforms,” said Alvaro Pereira, a director at the OECD’s economics department.

“It is essential to undertake reforms to restore long-run fiscal sustainability and growth, while continuing to support the economy in the short run.”

Even before the pandemic, the South African economy was struggling, with public finances strained by a comparatively high public sector wage bill (about 12% of GDP) and struggling state-owned enterprises needing frequent government transfers.

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