Covid-19 and the months of lockdown have had an immense negative impact on economies worldwide with entire industries forced to close their doors, affecting millions of workers who either lost their income for weeks on end or lost their jobs altogether.
Earlier today Mike Schussler, well-known economist and founder of private economic research house Economists.co.za, presented the 19th UASA South African Employment Report (SAER) in an online webinar.
Schussler said the latest forecasts on this year’s international GDP show the worst decline since the Great Depression in the late 1920’s to early 1930’s while the average projected growth for 2021 indicates the best growth since 2011 and possibly even 2007.
When looking at the unemployment numbers, Schussler believes South Africa is in a depression.
Covid-19 hit South Africa while the country was carrying double the unemployment load of any large economy, and the highest the country had ever seen. Our unemployment rate almost doubled in a mere 25 years from 16,9% to 30,1%. No country in the world has lived with an unemployment rate of 20% and more for over 20 consecutive years! Our unemployment rate is fully a fifth higher than that of the US rate (25%) during the Great Depression.
‘’The year up to the first quarter of 2020 saw the largest increase in the number of the unemployed since the global crisis of 2009. As a result it is likely that more people will die from the broader unemployment crisis than Covid-19 over time” he said.
Of all the major economies of the world South Africa had the highest unemployment rate going into the lockdown.
“We were the only country with an unemployment rate of over 15% and that means South Africa had double the rate of any major economy (Greece is the next highest of the major economies at 14,5%) even before the Covid-19-lockdown started.
“It seems clear that South Africa should have tried to find the least disruptive solution for the Covid-19 crisis. We will have to learn to live and thrive with it as it is not going to disappear soon,” said Schussler.
That said, most countries have not yet seen the full unemployment impact as employment tends to be a lagging indicator worldwide. Some countries did see a drop in unemployment but this was mainly due to large cash injections that enabled businesses to hold on to their employees. South Africa attempted something similar with UIF payments but that money is running out fast as over R40 billion was paid out between the end of April and mid-August.
Schussler expects unemployment numbers to increase due to the Covid-19 crisis and lockdown to between 1,3 million to 3,3 million jobs lost on a permanent basis by March 2021. He expects a decline in these extreme numbers from about 40% unemployment (the official definition) back to around 34% to 37% within 15 months after March 2021.
The changing world of work
In future many more people will work from home, especially those in the knowledge and services industries. With fewer manned office buildings, manual and unskilled labour may lose work opportunities.
In South Africa more than 80% of workers are employed in the services sector already.
Remote work will also mean that people will need less fuel and will buy fewer cars. There will be a shift in where people shop, from places that were close to work to places that are closer to their home offices. This will hurt city centres and commercial districts and will lead to a drop in retail rental income.
Higher education could see major changes in the years to come as online classes have been established all over the world. Students choices are increasing while universities will have to become more competitive than ever.
South Africa, like many other countries, needs to understand that manufacturing is robotising and needs more fixed capital than ever per job.
Agriculture could offer some hope in the total supply chain but we need to be realistic that it is not ever going to help much.
Some of the points Schussler made included:
- Only three of the larger economies are expected to show positive growth this year, namely China (1,7%), Egypt (0,6%) and Indonesia (0,2%).
- South Africa can expect one of the worst GDP per capita declines in the world. The country’s per capita GDP for the second quarter of 2020 will be similar to the level seen in 2000. We will bounce back but the total recovery will take years – about 6 to 9 years for 2019 levels and 11 to 14 years to go back to 2014 levels.
- The problem is that our government does not have the capacity to be of much assistance. Total government expenditure as a percentage of GDP is at around 37% while the expected and received tax revenue for 2020/2021 is only about 21% of GDP. Since government cannot stop spending, they need ever more revenue which is not forthcoming. We can therefore expect a larger government deficit (16% of GDP) as a result.
- South Africa’s gross government debt will reach 100% by 2024.
Click HERE to view the presentation
For further enquiries or to set up a personal interview, contact Mike Schussler at 082 417 5542 or Stanford Mazhindu at 074 978 3415.