South African Chamber of Commerce and Industry chief executive officer, Alan Mukoki, has warned that the country’s unemployment rate could climb as high as 50% in line with the National Treasury’s worst prediction.
Treasury said that more than 2.5 million jobs could be cut as a result of the coronavirus pandemic, with wages and salaries expected to fall by as much as 30%.
While these numbers are severe, Mukoki said that jobs would be sacrificed so businesses could stay afloat.
“Employers have cash-flow problems. Some lucky businesses will make it through this, but it will be at the cost of their workforce.
“The prospect of having the unemployment rate climb to 50% is not out of line,” he told the Sunday Times.
“What we are seeing is that businesses will not borrow money and get into debt to pay staff when they can simply be laid off and made the burden of the Unemployment Insurance Fund.
“Most staff are not indispensable so you can get rid of them and maintain the business when it needs to be reactivated in six months’ time, or whenever the economy can reopen properly.”
Treasury has said that it expects job losses, tax losses and a contracting economy due to the coronavirus pandemic and the lockdown to halt its spread.
The finance minister will only present an adjustment budget, which accounts for the impact of the pandemic and economic relief measures, in June or July, according to Treasury and tax officials who briefed lawmakers on the potential impact of the virus on Thursday (30 April).
Some of the key points they presented include:
- South Africa’s economy could contract by as much as 16.1% this year, depending on how long it takes to contain the coronavirus pandemic and for the economy to recover to the end of 2020;
- More than seven million jobs could be shed as a result of the virus and lockdown that has brought almost all economic activity to a standstill;
- A substantial shortfall in revenue from the R1.43 trillion tax-collection estimate in the 26 February budget due to weakness in the economy and virus-related tax relief measures.