Warning of major job losses and economic decline if harder lockdown makes a comeback in South Africa

 ·10 Nov 2020

Business leaders have requested clarity from government around reported plans to move South Africa to a harder lockdown in the event of a second wave of Covid-19 infection.

On Monday, Bloomberg reported that government is considering re-imposing several measures aimed at containing the coronavirus pandemic as fears mount about a second wave, citing three officials familiar with the situation.

The option of reintroducing the restrictions is likely to be on the table when the National Coronavirus Command Council meets this week, the officials said, speaking on condition of anonymity because the information hasn’t been made public.

However, businesses in South Africa expressed concerns over the report, saying that a higher level of lockdown would have an “extremely negative impact on the economy and jobs.”

Business for South Africa (B4SA) said that certainty around government’s policies is required to restore and boost investor and consumer confidence in South Africa.

“Certainty that South Africa will not return to a hard lockdown – irrespective of infection rates – would stimulate economic activity by unlocking business investment projects and consumer spending plans, which are currently on hold due to concerns about government’s response to a potential second wave of infections in South Africa,” the group said.

The first hard lockdown, from April to July 2020, caused more than two-million job losses. Statistics South Africa is expected to published improved job numbers for Q3 2020 this week, but further lockdown restrictions could curb growth, the group said.

Gross domestic product (GDP) fell significantly quarter-on-quarter as consumer spending collapsed due to lockdown measures. SME bankruptcies increased to 6.5% from 4% in the previous year and are expected to reach over 10% as credit extensions and tax relief expire.

B4SA’s modelling suggests that a one percentage point change in real GDP growth leads to a 0.91 percentage point change in employment numbers.

One downside scenario modelled, which looks at South Africa moving back to lockdown level 3 from mid-November and December, could result in a further 200,000 job losses and a 10.6% decline in GDP for 2020, the group said.

“We estimate that formal job losses have already reached between 1.4 million and 1.6 million, with a further one million lost in the informal sector,

“It will take until 2024 for formal employment levels to return to the pre-Covid level of employment, assuming that we pivot the economy onto a sustainable inclusive growth path,” said Martin Kingston, B4SA’s steering committee chairman.

South Africa can ill-afford additional job losses and compounded economic difficulty, he said.

Kingston said that the impact of a return to Alert level 3 or above would be worsened by the fact that the majority of measures available to counter the negative economic effect on individuals and businesses may no longer be available:

  • Covid-TERS is ending;
  • Top-up social grants are unlikely to continue after the three-month extension;
  • UIF and VAT relief cannot continue indefinitely; and
  • Banks that extended credit to businesses and individuals now require payment.

“To improve investor and consumer confidence, the government should provide as much certainty as possible that there will not be another hard lockdown – irrespective of infection rates,” he said.

Can’t afford to go back 

It is vitally important that South Africa deals with Covid-19 hotspots as they appear – because the country cannot afford to re-enter the lockdown, said Western Cape premier Alan Winde.

In a digital briefing on 5 November, Winde said that he was concerned that a number of European territories had re-entered lockdown – especially countries such as Germany which had previously been seen as a leading example in its Covid-19 response.

“We have to avert this, we have to ensure that we don’t go into a further lockdown (as) South Africa cannot afford it. Our economy cannot afford it, we are getting poorer, we are losing jobs and we need to recover now.”

Winde said that the country’s economy can only recover and begin to claw back jobs if the it continually makes the management of Covid-19 a ‘habit’, and understanding risk areas.

“If we get things right then we can avert that second wave and can focus our energy on recovery instead of spending too much time on managing and preparing for a second-wave (of Covid-19 cases).”

President Cyril Ramaphosa is set to brief the nation this week on South Africa’s lockdown strategy around the coronavirus pandemic.

South Africa reported have 1,247 new cases on Monday (9 November), taking the total reported to 738,525.

Deaths have reached 19,845 (a daily increase of 36), while recoveries have climbed to 680,726, leaving the country with a balance of 37,954 active cases.

Read: Government looking at new lockdown restrictions for South Africa

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