SIMON BROWN: I’m chatting now with Christie Viljoen. He is an economist at PwC. Christie, I appreciate your early morning time (to discuss) the report you are putting out (South Africa Economic Outlook 2021) around the South African economic outlook, and in particular, the consumers driving it, and of course what happened last week with the rioting and looting we saw, and the impact of that. It’s still early days, but how is last week expected to play out in terms of GDP and potentially employment going forward?
CHRISTIE VILJOEN: Yes, Simon, you’re quite correct. It’s early days in terms of estimating this impact. We’re seeing lots and lots of news articles, comments from big companies, retailers, transport factories. We’re seeing analysts trying to get to grips with this because we are in a fragile economic recovery. We are in a period where we’re trying to get jobs back after the 2020 recession. So it’s very tricky at this stage to really get a sense of what’s going on in terms of what the numbers look like.
What we’ve done is sort of a thought experiment, to say that because of what happened last week many parts of KwaZulu-Natal and Gauteng were in a virtual Level 5 lockdown. People were stuck at home. They couldn’t go to work. Shops were closed. Shopping malls were closed for obvious reasons. Interprovincial transport was severely affected.
So we did the process of modelling this one week of a virtual lockdown on retail and transport in those areas. What we found was, compared to a previous economic forecast, that we think GDP growth this year will probably be about 0.4 percentage points lower than previously expected. So our current forecast is for the economy to grow by 2.3%, which I know among many of the other forecasts out there is quite low. We’ve also worked on the adverse effect of load shedding, for example.
And if we think from a jobs perspective, this is putting about 50 000 jobs at risk.
Now we know a lot of people couldn’t go to work last week. We know many supply chains have been disrupted, infrastructure has been damaged. So we’re looking at tens of thousands of jobs at risk at this stage of not being able to recover, companies closing, not reopening shops, that kind of thing. So that’s our estimate among many of the others, but it is still unfolding. We’re still seeing new data coming through and new analysis happening. So it is uncertain at this stage what the full impact will be.
SIMON BROWN: Yeah. Point four gives us a good sense of insight into what we are seeing. Last week might’ve changed this a bit, but South Africans are becoming more positive about the economy and, in particular, they’ve kind got plans for spending around eating out, around traveling, that leisure. I suppose we’ve all been locked down. Once we are through this current wave and the president starts to lift the levels, let us get back to restaurants, let us leave Gauteng for leisure travel. There is pent-up demand. There is a sense that the South African consumer does want to go out there and have some leisure, have some relaxation after what. has been a tough week and a tough year-and-a-half.
CHRISTIE VILJOEN: Most definitely. Our own consumer survey has shown that people are more comfortable than earlier this year, thinking about going to a restaurant, going to a hotel, taking a domestic flight. Obviously, this is dependent on local regulations. Our survey was done in June before we had the more strict Level 3, Level 4 lockdowns. But as you said, there’s this pent-up demand that is growing. If you look at numbers from January, for example, what people were spending at hotels and restaurants, the numbers improved every month thereafter into April, which is the latest official Stats SA data. And we’re also seeing company reports from retail and hospitality, for example. Those numbers are looking better. We know that the consumer is very important to the South African economy. Consumers comprise the biggest part of the South African economy. We also know that jobs were lost last year. We can’t ignore that. the unemployment rate is the highest it’s ever been.
So that’s intensified our challenges with poverty and inequality and unemployment. And there were certainly some elements of that in what happened last week in Gauteng and KwaZulu-Natal. So I’m not going to try and do any kind of political analysis and that, but we know in South Africa we’ve got millions and millions of people who go hungry every day, who don’t have a job, don’t have a way to provide for their families. We are certainly well aware of that. But still, the South African consumer – and this might even be let’s call it the middle class and higher up [consumer] – has in many senses recovered from last year’s recession and last year’s lockdown situation. I think you’re quite correct. Once we get past this current Level 4 lockdown – and we expect next month to be a bit better and then September to be a lot better in terms of these restrictions – we can expect South Africans to get back even further, closer to that previous normal of going to restaurants, going on holidays.
And especially if we look towards the end of this year, where people might be thinking that in December last year we couldn’t really take a holiday, but this year things might get better [with] fewer lockdown restrictions, more people will be vaccinated.
So we are hopeful that the South African consumer would continue on this trend that we’ve already seen, this trend that shows that they are spending more, they’re getting back to more normal ways of life. This will certainly help the South African economy grow.
At this stage, it’s going to take quite a few years before we get back the jobs and the GDP we had before Covid-19, but it is a process that really needs to get going this year. We really need that momentum to continue if we are to get our economy back on its feet on a more sustainable basis.
SIMON BROWN: I take that. Of course, I hadn’t even thought that the vaccines are going to play a large part in that as well. Christie Viljoen economist at PwC, I appreciate the early morning time.
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