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Level 3 restrictions will cost one in 12 South Africans their jobs

An analysis of the impact of the lockdown measures.
The authors say unemployment could go beyond 51% within a year and that government has a moral duty to avoid causing business failures and mass hunger. Image: Bloomberg

Nearly 1.4 million formal and informal jobs are at risk in the South African economy, with the current Covid-19 lockdown alert Level 3 restrictions having a direct impact across at least seven sectors: travel, tourism, entertainment, leisure, manufacturing, agriculture, and services not classified elsewhere.

The total number of people employed across these sectors equates to one in 12 jobs being directly at risk of destruction. If one includes family and dependants as a reflection of the normal size of households, the Level 3 restrictions could impact millions more as they rely on the breadwinner’s wages.

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Since many also help dependants outside the immediate family, the overall number of people impacted could be as much as 10% of the South African population.

Remember too that South Africa is often credited with the highest unemployment rate in the world. The impact will be felt even if only half of the jobs at risk are destroyed.

Impact on some provinces and metros will be more severe

Some provinces have even higher numbers: one in six jobs in the Western Cape and one in five in the Northern Cape are at risk.

While the Eastern Cape has ‘only’ one in 13 jobs at risk, the impact could be greater, as the province’s extended unemployment rate could increase to close to 60%.

Measured differently, the risk for the Eastern Cape is that only one in four adults will have a job if the jobs at risk are destroyed.

While metropolitan unemployment rates are generally lower than rural unemployment rates, all eight metros in the country could end up with extended unemployment rates above 40%.

One, Nelson Mandela Bay, would have an unemployment rate of over 50%.

Two others, Mangaung and Ekurhuleni, could have unemployment rates of close to 50%.

Employment impact of current Level 3 restrictions by province

Province One out of x number of jobs at risk Number of jobs at risk
Western Cape 6.1 417 953
Eastern Cape 12.8 109 643
Northern Cape 4.6 74 222
Free State 18.3 43 805
KwaZulu-Natal 15.2 177 427
North West 28.1 35 615
Gauteng 15.6 331 191
Mpumalanga 16.2 77 465
Limpopo 13.0 109 361
SA 12.1 1 376 682

Source: Economists.co.za

Base source: Statistics SA’s Quarterly Labour Force Survey (QLFS); with added data for barley-, hops- and wine-grape farming, as well as annual reports for airports, rail services, and data on Uber and Bolt from desktop research. Provincial split from QLFS and commercial survey of agriculture.

Limpopo and the Eastern Cape already have the highest unemployment rates in the country, so any increase, not matter how small, will have a devastating impact.

Overall, South African unemployment could rise from 43.1% to 51.6% within a year, driven by the potential Level 3 job losses and increasing numbers of job seekers.

In addition to these unacceptable job losses, the Level 3 restrictions are having detrimental repercussions for the turnover of industry as well.

Turnover, tax and knock-on effects

The turnover of those formal private sector industries most impacted by the restrictions was R69 billion a month in 2019.

Using annual financial statistics, the formal private sector is at risk of losing 8.1% of its turnover every month the restrictions remain in place.

The estimated impact across these sectors is a reduction of at least 60% in turnover.

This means R41.4 billion is lost every month the restrictions remain.

The formal salaries paid to employees in these sectors is R9.6 billion per month. Personal income tax is estimated at R1.5 billion per month. Adding agriculture and informal employee income would take the total close to R10.5 million.

The knock-on impact can be seen by the fact that these industries buy R38.7 billion worth of goods from other sectors every month. They also spend R1.5 million on advertising, and R4.6 billion on fixed costs such as rent, leases, and interest per month.

Read: SAB cancels R2.5bn investment

Moreover, these sectors pay R7.6 billion in taxes every month, over and above the employee paye-as-you-earn (PAYE) tax mentioned above. These taxes are made up of value-added tax (Vat), excise duties, and company taxes.

The total taxes combined are well over R9 billion per month for the formal sector alone.

