The National Treasury has warned of a jobs bloodbath in South Africa, putting a number to the potential damage that the Covid-19 will do to the country’s rate of employment in 2020.
The Treasury manages national economic policy, prepares the South African government’s annual budget and manages the government’s finances. It forecasts that the impact of the virus, and resulting lockdown period, could lead to job losses of between 690,000 and 1.79 million, News24 reported.
This is revised from an earlier forecast at the end of April, where Treasury indicated that as many as 7 million South Africans could become unemployed if large chunks of the economy remained closed for the remainder of the year.
It said that around 3 million jobs are at risk even if the pandemic is contained quickly, while a slow recovery could see 5 million job losses. A worst-case scenario would push the unemployment rate to over 50%, from its current rate of just under 30%, it said.
A full time equivalent measure was used this time, to take into account businesses that may be making use of furloughs, among other measures, to mitigate the impact on jobs, Treasury said in its revised presentation.
Nedbank forecasts that 1.6 million jobs will be shed in the country in 2020, with the bulk of the jobs lost in the first half of the year. By comparison, approximately 900,000 jobs were lost after the global financial recession, it noted in a presentation in May.
Data published by TransUnion shows that South Africans continue to lose their jobs because of the the effect of the Covid-19 pandemic, and lockdown in the country.
The credit reporting agency said on Thursday (21 May) that the number of consumers who have lost their jobs has increased sharply since the beginning of April – from 10% in week one to 14% in week three, citing an updated poll.
Bloomberg reported that South Africa stands to lose five years of potential economic output due to the shock from the coronavirus pandemic and measures to curb its spread, citing the central bank.
South Africa fell into a recession even before the first case of the coronavirus was detected in the country. Economic growth-projections deteriorated after the government imposed one of the strictest lockdowns in the world on March 27 that shuttered most business activity, it said.
The SARB expects a GDP contraction of 7% in 2020, the first full-year growth decline since 2009. This represents a substantial shock to the economy, as the worst full-year GDP growth performance in South Africa’s post-World War II history was -2.1% in 1992, it said.
While growth is forecast to recover to 3.8% next year and 2.9% in 2022, GDP will still be smaller than the levels recorded in 2018 and 2019, Alex Smith, the Pretoria-based Reserve Bank’s lead economist for the financial stability department, said in a presentation on Wednesday.
“Hence, the Covid shock could result in nearly half a decade of lost output.”
Momentum Investments said in a note on Monday (1 June), that an estimated 80% of the economy should be operational under level 3 restrictions. However, decimated sentiment and pressure on smaller businesses will lead to a further increase in job losses in the coming quarters, it warned.
With the country’s relatively strong financial and economic integration into the world economy, suppressed international demand and global disruptions in supply chains will cut the country’s exports, it said.
Momentum said that even with the government’s announced stimulus package, “the economy is unlikely to be saved from a historic contraction in growth this year”.
The financial services firm forecasts an 8.1% contraction in GDP, with the economy set to grow again, 2% in 2021.