South Africa is one of the countries on the African continent that has been greatly hit by the COVID-19 pandemic with approximately 21,000 confirmed cases, 10000+ recoveries and 400+ deaths. Hit by the pandemic in the mist of economic struggle-an economic recession, the country will have a hard time dealing with post pandemic recovery. In fact, according to S&P Global Ratings, the economic fallout from the coronavirus pandemic on South Africa will be “very difficult to handle” as the country entered the crisis in an already weak fiscal and economic position.
On March 27 2020, South Africa after the detection of it’s first COVID-19 case imposed one of the strictest lock-downs in the world and gross domestic product projections deteriorated afterwords. A lock-down which shuttered all activity except essential services for five weeks, and was only partly eased from May 1.
“South Africa’s fiscal position remains weak, and a Covid-related shrinking economy, lower government revenues, and a large fiscal package have further exacerbated existing fiscal problems,” said S&P analysts, led by London-based Ravi Bhatia.
This comes after S&P Global Ratings’ earlier move late in April which downgraded South Africa’s credit rating further into non-investment grade territory, saying COVID-19-related pressures will have significant adverse implications for its already ailing economy and for tax revenues.
The Treasury is due to finalize an adjustment budget in June, which will account for the impact of the virus on government coffers and detail funding plans for a 500 billion rand ($28 billion) stimulus package. While 130 billion rand of that will be redirected spending, the plans could prove “overly ambitious” if the virus spread worsens or there is a second wave of infections, S&P said. The government also intends to fund virus-related health and social expenses by borrowing from multilateral lenders and development banks. The success of this stimulus package therefore depends greatly on whether or not there is is another wave of the epidemic.