Prior to the outbreak of the current pandemic, the South African economy was already suffering and heading into a recession. What Covid-19 did to South Africa was turn the pre-pandemic recession into the greatest financial crisis for the country since the Great Depression in the 1930s. The South African Reserve Bank reported that GDP would fall more than 7% during 2020: the largest contraction in South Africa’s history.
With some of the strictest lockdown measures in the world, the economy in South Africa paid the price for ultimately saving lives. Despite the pandemic and the shutting down of industries to protect lives, the country still managed to export $82.5 billion worth of goods across the globe. As the world tentatively edges away from the grip of Covid-19, there are signs of optimism in South Africa and 5 reasons why the economy is going to bounce back:
1) Trading stocks and shares
When it comes to stock trading, South Africa has long been seen as a favourable market due to its history and stability. With the primary stock market, the Johannesburg Stock Exchange, dating back over 120 years, it is seen as trusted and secure. The financial impact of Covid-19 has not just been felt in South Africa: it has sent a shock wave around the world. As such, investors will be seeking a safe haven for their money, which brings us on to point number two.
2) The price of gold
There is a possibility that we are hurtling towards a global recession: in a similar vein to 2008, the world’s economy is heading towards a crisis. Covid-19 has impacted every major economy across the globe and when this happens, investors turn to the security of gold. With South Africa exporting $17 billion worth of gold last year, the price of gold is set to increase and boost the South African economy.
3) Trading partners
As South Africa’s economy relies heavily upon exports, there are key changes to that landscape in 2021. With China, the US, and the UK, being the top destinations for exports, changes in these countries look set to benefit the South African economy. The change in the US leadership, the UK seeking out new trade agreements following Brexit, and China keen to remain financially strong, all open up opportunities for the South African economy in terms of its exports.
4) The tourism industry
South Africa has always had a financially positive tourism industry: tourists into the country spend significantly more than South Africans who travel abroad. In December 2019 alone, over 2.5 billion Rand was spent on accommodation and a further 734 million Rand in pubs and restaurants. Then came Covid-19! As the world looks to vaccines and as nations begin to lift travel restrictions, 2021 will see the South African economy benefit again from its tourism trade.
5) A good place to do business
Despite the financial difficulties that preceded Covid-19, traders and businesses have long seen South Africa as a positive market to operate in: it’s large stock exchange, and stable banking system, instils confidence in traders and investors. As South Africa, and the world as a whole, look to move forwards from the impact of the pandemic, there is a real opportunity for the South African economy to boom.
