South Africa is set to lose about 1.6 million jobs as a result of the COVID-19 pandemic.
This is according to a new report by Nedbank, released on the eve of worker’s day as 1.5 million prepare to return to work as lockdown restrictions are eased.
This compares with approximately 900 000 jobs that were lost after the global financial recession in 2009.
Nedbank expects the wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods; hotels and restaurant sectors, which it calls ‘retail’ to shed about 1.4 million jobs, with the bulk of the jobs lost in the first half of the year.
Other industries that the green bank expects to lose jobs this year are manufacturing with 149 000, transport storage and communication losing 124 000 as well as construction, which is set to lose 109 000. Mining is expected to add 7 500 jobs while finance, real estate and business services is expected to add 24 000 jobs.
Employment in the ‘electricity, gas and water’ industry is forecasted to remain virtually unchanged.
Economist Mike Schussler describes the current job loss as a “Tsunami”.
Schussler points to the number of people who have been assisted under the government’s Temporary Employment Relief Scheme (TERS). According to the Unemployment Insurance Fund, which administers TERS, earlier this week, they had paid just over 1 million people from 72 000 about R 4,1 billion in TERS benefits.
Schussler says including temporary job losses, the number is expected to hit 2 million.
Michael Bagraim, a labour lawyer with 36 years of service cites the labour ministry’s own estimates of between 1 million and 2 million jobs lost and says he has never witnessed such a “nightmare”.
He notes that of a client base of 500 companies with 200 employees or less, about three quarters have signalled an intention to retrench middle management, or white collar workers as they have been retrenching lower income earners for the past few years.
A disturbing feature of the South African economy is that a 1% fall in GDP leads to a bigger fall in jobs, suggesting that most jobs are precarious and vulnerable.
In the 2011 Budget, the National Treasury undertook an analysis of ten countries that had been hit by the recession looking at this jobs loss multiplier.
Only Spain fared worse than South Africa when its unemployment reached a record 20% as its construction industry collapsed.
This led the treasury to remark that South Africa needs quality jobs.
Nedbank confirms this trend in its latest research note. It notes that in South Africa, GDP growth tends to lead employment growth, meaning a period of sustained economic growth is required before jobs growth is evident.
Following the 2008 recession, GDP took about a year to recover while employment took three and a half years.
“The 35-day lockdown has severely negative consequences for employment, which will take more than three years to neutralise,” Nedbank says.
The Trade and Industry Policy Strategies think tank says between 50% and 80% of mostly low income jobs will be temporarily lost outside of the food sector, which has operated during the lockdown.
TIPS says since the lockdown, travel to work fell by 50%, as did travel for shopping for food and pharmaceuticals.
Travel for other shopping and leisure has fallen by 75%. Electricity production has also been cut in half.
This will all have an income and therefore jobs knock on effect.
TIPS studied the automotive, steel and plastic industries to assess the impact of the lockdown.
The auto sector, which employs 100 000 people was devastated by falling demand even before the lock down, with car sales falling domestically and on the export market in March.
“To date, no major South African vehicle assemblers or automotive component manufacturers have formally initiated retrenchment programmes, but they agree that some downsizing is inevitable,” says TIPS.
TIPS says the first three weeks of the lockdown were already devastating for all parts of the steel industry, with an estimated cash cost of around R1 billion including labour and fixed costs.
Demand for steel in the second quarter is expected to fall by 50% from pre COVID-19 levels and is expected to increase by between 20% and 30% by the end of the year.
This will place a pressure on jobs.
The plastic industry, which employs 50 000 people, has seen an overall decline in production as it supplied inputs to essentials such as safety equipment, breathalysers and medical equipment but saw a fall in take away packaging, alcohol, textile and clothing and employers outside of essentials have started seeing job losses.
When releasing its Monetary Policy Review at the beginning of this month, the South African Reserve Bank reminded stakeholders that South Africa’s economic growth and unemployment crisis started before COVID-19 and was caused by factors such as load shedding.
The Bank says the economic contraction in the last quarter of 2019 was a “bad ending to a lost decade” noting that production in the last decade grew by 15.9%, lower than the 1980s and 1990, which were crisis ridden.
While growth in the past decade has been volatile load shedding has been a major constraint
The Bank says over the past year, the amount of electricity available measured as the electricity Availability Factor (EAF) fell to 66.9%, meaning that only two-thirds of installed capacity was producing electricity, an all-time low.
“In 2015, the previous most severe episode of load-shedding, electricity shortages have coincided with contractions in both mining and manufacturing.”
The Bank says, noting that transport also curiously fell, possibly because power stations that required were not receiving deliveries during load shedding.
Even before COVID-19, mining and manufacturing were already under pressure as electricity availability has been only around 62% so far this year.
“In these difficult economic circumstances, unemployment has risen. Job growth stalled in 2019, with the total number of employed people declining from 16.44 million at the end of 2018 to 16.34 million at the end of 2019,” the Bank says of the recent economic picture.
The Bank then reiterates that at times South Africa’s problem has not been a failure to create jobs but rather a failure to keep up with the growth of the labour force.
Last year, there were 481 000 new entrants.
“Over the past decade as a whole, the total increase in the workforce has been 4.87 million people, compared with an employment increase of 2.52 million,” the Bank says.
Raymond Parsons of the University of North West Business school says despite the government’s R500 billion stimulus package “the economic outlook for 2020 remains one of deep recession, widespread business failures and rapidly rising unemployment”.
Parsons says the prospects for economic recovery and stabilising unemployment in the months ahead will depend on how quickly the world economy recovers, the successful implementation of the government’s economic support measures and the pace at which the lockdown is phased out.
Mesela Nhlapo, CEO of the Rail Road Association says even before COVID-19, the industry was struggling with poor economic conditions but also governance challenges at two of the largest customers for the Rail Manufacturing industry, Transnet and the Passenger Rail Agency of South Africa (PRASA).
The Association has also called on the government to reopen the sector during stage 4 of the lockdown as it supports a number of other sectors from mining to energy and the automotive sector.
Nhlapo notes that one of the changes that COVID-19 is likely to bring is to hasten a move towards automation, which can lead to certain jobs disappearing.
But Nhlapo notes that automation needs to go with reskilling workers and addressing South Africa’s education system, from basic education, is the best long term solution. She cites instances where automation leads to an increase in the staff complement for areas including maintenance.
Ofentse Mokwena, an independent transport economist, expects mixed fortune for the sector.
He notes that segments like courier companies are likely to do well after the lockdown, as stockpiled inventories must be moved out of warehouses and the companies will benefit from the growth of online shopping.
Mokwena says the subsidised transport segment like buses and trains will survive the pandemic but there is uncertainty for the taxi industry even with government support including payment holidays due to the lockdown.
Mokwena says this may be an opportunity to introduce labour regulations on pay and conditions to the taxi industry and long distance road transport.
The industry may also attempt to have public transport classified as essential, a move which unions are expected to resist.
COVID-19 raises the question of what wage settlements workers can expect for the remainder of this year and protection workers are entitled to in the event of a lockdown, which is beyond their control.
Bagraim says at this time of year he is usually preparing for wage negotiations in June. He has not received a single demand or wage offer increase.
Livhuwani Mamburu, national spokesperson of the National Union of Mineworkers [NUM] says they would demand to have COVID-19 declared an occupational disease so that workers who contract it at work can be compensated.
This week, the International Labour Organisation warned that half of the world’s working population, or 1,6 billion people, are “at immediate risk of losing their livelihood” due to the Coronavirus. These are people who work on short term contracts or are self-employed and have seen their wages collapse by 60% in February when the pandemic hit, according to the ILO.