Question

Finally, as a net importer of oil, provide a few recommendations on how SA can benefit most from the current oil crash, specifically focusing on the post-pandemic period. Should we continue with our current oil-based production practices or should economic activity be structured more toward alternative energy sources.

Answer 1

                        The Covid pandemic period has seen a wide effect in almost all sectors of the economy across the globe affecting almost all factors of production. It has had a great impact on the price of oil also during the period. The transport and traffic have reduced over the period which has caused a fall in the demand for oil across the globe. With respect to the above situation, it ca be seen that many countries like South Africa who have been a net importer of oil have gained some benefit in this regard. South Africa holds only 150 lakh barrels of oil which is only a meagre part of the world’s oil reserves and hence it remains one of the major importers of oil in the world. Almost 42% of the oil requirement of South Africa comes from Saudi Arabia with more than 30% from Nigeria also. Food and beverages, Petroleum and chemicals and the basic iron and steel industries forms about 70% of the total industrial output of South Africa. In this regard, it can be seen that oil import and the variation of oil prices would have some impact on the economy of South Africa. Oil based production like petrochemical manufacturing has been a major contributor to the economy of South Africa which has seen an advantage during this pandemic period.

                        In the given context, we have to analyse the condition after the pandemic gets over. South African economy is not fully dependent on the import of oil as clothing, chemical industries, diamond mining, agro-based industries all contribute well to its economy. The share of all these are higher which means that the fall in the oil prices in the pandemic time cannot remain the sole reason why they should stick on to the oil based production strategies. The geographical features and the economical conditions of South Africa suggests that other industries also have a big role to play in maintaining the economy of South Africa. The pandemic situations have played a role in the reduction of the oil prices in the international market which has been also beneficial to the economy of South Africa, yet the time has not come to say that the economy of South Africa shout shift to oil-based manufacturing alone. The benefits of the period can be reaped to stabilise the oil-based manufacturing while the other sectors should also be given importance during the time and once the pandemic is over, the other sectors can be focused to gain the benefits to the domestic economy.