Adding things like passenger taxes and tourism spend along with informal sector Vat spend, the impact of the Level 3 restrictions on the fiscus is certainly well over R10 billion per month.

Keep business alive

The fact that the government extracts over R10 billion per month from these industries during normal times, but cannot find any funds to help them when they are in trouble, is economically short-sighted.

Keeping these businesses alive and operating as far as possible, while they take precautions against the Covid-19 pandemic, will help pay for the now bigger deficit even in the short term.

Over a maximum period of six years, a relief package that helps the whole industry for three months at a rate of just over R10 billion will have been more than paid back.

Government relief on that scale will also mean that banks will be more likely to help restructure repayments, and suppliers would be able to help with more finance too.

Paying employees extra via the Temporary Employer-Employee Relief Scheme (Ters) would also help greatly. No one can go 10 months with restrictive earnings as a result of harsh restrictions without any government relief.

Government has a moral duty to not cause business failure, and to avoid mass hunger.

It must immediately reopen the economy and allow businesses to take the necessary hygienic precautions without undue interference.

Mike Schüssler is a long-time Moneyweb columnist and Phumlani Majozi is a business and macroeconomics analyst and commentator.

Listen to Nompu Siziba’s interview with Mike Schüssler on level 3 restrictions, (or read the transcript here):

COMMENTS   45

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Brilliant. Who will have to carry all the unemployed? In addition, more unemployed means more civil unrest. We need to break the lockdown right now!

You first buddy.

Ah, yes, protect the elderly white folk (proportionally the black population has far less elderly) without any consideration of the consequences for the middle class and poor.

I’m sure DSS is sitting pretty, aren’t you? How utterly selfish and privileged can you be?

By now, people need to look after themselves. You are right that the black population is less elderly and therefore less at risk of Covid, but more at risk of economic hardship, and if the comments section is anything to go by, there should be no quarter given to those who are perpetually discontented. They can, and should, be left to their fate.

However, there is a mutation that is more transmissible and may not be blocked by vaccines in South Africa. Given the timeframes involved, it would be dangerous to allow this disease to spread unchecked at this point, with the risk of further mutations arising, when we can see the light at the end of the tunnel.

The corrupt ANC government is perfectly aligned with most western governments in destroying the middle class and set the people up to become hand out dependent slaves trough the wicket Great Reset. The only area in which the ANC excels is destruction.

Covid was designed to help the ANC destroy the middle class. What diabolical geniuses! (Sarcasm)

Considering that reopening the SA economy has given the world a deadly mutation that may possibly render vaccines ineffective, and that most countries that would send tourists have closed their borders to SA, one wonders what it will take for celebrity economists and podcasters to back off on the fantasy that opening everything up will solve SA’s problems. It’s clear that this article was written by two people, one proposing a sensible policy of government support (even if it’s unlikely since the ANC had looted the cupboard bare), the other proposing more let it rip lunacy.

Early on in the pandemic Benjamin Netanyahu is reported to have said that Covid would mean the end of human civilisation. That was a gross exaggeration, but it seems like some talking heads are determined to make it happen, turning a disaster into a catastrophe.

At least Benny Net did something pro active !!!

He locked down his country hard when he saw the second wave.

The South African mutant covid is not more deadly, just highly more contagious. Covid is flu. #19 is the strain

And where is the evidence that lockdowns are resulting in the covid demise? None..exactly

More contagious->more infections->more deaths=deadlier.

Lockdowns eliminated Covid in NZ and Aus. The only cases in those countries are those that escape quarantine.

But at this point, there’s no point discussing this with Covid denialists. At least some of the AIDS denialists were committed enough to inject themselves with tainted blood. Covid denialists should do a few shifts in Covid wards without PPE to show us that they truly believe what they put out.

DSS… you are comparing swans with flies?

No, I am pointing out that lockdowns have eliminated Covid in some places, thus falsifying the Covid denialism statement.

How do you personally eat? From a trust fund or government pay check?

The people whinging the loudest are not black. They also have never expressed interest in issues of poverty in the past.

