CO-OPERATIVE Governance and Traditional Affairs Minister Dr Nkosazana Dlamini Zuma says the tourism industry could bleed between 555 000 and 600 000 jobs this year. GCIS
CO-OPERATIVE Governance and Traditional Affairs Minister Dr Nkosazana Dlamini Zuma says the tourism industry could bleed between 555 000 and 600 000 jobs this year. GCIS

Dlamini Zuma warns of unemployment surging above 50%

By Siphelele Dludla Time of article published May 27, 2020

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JOHANNESBURG - The government yesterday acknowledged that the country’s unemployment rate could surge to beyond 50percent as a result of businesses taking strain from the coronavirus epidemic.

Co-operative Governance and Traditional Affairs Minister Dr Nkosazana Dlamini Zuma said there was a high risk of closures in the tourism, entertainment, leisure and aviation sectors, as well as start-ups, and small and informal businesses.

“Our economy has declined, not only because of the lockdown. We know that our economy was declining and we had been downgraded,” Dlamini Zuma said.

“There are companies that are thinking of liquidation or retrenching some workers. Unemployment will rise, tax collection will be low, and the vulnerable households have lost income.”

Dlamini Zuma said the tourism industry alone could bleed between 555000 and 600000 jobs this year, as more than 50000 tourism businesses could close temporarily or permanently.

“The tourism sector is going to be hit hard, because we have closed our borders and we have also closed tourism within the country,” she said.

“Only 30percent of businesses can survive less than a month without any turnover, and they have declared that they will lay off workers either temporarily or permanently.”

Dlamini Zuma was briefing the National Council of Provinces in a virtual presentation about the government’s measures to manage the spread of Covid-19 through the implementation of a risk-adjusted strategy.

She said tax revenue collection could fall as much as R250billion in the current financial year as more people lose their jobs. This is in line with the R285bn revenue under-recovery forecast by the South African Revenue Service earlier this month, 15percent to 20percent lower than the February Budget forecast.

Dlamini Zuma said at least 1.9million people had applied for Unemployment Insurance Fund benefits in the first two weeks of the nationwide lockdown in April.

Old Mutual’s investment strategist, Izak Odendaal, said job losses would persist, as the economy was projected to decline by more than the 7percent forecast by the SA Reserve Bank.

Odendaal said the decline would eclipse levels last seen 70years ago.

“The challenge is that for now we don’t know the scale at which it will decline as data collection poses a problem, since StatsSA has to work from home,” Odendaal said.

“Even though we have never had such a decline, it’s not unrealistic that the economy could decline by double figures between 12 and 15percent. In fact, most countries are expecting at least 10percent economic contraction this year.”

Odendaal said job losses could be expected in any sector that relies on significant human-to-human contact for its operations.

He said tourism and hospitality employees were expected to be the worst affected, alongside domestic workers.

“Those industries may be worst affected by consumer behaviour rather than government regulations, as people may be reluctant to travel, eat out at restaurants or stay at hotels even after the lockdown has been completely lifted,” he said.

BUSINESS REPORT 

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