Winter of discontent marks a fork in road and we dare not ignore warning lights

In August, SA notched up its highest recorded unemployment rate, capping more than a year of economic shocks that started with the arrival of the Covid-19 pandemic.

Though there have been glimpses of a tentative recovery in 2021, there have also been setbacks.

The unrest and looting in July shattered any illusions about the depth of the hole we are in. The rollout of vaccines is happening too slowly for comfort, and new variants of the virus are popping up all the time, making it hard to predict when, if ever, the coronavirus nightmare will be over.

The truth is, our problems predated all of this. The virus, the lockdowns and the economic devastation of the past 18 months simply made a bad situation far worse.

The path to a full economic recovery is littered with risks, but possibly the most serious of these is that it will be too slow to prevent a fresh outbreak of unrest on an unstoppable scale as the hardship inflicted by continuous lockdowns stretches the tolerance of the economically marginalised to breaking point.

The warning lights are flashing and the events of July may turn out to be either the wake-up call that was needed or a signal of worse to come.

So far there has been an alarming lack of urgency in the government’s response as it continues to act as though the unrest never happened.

The only sustainable response is to treat job creation as the number one national priority, and put all other policy decisions in the service of that goal.

HOW NOT TO DO IT

The treatment of the alcohol industry over the course of the Covid-19 pandemic is an example of how not to go about it. Arbitrary bans on alcohol have deprived tens of thousands of people of a source of income, and not only those directly employed in the sector. Waiters, security guards, truck drivers, workers in packaging manufacture, farm workers and hundreds of service providers depend on the alcohol industry for their living.

Crucially, the hospitality and tourism sectors, which have strong links to the alcohol industry, are major employers of youth and low-skilled workers, who cannot easily find employment elsewhere or work remotely.

It is unclear how long it will take either of these sectors to recover from the blows dealt by the pandemic, alcohol bans and lockdowns.

At the same time, criminal syndicates with tentacles stretching across the country have cashed in during the alcohol bans and have used the profits to entrench themselves when the bans are lifted. Alcohol bans have caused the criminal economy to grow at the expense of legal businesses and jobs.

This is a recipe for disaster, as we saw during the unrest, when 331 alcohol retailers and outlets were plundered, damaged and burnt, and more than R500m worth of alcohol stock was looted.

Alcohol bans created the demand, and the extreme deprivation created by harsh lockdowns and lost jobs provided the tinder, waiting to be lit. Criminal syndicates stepped in, once again, to take full advantage.

THE ONLY SUSTAINABLE RESPONSE IS TO TREAT JOB CREATION AS THE NATIONAL PRIORITY

In 2020, the illicit alcohol trade grew to record levels with the help of alcohol bans. It was worth a staggering R20.5bn R6.5bn more than the R14bn 2021 police budget for criminal investigations. At this rate, criminal syndicates will be better resourced if they aren’t already than the law enforcement agencies whose job is to bring them to book.

There are many other examples of how the government has strangled job-creating sectors with evidence-free interventions in its misguided bid to control every aspect of economic activity.

With these heavy-handed interventions, the state is not only holding back economic growth, it is also depriving itself of precious tax revenue, weakening itself in the process and fuelling informality, unemployment and rampant crime.

The July unrest points to a fork in the road for SA. On one side lies the path of continued decline, erosion of state capacity, growing unemployment and social ferment, leading ultimately to a broken society. On the other lies the path of rapid economic reform, rising growth and employment, and steady improvements in living standards and social stability.

Carrying on as before is not an option.