As many as 7-million South Africans could join the ranks of the jobless if large swathes of the economy remain shut until the end of the year, with more than 2.5-million jobs at risk even if the pandemic is contained quickly and the economy bounces back.
The Treasury presented the bleak scenarios on the impact of Covid-19 on Thursday, in a briefing in which it outlined the government’s approach to rebooting the economy and detailed its R500bn stimulus package.
About one-fifth of the money is earmarked for the creation and protection of jobs. Finance minister Tito Mboweni is expected to discuss this when he tables a special adjustment budget within a couple of months.
The Treasury’s grim forecast draws on a study by researchers at Southern Africa – Towards Inclusive Economic Development (SA-Tied), a collaboration between the government and local and international bodies including the UN.
The researchers project that even a “quick” recovery would see the economy contract 5%, “an economic outcome that would have been considered catastrophically bad a little more than one month ago”.
But the outcome would be even worse in a “slow” scenario of prolonged disruption to the economy, which could shrink 16% this year.
Jobs in construction and manufacturing will be hard hit, and the trade and accommodation sector, which includes restaurants and hotels, could see more than 1-million job losses in a worst-case scenario.
A study by PwC last month projected that SA’s unemployment rate – which is already one of the world’s worst at 29% – could jump to nearly 48% in a worst-case scenario in which the economy crashed, while even a milder scenario could push it to 33%.
In the last quarter of 2019, the workforce totalled 16.4-million, with 6.7-million people jobless.
Household incomes will fall dramatically, the SA-Tied study found, particularly in the middle-income bracket that does not qualify for social grants.
Across the economy, the lockdown could see total wages and salaries shrink as much as 30%, but company profits will be slashed by even more than that.
Mboweni confirmed again this week that SA was approaching the International Monetary Fund and other lenders in the hope of borrowing a total of R95bn this year to support businesses and protect jobs.