NOMPU SIZIBA: The BankservAfrica Take Home Pay Index for June 2020 was released today. It shows that the number of salaries paid in that month declined by 20.7% on June 2019 – basically one-fifth of employee salaries. Casual workers’ pay, however, was the hardest hit, declining by 35% on an annual basis. BankservAfrica was also out with its Private Pension Index, which saw a second straight month of income decline of ‑0.3%, with an average income of R7 355 a month.
Well, to take us through these reports, I’m joined on the line by Mike Schüssler, chief economist at Economists.co.za. Thanks very much, Mike, for joining us. Before we get into your observations of June, what did you see in terms of take-home pay in the months of April and May?
MIKE SCHÜSSLER: Well, we’ve seen a small decline in the number of payments in April – not much. And in May there was about a 13% decline in the number of people that got paid. And then in June we got a much bigger decline of around 21% in the number of people missing.
The actual payments or the amount of money followed that trend. So what I do pick up here is that the first month of the lockdown – the lockdown started end of March – didn’t really have much damage on the job side. And what I am picking up now is that the damage is getting even bigger the longer our lockdown and interventions in the economy carry on, because there’s a knock-on effect. A child doesn’t buy a bed, the manufacturer doesn’t buy wood that makes the bed, and so it goes on. And that’s what we’re looking at, at the moment.
NOMPU SIZIBA: Interestingly, you note that it was really the private-sector salaries that were generally affected as public-sector salaries have pretty much been unaltered by the Covid crisis.
MIKE SCHÜSSLER: Yes, that’s right, because the public sector, you must remember, also had an increase late last year in the second half. So that’s still within their increase period. But the bigger picture is that government hasn’t really laid off anybody. They’re unlikely to. And we are seeing a situation where the private sector is the area of the pain. One in four jobs in the private sector has gone. And, if you think about it, it makes perfect sense, because a lot of the jobs that have gone are the casual and daily jobs, sort of thing, the waiters of the world, the construction workers, because we know construction is severely constrained at the moment, and the drivers and the like.
When we go to the weekly payments, again, the waiters, the truck drivers and the mechanics and the fuel and petrol attendants, with [people] driving less, they’ve also been very, very hard hit. And then after that, it’s the monthly payments which haven’t been keeping up, either.
NOMPU SIZIBA: And of course your warning that your index may not fully capture the impact on people’s salaries or wages across the board, because your index tends to capture your more medium to larger-sized entities paying money to their workers.
MIKE SCHÜSSLER: That’s right. We know that we under-represent small firms, and certainly by the nature of the definition we also obviously do not present the informal sector, because they don’t really go through the banking system and have a payroll person. So ultimately we’re looking at a situation there. This is the damage on the stronger parts of the economy, if you wish.
We’re not too sure how the damage is going to be going out in, let’s say, the informal sector and the smaller companies. I have a sneaky suspicion that some smaller companies are doing a lot better than we think, but I also think that there will be widespread job losses there too.
NOMPU SIZIBA: Why do you say that you think that there are smaller companies which may be doing better than we think, because the whole talk has been about poor SMEs?
MIKE SCHÜSSLER: Yes. I think there are those poor SMEs. But I think a lot of the SMEs were able to still work through the lockdown. For example, your plumber and your electrician, the DStv installer were allowed to come to your house. And the sort of smaller law firm, the research firm, could easily shift to homes.
And I think there’s one other thing that makes a big difference – the smaller parts, except in the retail sector, are genuinely not big renters. So they don’t have a landlord that they need to please.
NOMPU SIZIBA: When all is said and done, your index is basically showing that there are fewer people currently who’ve been able to put food on the table. Or, if they are doing so, they’re doing it with great difficulty. What sort of impact will the estimated job losses during the lockdown have on the broader economy and society, do you think?
MIKE SCHÜSSLER: It will be huge. I think the longer that this lockdown goes on, the longer that we have parts of the economy closed, the bigger the impact. We’re now entering the fifth month, and it is very concerning that people just can’t start up their companies again – and that is going to have an ever bigger impact. My concern is that, if we look at the amount of money that’s missing, it’s about 25%, then I would say that knock-on impact is now going to get into the retail sector, into consumer spending like cellphones and the like.