Let me ask another question. How long would you like the lockdown to go on for then? Until you run out of netflix and movies to watch in your home theater or until woolies stops delivering to your door?

Till the vaccine gets rolled out within the year. If there were no vaccines on the horizon, it would be reasonable to argue that we’d have to reopen and let people take their chances (in fact I fully agree that the poor and black, who are much younger, shouldn’t be protecting the rich and white, who are older, and who, based on what we see on forums like this, unrelentingly hostile to attempts to control Covid, it would mean collateral damage to older Coloureds and Indians who don’t seem to share that level of hostility to controlling Covid; but they also tend to vote DA, so their political representatives would agree with the let-it-rip philosophy).

The problem is that a country like SA with an incompetent and corrupt government, high levels of poverty, an undisciplined population, a broken healthcare system, combined with advanced transport networks, means that mutations will not only arise, they spread quickly. If a mutation arose in SA that rendered the vaccines ineffective, the rest of humanity; which doesn’t share the kamikaze tendencies of this vocal and small embittered group, will suffer. That’s why a few more months of restrictions is better than the alternative.

Proudly brought to you by the ANC.

And by its voters, who clearly enjoy starvation and misery. They vote for it every time.

Great article.

It demonstrates the fact that our “leader” is not a seasoned businessman as many think. He is a backseat driver that is half asleep and allow whoever wants to have a stab at it to run the country.

Self enrichment and business acumen is not the same thing.

The damage done by this lot will never be repaired. I just look at how many businesses closed in my area. Many has been closed for months already.

I agree that we are a poor country. Poor in proper leadership.

Most countries around the world have had lockdowns. The difference is that their governments stepped up to support businesses. South Africa has been woefully inadequate, both because fiscal policy is extremely hawkish, and because the ANC looted the country so badly.

@Mmmm, I agree.

He is a product and the epitome of what BEE delivers.

Transferring of wealth through forceful intervention only results in the recipients inability reproduce anything meaningful as they have never really had to work for it and merely been in the right place at the right time.

Sadly all South Africans will face the consequence of this product:
1) Un-natural wealth distribution through unsound fiscal policy
2) Devalued Currency
3) Expropriation Through Inflation (Printing More Money)
4) Failed Municipalities and Bankrupt Cities
5) High number of unnatural deaths and the inability to deal with epidemics (Starvation; Alcoholism; Covid)

Proof that everything government tries to control creates more destruction.

Read: The Government Against the Economy by George Reisman

Not to worry these PHAT ministers will retire of with their full packages and no worries how they ruined “Their” country.

We get more evidence that lockdown serves no purpose. In fact, the minister of health admitted that lockdown measures are not intended to stop the disease from spreading but merely to flatten the curve. By this time the virus is everywhere and most people have been infected already. Everybody has to eat and the point of infection is the grocery store, not the beach, surf spot or restaurant.

Intelligent and mature individuals do not need ignorant government officials to make decisions on their behalf. The accountability for his health lies with the individual anyway. If the government cannot mitigate the fallout, then the government should not implement the action. They cannot receive their full salaries and housing subsidies while they ban citizens from exchanging their labour for food. This is a recipe for violent revolt against the privileged elite who are government employees.

The biggest catastrophes in history were caused by government interference in the free market. Government intervention in free economic activity destroys lives. Why will it be different this time around?

Well said. Lockdowns only bring on abject poverty – see as this plays out over time

In our context: Ignorant and stupid individuals do need ignorant and corrupt government officials to make decisions on their behalf in order to ensure they stay in power.

The ANC is like a virus itself – a pestilence that invades a healthy body and through parasitic action slowly kills off the host. Look at our unemployment figures, Zim stands at 95% and we are well on our way to become Zim 2.0

Cyril – what a letdown. A well-spoken recipient of BEE benefits that proves himself to be totally useless as the NEC is ruling this country. The ZAR exchange rate is proof of it, strengthened when CR took over and then went into a deep dive.

