Zuma’s arrest has been overshadowed by the real economic hurdles South Africa will continue to face, whether he remains behind bars or not, alongside global factors such as reflation, stimulus and global growth. Despite this, there is a real concern as to the effect protests and looting will have on the economy. The violence is likely to offset any positive inroads made into South Africa’s global reputation by Zuma’s imprisonment, and the damage to property as well as the job losses to follow will add to the fragility of the local economy.
The Rand was hovering around three-month lows in early trade on Wednesday, as the country prepared for what could be another day of unrest linked in part to anger over poverty and economic inequality. The continent’s most industrialised economy has been gripped by some of the worst violence in decades after grievances unleashed by the jailing of former President Jacob Zuma spilled over.
As many as 72 people have died and 1 234 people have been arrested, after protesters on Tuesday clashed with police and ransacked shopping malls or set them ablaze. The rand dipped and local equity and bond markets also suffered. At 8.30am on Wednesday, the rand traded at R14.74/US$, unchanged from its previous close.
US inflation data and a stronger dollar added to the woes of the South African currency, which had been one of the best performers among emerging markets during the pandemic. The riots and violence are causing real investor anxiety
Government bonds were slightly weaker, with the yield of the instrument due in 2030 rising one basis point to 9.015%. It breached the 9% mark for the first time since late June on Tuesday.
Stocks also opened slightly lower, with the JSE’s Top40 Index down 0.11% and the broader All-Share Index down 0.12%.
Without a swift return to political and social stability and respect for the rule of law, South Africa will be unable to recover from the economic ravages wrought by years of poor governance and maladministration and exacerbated by the devastating impact of the Covid-19 pandemic.
Most private and some public vaccination sites have closed in Gauteng and Kwa-Zulu Natal. Many shops and businesses have also shut their doors with people fearing for their lives.
“It is difficult now to continue with the vaccinations in some of our communities,” said Gauteng premier David Makhura.
“The vaccination programme is not going the way it was happening. Even the health services in some of the areas where health workers are unable to go to work.”
Cas Coovadia of Business Unity SA (BUSA) says: “The anarchy has caused significant economic damage and cost and the ongoing violence and destruction of property continues to cause severe losses to the economy. The resultant loss of jobs because of businesses not having the confidence to continue operating will exacerbate an already high unemployment rate.
These events are being reported on globally, resulting in significant loss of confidence in our country as an investment destination, at a time we are competing with more positive destinations in different parts of the world.”
Coovadia said the economic damage caused by the anarchic actions of a small group of people would be long-lasting and would be felt broadly, particularly among those who were already under severe stress.
He said the impact on society was also severe.
Coovadia said BUSA urges all sectors of society, including labour, community groups, faith-based organisations and others to express their serious concern and anger at the small group holding our country to ransom.