{"id":413019,"date":"2020-07-06T12:20:20","date_gmt":"2020-07-06T10:20:20","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=413019"},"modified":"2020-07-06T12:21:00","modified_gmt":"2020-07-06T10:21:00","slug":"south-africas-alphabet-soup-recovery-and-up-to-1-5-million-jobs-lost","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/413019\/south-africas-alphabet-soup-recovery-and-up-to-1-5-million-jobs-lost\/","title":{"rendered":"South Africa’s ‘alphabet soup recovery’ – and up to 1.5 million jobs lost"},"content":{"rendered":"

While the International Monetary Fund\u2019s (IMF) World Economic Outlook suggests a contraction of 8% in South Africa\u2019s economy in 2020, the current rates of recovery from government lockdowns on various sectors could see a contraction of as much as 10% in the country\u2019s GDP this year.<\/p>\n

South Africa\u2019s steady recovery from one of the most stringent lockdowns in the world – which has seen the economy currently running at around 80% of its pre-Covid capacity – should give some optimism for a rebound, according to Carmen Nel, economist and macro strategist at Matrix Fund Managers.<\/p>\n

Speaking at a webinar hosted by Eugene Visagie, client portfolio manager at Morningstar, Nel said many models were predicting a peak in virus infection rates in late July or early August, which meant the focus would now shift to what she called \u2018the alphabet soup of recovery\u2019.<\/p>\n

\u201cWe\u2019ve heard much speculation about what the shape of the recovery will be, with talk of a W, a V, an L or even a swoosh\/hockey stick. Right now, there\u2019s still a wide range of outcomes on the table, as we\u2019ve started to see jitters in some markets around a second wave of infections, and this has caused some concern about the shape of our recovery,\u201d said Nel.<\/p>\n

When referring the aforementioned \u2018W\u2019, \u2018V\u2019, \u2018L\u2019 or \u2018swoosh\/hockey stick\u2019, it refers to how the line of recovery would look like on a chart.<\/p>\n

\"\"<\/a><\/p>\n

The sectoral impact of government lockdown regulations was severe, especially on industries like construction, which took a 14.2% hit, and tourism, where foreign tourism fell 30%.<\/p>\n

Spending has been more defensive in recent weeks, which raises questions around behavioural change, which could see a higher proportion of savings.<\/p>\n

While there was pre-emptive buying in March, and some pent-up demand coming through as lockdown restrictions ease, Nel predicts trade will be hit by a decline of around 10-15%, through a combination of lockdown and weakened demand from offshore.<\/p>\n

\u201cRight now, South Africa is doing what it can. finance minister Tito Mboweni\u2019s supplementary budget provided some surprises: the market wasn\u2019t expecting the pace of the consolidation that the government showed, and the statement that the cabinet had endorsed accelerated reform was another positive.<\/p>\n

“It was an incredibly ambitious budget statement, but we have to ask whether there is credibility, as the budget was quite vague on how we will fund longer-term consolidation,” she said.<\/p>\n

Jobs<\/strong><\/p>\n

One of the major challenges facing the country remains unemployment, with substantial job losses driving the official unemployment rate to 30%. Job loss estimates range from 400,000 – 1.5 million.<\/p>\n

\u201cOur view is that losses will be towards the lower end as the economy opens up again.<\/p>\n

“If we lose 1.5 million jobs, that will mean half our labour force will be unemployed, which will put a tremendous strain on the UIF and grant system, and even raise questions around the need for a universal basic income grant,\u201d said Nel.<\/p>\n

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Job losses this year estimated at a absolute minimum of 860 000. Most likely above 1 million.<\/p>\n

\u2014 Wayne McCurrie (@WayneMcCurrie) July 6, 2020<\/a><\/p><\/blockquote>\n