And I think that’s going to really have a second-round impact of this Covid thing on its way now. And that’s my concern. And the longer we delay opening up the rest of the economy, the more difficult it’s going to be to open the economy as such, and also get going again.
NOMPU SIZIBA: Of course we want broad-based growth and broad-based advantages, but it does seem as though, despite what you say, there are some winners in terms of sectors like the telcom sector. They seem to be doing quite well, regardless of the fact that people are earning less or not much.
MIKE SCHÜSSLER: I think they’ve been lucky, because what’s happened is many of us are working from home. In fact, when you look at the media – many of the journalists on TV are broadcasting from their home. And for that, you need the telecoms, obviously.
And the other part that is doing very well, that we also know about, it’s the courier type service, the person delivering goods to the home. If one looks, for example, at the UK, where the actually track online sales, they had an increase of 75% in the last month. It was for May, compared to general retail that was down 7%. So it’s still not the biggest part of retail, either, but it’s showing us that that’s happening.
And in South Africa up and until April, we saw big increases in what we call “other retail”. Now that is mainly online, but it includes music and toy shops and the like. That was increasing around 16%.
So I think when we get out of this lockdown, we’ll see the change in sectors towards the courier, towards online. I think also things like movies and gyms will also disappear into the homes. People are buying home gyms, people are watching movies on Netflix and the like. So those are the parts that are going to win, but the losers are obviously going to be the movie houses, the gyms, the retail side and the office sector. It’s particularly now office workers that are moving into their houses. And that is where we are going to also see a very big change.
Having said all that, certainly in the data that we have we don’t know what sort of jobs people have, but we’ve seen a noticeable decline in the sort of part-time work and the weekly paid work, whereas the monthly, up until now, was pretty much hanging on. But, as we go into this more difficult period, let’s call it, where everybody’s got a fear of the virus that’s actually arrived, I think it’s going to impact the monthly paid person as well, and probably on the factory floor, mining floor, all over – and that is a concern that we ought to have.
NOMPU SIZIBA: Mike, let’s just turn now to the Private Pension Index. We know that pensions will have come under pressure with equity markets having plunged previously, diminishing people’s investment pots, although that situation has since improved. But what were the key takeaways from the index that you saw?
MIKE SCHÜSSLER: Well, I think it’s the second time that we’ve seen two months of decline in real terms in this index … So, you know, pensions have generally done pretty well. And I think what it says to us, once interest rates starts dropping, much of the pensioners’ stuff is in the interest rates arena, because they’re much more conservative in nature, that’s the one area that would be hitting them. Also, we note that about a third of the pensioners, have government pensions, which are not declining. They carry on, on a scale because they are defined benefit. The problem is, again, the burden is born by the people who have have a defined contribution, and now have to make their own way with their living annuity. It says to us that the stock market hasn’t done well for a while, and with the interest rate dropping the pensioners felt that pain. And the Reserve Bank governor often mentioned pensioners saying, “Please don’t drop interest rates, we live off that”. So we do see that.
But I think it’s only two months, and we hope it can recover again in another two or three months. It’s had a very, very good run, and it’s been a surprisingly strong and stable part of our consumer sector that has always been underrated because it’s only 10 or 12% of the total. But I think it is an important 10 or 12% in many spheres, probably in the sort of supermarket, general retailer, and old people play a very big role in quite a few areas, I think, of the retail market, because they are unlikely to buy new cars. They are likely to buy food.
NOMPU SIZIBA: Mike, one last question. Are we getting the balance right in terms of saving lives and livelihoods?
No, not at all. I’m a lockdown sceptic.
I can tell you that the countries that have locked down the hardest have got the biggest lives that they’ve lost, be it the UK or be it … If you look at the countries that have a much softer approach they’ve lost fewer lives and lost less of the economy, probably, when this thing is finished. And that says to me we should have maybe not the … example, because they’ve also made mistakes, but been a lot more easy-handed with this.
NOMPU SIZIBA: That was Mike Schüssler, the chief economist at Economists.co.za.