Extended unemployment in formal sector to rocket, economists warn, as rand bleeds after Moody’s downgrade
File image: IOL
Extended unemployment in formal sector to rocket, economists warn, as rand bleeds after Moody’s downgrade File image: IOL

1 million jobs could be shed in lockdown

By Lyse Comins Time of article published Apr 6, 2020

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Durban - If the South African government extends the lockdown by another two weeks, more than 1.6 million jobs could be lost in the formal sector by the end of the second quarter.

Economists already predict that the country could shed more than 1 million jobs as a result of the 21-day lockdown, and an extension would only lead to further economic devastation and hunger.

Health Minister Dr Zweli Mkize indicated last week that the lockdown period might not be sufficient.

His spokesperson, Popo Maja, said that the decision on whether to extend the lockdown depended on scientific evidence on the rate of new infections.

“Public health specialists will advise us on whether the rate of infections has gone up or down, which we know is a key measure in the prevention of the spread of a pandemic,” he said.

He added that a decision on extending the lockdown would be made only once the data had been received.

Economist Mike Schussler said he had calculated that if the lockdown was extended by another 10 days, about 1.6 million jobs would be lost in the formal sector by the end of the second quarter.

If the lockdown goes on for as long as three months, South Africa could only expect to climb out of the devastation in mid-2021 or in the first quarter of 2022, he said.

“We are probably looking at a decline in GDP of between -6% to -7.5% for the year, with a decline of -25% seasonally adjusted and annualised occurring in the second quarter,” Schussler warned.

“If the lockdown goes on for longer than that, the decline would be deeper, but would never be 100% because food production and transport is ongoing.

“We could see a decline of -35% if we are locked down for two months. We need to shift our thinking not to be only about the virus now. It should be on how we get the economy going. To stop an economy is easier than starting it,” Schussler said.

He said economists and experts had indicated that it was likely the lockdown would be extended for two weeks, as it had been in other countries.

However, he said the government should only extend it for three days to April 20 to curb the impact on the economy.

Schussler said based on a one-month lockdown the formal economy could shed up to 70% of the 575000 jobs in construction; 70% of the 376000 jobs in hotels and restaurants; 40% to 50% of jobs in retail and 30% to 40% of the 400000 jobs in the wholesale sector.

He said hairdressers, gym trainers, pre-school staff, estate agents, car sales and travel agency representatives and people working for NGOs would all be affected by the loss of income.

Schussler said when people did not have access to nutritious food their immune system would be compromised, and that there “are going to be more deaths from hunger and depression” than from the virus.

He said to ameliorate job losses the government should relax some of the “harsh lockdown” measures from week three.

He said the government should allow people to walk on the streets, while practising social distancing, allow cellphone and IT stores to open so people could book device repairs, allow restaurant home deliveries and limited shopping at clothing stores.

He said manufacturing of some goods should be permitted up to 25% of production.

Efficient Group chief economist Dawie Roodt said he expected that more than 1 million jobs would be lost following the 21-day lockdown and that the economy would contract by at least -5% in 2020.

“If we are locked down for seven weeks or three months, the economy of our country will be involved in a serious war, and we could look at a contraction of 20% because of loss of production. Unemployment and debt numbers will look horrendous,” Roodt warned.

“I am very concerned about the poor who are going to get hungry, and hungry people can be very, very dangerous. One concern I have is what is going to happen after this crisis, because now we have politicians who are very powerful in a crisis and no bureaucrat is going to give those powers back,” Roodt said.

“I think we have to go back to work as soon as possible. I know people are going to be infected and are going to die; the only thing we can do is manage it at a tempo. We cannot afford this, and I understand there is going to be huge pressure on health services but we have got to stop this,” Roodt said.

Chris Hart, executive chairperson of Impact Investment Africa, said the R3billion Solidarity Fund donation from Johann Rupert, Nicky and Jonathan Oppenheimer, and Patrice Motsepe would help some businesses.

“It’s not that much in a large economy but for many small businesses a little can go a long way. It will have a good impact, some businesses will be saved, but it won’t have a complete impact,” Hart said.

He expected unemployment levels to hit 35%, while Moody’s downgrade to junk status and the struggling rand which was trading at R19.05 to the dollar yesterday, did not help to boost ailing investor confidence.

“If after 21 days you think you are going to get rid of the virus completely, you are living in a fool’s paradise. In these 21 days it is crucial to find an extensive method of testing so there can be quarantine immediately and contact tracing, rather than extending the lockdown,” he said.

The Mercury

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