COVID-19 and the Counter-cyclical Role of the State in South Africa

Abstract

The COVID-19 pandemic has disrupted social and economic activities across the world, resulting in the contraction of national economies and the global economy, causing an unprecedented loss of employment. The pandemic’s detrimental impact has meant that governments have to play an interventionist role to mitigate the staggering social and economic effects of the COVID-19 lockdown on sustainable development. In light of the damaging impact of the pandemic on the economy, employment and poverty, this article assesses the socio-economic contribution and effectiveness of the counter-cyclical policies in mitigating the socio-economic impact of COVID-19 in South Africa. Methodologically, the article used secondary qualitative and quantitative data to assess the government’s fiscal and monetary measures. The findings suggest that South Africa adopted extensive counter-cyclical fiscal and monetary policies, such as increased government spending on social and economic public goods, tax relief, interest rate cuts and job protection measures. While these counter-cyclical measures had some degree of effectiveness, they were undermined by the lack of comprehensively targeted measures for low-income households. This article argues that the country needs to find proactive ways of managing its counter-cyclical fiscal measures to ensure a higher degree of effectiveness and economic stabilization to reach those in greatest need.