Economic recovery from July riots could take 2 years, Treasury tells MPs

Treasury official Duncan Pieterse cited a range of research findings, including literature, suggesting that the effects of such a shock to the economy could be felt for up to six quarters – that’s 18 months – if not longer.

FILE: People carry goods as they loot and vandalise the Lotsoho Mall in Katlehong township, East of Johannesburg, on 12 July 2021. Several shops are damaged and cars burnt in Johannesburg, following a night of violence. Police are on the scene trying to control further protests. It is unclear if this is linked to sporadic protests following the incarceration of former president Jacob Zuma. Picture: Phill Magakoe / AFP

CAPE TOWN - Recovery from the economic shock of the recent violence and looting in KwaZulu-Natal and Gauteng could take nearly two years, National Treasury has told Parliament.

Treasury officials were briefing Parliament’s select committee on finance on the economic impact of the week-long unrest that erupted in the two provinces last month after former President Jacob Zuma was jailed for contempt of court.

Treasury said that the country’s GDP could fall by between 0.7 and 0.9 of a percentage point as a result of the mayhem.

Treasury official Duncan Pieterse cited a range of research findings, including literature, suggesting that the effects of such a shock to the economy could be felt for up to six quarters – that’s 18 months – if not longer.

"And that really comes to the longer-term impact that a shock like this has on investor sentiment and potentially the scarring effects on employment. So, people who lose their jobs cannot spend and participate in the economy like they were able to, and that also has longer-term growth impacts."

Pieterse said that the Beyond Covid Research Initiative said that small, medium and micro-enterprises accounted for 89% of businesses affected.

Just 6% have reopened, 51% have closed and of these, 7% will not reopen while 44% said they’re just shut for now.

A clearer picture of the cost of the unrest to the economy is expected when new Finance Minister Enoch Godongwana delivers his maiden medium-term budget policy statement in October.

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