Sagging commodity prices will put the brakes on SA's economic recovery
Reduced consumer demand and plunging commodity prices caused by the coronavirus pandemic spelt a long road to recovery for SA’s economy.
This is according to Transnet CEO Portia Derby.
With SA's economy expected to crash by as much as 9.5% and global trade volumes expected to drop by nearly 12% this year as the pandemic grinds on, there is little hope for a strong economic rebound in 2021, said Derby during a Southern Africa Transport Conference (SATC) webinar on Wednesday.
“As SA we got into this when the economy was already in trouble,” she said.
SA’s economy had been expected to grow at just 0.9% before the pandemic hit. Now, falling US consumer demand would likely see reduced working hours in Asia, which in turn would cause commodity prices to sag.
Some 1,500km of Transnet’s 30,400km of track are dedicated heavy-haul lines carrying iron ore, manganese and coal for export.
To compete, SA would need to become the main transshipment for the Southern African Development Community (Sadc) region, said Derby.
“The north-south corridor is our priority,” she said.
The corridor links SA ports to Botswana, Zimbabwe, Zambia and Democratic Republic of the Congo (DRC).
While Transnet’s Covid-19 command centre was being demobilised, the lessons had been embedded as the “new normal” in its daily port, rail, pipeline and property operations.
One of the utility’s greatest challenges during the pandemic has been protecting workers at the country’s ports, which remained open even as the pandemic surged through SA.
“Ports have the highest person-to-machine interface,” said Derby.
Transnet had coped with infections among port workers by moving teams between different harbours which had allowed operations to continue efficiently.
Africa could expect to suffer its largest ever recession in the wake of the pandemic, with UNCTAD estimating a 40% drop in foreign direct investment (FDI) flows in 2020-21, compared to a 35% drop during the 2008-9 global financial crisis.
“SA will be burdened by low private investment, high unemployment and growing poverty if we do nothing,” said Derby.
“The challenge for SA [will be] how to change the risk/reward perception.”
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