I do actually agree with you: at this point, reasonable people would be managing their own risk. But with the latest mutation that has arisen in SA, the risk of vaccines not working threatens to set the entire world back another year.

Restrictions slow the transmission and potential mutation of the virus. With vaccines on the verge of being rolled out, it seems foolish to risk the virus mutating out of reach of the vaccines.

Dear Mr Lamola : Why the Courts are failing South African Citizens during Covid

A simple fact: Court Officials cannot fulfill their jobs and yet continue to be paid.
Another fact: Lawyers and advocates have to do complete their jobs in order to be remunerated.
Ipso facto: Without these generated taxes, court officials will not receive a salary.

Mr Lamola, it is totally understandable why court officials cannot do their jobs. There is no, or very little, PPE in the courts to protect them. Why would you, or anyone, risk your life when you can be paid whilst avoiding and semblance of work? This is the reality in which many civil servants find themselves.

The matter is stark, and the matter is very real. By working with no PPE in place, court officials risk their whole families’ lives. This requires urgent intervention.

In Pietermaritzburg, there are many Court Officials who are willing – who are able – to work. There are many lawyers and advocates waiting to work. This is microcosmic representation of a larger, nationwide situation. Until the law’s wheels of motion can start their heft rotations, the law no longer serves the citizens of South Africa.
Law firms and Advocates will go out of business. Laywers, secretaries, messengers will have no salaries for Tax, school fees, home help etc. Many more unemployed to come and no courts to assist with Civil unrest.

The solution:

While government needs to utilise all of its funds and resources to fight COVID-19,
please allow law firms, through their local law societies, to lend courts PPE Equipment to protect the Courts and allow the Law to be effective?

Thank you

Just horrendous. The result of communist policy and BEE showing their efficacy, especially in terms of morality

I think more like one in five.

Thank you Mike for having the courage to call a spade a spade…please all go and listen to his interview with Ryk on RSG geldsake,….these political leaders taking these decisions are truly ” van hulle sinne beroof!”

Thank you Mike for the article. I wish I could say it is an excellent piece of reading (there is nothing wrong with your information), but the message is concerning and bleak. I so want to read some “good news” articles, but the reality is exactly what you convey in this article. We can blame the ANC and have conspiracy theories, but people are suffering, households and children are suffering as a result of this. Will lifting the lockdown really turn the situation around. The current environment is like a huge oil tanker ship on a stormy sea. It takes long to actually change direction and must plan ahead before deciding to turn left or right, if they want to get on course. Yes, cancel lockdown, but remember it is only one step in the right direction, businesses need to recover still which will not happen over night.
Anyway, thank you again for your contributions on this platform. I can only hope that the people who need to read this article, who can make decisions, take it to heart

And China being the main instigator of this covid-? business is laughing at the ease with which they managed the world’s politicians to destroy their own economies and indirectly boost the Chinees economy. Makes you wonder whether Trump didn’t have some inside information on this issue.

Look lets be real, this government has no idea what they are doing. I can almost forgive the initial month of lock down last year March as the entire world was seemingly going crazy and the medical “experts” was basically predicting the end of the world with their massive infections and death rate.

But since then a lot has happened, we now realize that the death rate is not nearly as bad as initially predicted and that only certain subsets of the population with underlying medical conditions or advanced age are truly at higher risk.

Therefore the logical solution for me would have been to implement compulsory social distancing, sanitation and mask wearing but to leave to economy to continue as normal. And for those who disagree you are still free to lock yourself up in your own house and keep yourself safe.

We are now at a stage where the economy is truly in bad shape. Luckily for me I work for an essential business and as such I received my salary every month and the massive stimulus have really propped up the markets helping my investments grow. This is though not the case for the majority of the working class and I have seen some rather frightening situations over the past year.

Situations where people had to swallow their pride and beg for food, where people only kept the curtains on the windows while having to sell the majority if not all of their furniture to get some cash. And this all was done by the government to “protect” these people who now have lost their jobs and are quickly burning through the little assets they have, but hey at least they do not have Covid right?

The sad part is – people will lose their livelihoods due to the foolish lockdown measures……and then lose their lives due to covid anyway!

Does lockdown provide a guarantee that people won’t be infected? Well, it does guarantee that people will lose their livelihoods. Therefore, lockdown guarantees that innocent, hardworking and honest individuals will lose their livelihoods while the covid threat remains at exactly the same level. First, they will lose their ability to provide for their families, and then they will die due to covid.

Where is the pragmatism? Where is the intellectual leadership? Where is the insight, foresight, understanding and statesmanship in this human-made catastrophe? We are being led by sheep following sheep. So-called leaders build their reactions around the ignorant public opinion as expressed on social media. Nobody is accountable for the fallout in this destructive negative feedback loop. The political leadership follow the opinion of the people they are supposed to provide with leadership.

Here we have another bunch of clowns who state that “lives must come before profits”. These fools are ignorant of the fact that profits support lives. Profit pays salaries and taxes that buy the medical care, vaccines, ivermectin and social grant. What kind of system allows such fools to determine policy?

This is a destructive system where the pillars of society rely on an earthquake to keep it upright.

How can a government enforce lockdown while simultaneously don’t have the monetary means to support the negative effects of said lockdown? It may work somewhere in Europe but I doubt in Africa. Furthermore to put it in context. Let’s say India gives us 120m covax doses – how long will it take government to give all its citizens 2 doses? We have huge capacity problems here. We have a parallel state evolving which simply bypasses the current government. We have blatant corruption. We have people in managerial capacity which is just not capable. Then we ask why are our government slow to have acted on vaccines? Then we ask why the vaccine rollout is difficult? We just can’t do it. So how on earth will a lockdown ever be successfully implemented here without enormous damage? Non of the people enforcing or deciding on this lockdown has not been paid every month? And they must decide on my wellbeing. Fools paradise this beloved country has become.

Well, to give the vaccine to the majority is really easy. Just call a country-wide election complete with cANCer T-shirts and food parcels. Before anyone, however, can get these handouts, they must first be injected. Problem solved regarding the vaccine.

The gavamunt heard about the second wave. That is why they closed the beaches.

@andymo

Surely the middle class and poor have and will suffer the most under the type of lockdown we have had and will have?

Sickevil leaders doesnt care.They’re pockets are lined.

the 1 376 682 would be much higher if our unemployment numbers were lower!!

a lot is said about this topic. I would like to hear from the gov decision makers their reasoning for a lock down, based on their original forecast figures, how the figures changed, what have they achieved, how they think to restore the economy and, is amongst them anybody whoknows anything about economy?.I have reason to say that we we all under estimate the real debt crisis out there. This is out of control. The Credit Act is an excellent Act however under the control of a empty post box(NCR).With people losing their jobs , the debt crisis will be the final nail My solution for the country: The interest on al loans should be phased in over say five years and pinned at a max rate of prime plus 4%. No minimum wage, Unions to be banned.. NCR to be privatised and most of gov a”services” BEEEEE kak be banned

“The American Medical Association has officially rescinded a previous statement against the use of Hydroxychloroquine (HCQ) in the treatment of COVID-19 patients.”

The Government doesn’t care, how long have business begged and pleaded for respite? How long have those rendered unemployed by this lunacy pleaded their case? How many times have we seen the economic catastrophe unfolding, yet their cries continue to fall on deaf ears!!
The lockdoens are ridiculous, my small local bakery and coffee shop has a person capacity of 45 people inside, yet the miles and miles of wide open beaches are closed and surfers cant enter the water!!

Unbelievable how people just don’t seem to realise (in the words of Milton Friedman)… Companies and Governments don’t pay taxes… people pay taxes. What is a company but a collection of tax paying owners, directors, employees and customers all paying PAYE, Tax, CGT, Company tax etc etc etc.

We are paying the price for this indirectly through decreased standards of living as well as the increased unemployement.

End of comments.

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