It’s easy to forget that economics is not really about a bunch of abbreviations, figures, tables and graphs, or economists dressing up in charcoal suits and crisp white shirts to present their predictions of the economy in a upmarket auditorium in front of an equally suited 200-odd people who know the exact difference between the GDP, GNP and GNI (or pretend to).
The economy is not about figures and letters, but rather the study of people. It’s about how they react to their environment, their plans and being happy.
Economists reduce it to numbers, but human behaviour, fuelled by emotions and hard work, will always be the bedrock of economics.
Most people realise the economic fallout of the coronavirus outbreak will affect the economy, and that it will affect a lot of people’s ability to work and earn money. It will not only reduce economic activity during the current three weeks of lockdown, but also thereafter.
Statistics South Africa’s latest Quarterly Labour Force Survey (QLFS), based on research completed during the last quarter of 2019, gives an indication of how many people will be affected. Stats SA uses 10 industry categories for its research, and the number of employees in each serves as a good indication of how many people will be affected. Many already are.
Employment by industry
|Community and social services||3 792 000|
|Trade||3 249 000|
|Finance||2 568 000|
|Manufacturing||1 720 000|
|Construction||1 350 000|
|Private households||1 286 000|
|Transport||1 011 000|
|Total*||16 420 000|
|* Total includes other industries not shown in the table|
Source: Stats SA QLFS, Q4 2019
One can assume that all mineworkers and construction workers are sitting idle at home, as are most of the employees in the manufacturing sector except for those involved in the food processing industry. Most will return to work, but retrenchments seem unavoidable given prospects of low economic growth in 2020.
The biggest industry as far as employment is concerned, labelled community and social services, employs nearly 3.8 million people. It includes those employed in the healthcare industry, many of whom continue to work.
Zero income likely for many
However, the bulk of the rest – hairdressers, personal trainers, restaurant owners and employees, piano teachers, car mechanics and whoever owns or works for a small independent business – will probably earn nothing during the current three weeks of forced unemployment.
The tourism industry, for years regarded as one of the most important growth sectors for reducing unemployment in SA, is one of the hardest hit.
Travel and tourism stopped, immediately and totally, when Covid-19 began to spread.
After a busy few weeks of local activity over the December holiday period, foreign tourists usually continue to arrive from the middle of January to around the end of May.
This is normally the good time for local businesses and SA. Tourists from Germany, Austria, Canada, Korea, the Middle East, China, Japan and Britain bring wallets full of strong foreign currency to eat, drink, sleep and play.
Importantly, this is new money from outside of SA’s borders. It is not local money that we merely shuffle around between us.
This money is the stuff that actually makes SA and its citizens better off; we ‘export’ pleasurable holidays.
Now there is nothing.
Not only did tourists immediately cancel their holidays and reservations, most of the early arrivals booked out immediately and headed home on the next available flight.
Unfortunately, tourism is also a sector that sustains a lot of small businesses, independent operators and individuals plying their trade.
Few big employers
There aren’t many big manufacturers along the Garden Route south of Port Elizabeth to Cape Town; just a lot of smaller towns and villages relying on tourists. The same holds true going north from PE towards St Lucia, or north from Cape Town towards Port Nolloth.
The ability to earn an income has changed for most of the inhabitants of these tourists towns, as a quick look at any of the small towns along the Garden Route shows. And it is unlikely to improve quickly. Tourism will recover slowly even after the pandemic passed on.
When guest houses emptied as soon as the world realised the danger of the virus, it left employees and independent workers in the lurch.
One entrepreneur has (or had) a nice little business venture after the guest house owner agreed to outsource the kitchen and preparation of all the meals to him. He would buy all the ingredients and prepare breakfast for up to 40 guests. He would also entice the visitors to try local dishes for dinner, including the favourite – and nearly compulsory – traditional braai. A margin was added to the best wines from Stellenbosch and Franschhoek, acquired from a small distributor.
The guest house, one of the biggest and most popular on the beach, was fully booked until the end of May. Those bookings have all been cancelled.
The same goes for the other guest houses in the street, and on all the other streets.
In addition, guest houses, hotels and health spas in the area all employ seasonal workers. These people and their families rely on the few busy months every year to pay school fees and buy new car tyres.
Big step, a hurdle, then shutdown
Another casualty is the owner of a small pub and restaurant. He took the big step of getting a loan and buying the small vibrant restaurant where he has been employed for years. A bit of money to clean it up and reorganise a few things created an appealing venue – only to be hit a few weeks later by the regulations banning the sale of alcohol after 18:00, and now a total shutdown.
The last few weeks had already been difficult, with the drop in tourist numbers. The latest developments have made things worse. He will not be able to pay rent at the end of the month. Shutting down for the next three weeks means no income for him or his landlord.
He is not the only one. The allure of any small holiday town is a big choice of small interesting restaurants that each keep a few people employed. In total, they offer employment to thousands in SA.
Even the bigger and more profitable restaurants will suffer. If the largest restaurant in town is able to afford to pay its permanent employees during these difficult months, the larger legion of casual staff is likely to be left without income.
Suppliers just as hard-hit
Suppliers to restaurants and related retailers have been hit just as hard. A large number of micro-businesses supply restaurants and the interesting roadside stalls with everything from wine, craft beer, condiments, dried fruit, pastries, tasty breads, crafts and art.
A friend built up a nice niche business producing and selling chilli sauce to restaurants, shops and farm stalls. His orders and income disappeared overnight, leaving him with no recourse to UIF or other emergency funds as he isn’t a salaried employee or a small business owner employing other people.
Everybody involved in tourist activities at this level, from the airport shuttle driver to small operators offering adventure activities, will be without income for the time being.
This includes those who offer tourists paragliding rides, sail boat excursions, canoe rentals, mountain bike trails, quad bike rides, archery, paintball and bicycle rentals, as well as the small shop selling cool drinks and sweets.
In short, most of the residents in such a tourist town are without an income for most of the month. Hopefully things will return to normal soon, but indications are that most will have to do with much lower income for the foreseeable future.
Knysna Tourism has cancelled a number of events, including the RS Tera World Sailing Championships in April and the Knysna Motor Show scheduled in May. The popular Pink Loerie Mardi Gras and Arts Festival scheduled for April/May, which attracts visitors from all over SA, has been postponed.
Oudsthoorn has cancelled the popular Klein Karoo Nasionale Kunstefees, which draws thousands to the dry Karoo town and brings in tens of millions in income to the local tourism industry.
Wild Info, a privately-owned tourism information bureau servicing the Garden Route towns of Plettenberg Bay, Knysna, Oudsthoorn, George and Mossel Bay, has experienced the cycles of the tourism sector for the last 12 years. Owner Jacques Pratt says the past Christmas season was actually quite good, but bookings by international travellers declined immediately soon after the outbreak of the coronavirus in China.
“At first it looked as if the slack would be taken up by local tourists, but the initial steps to limit public gatherings to 50 people and restrictions on the sale of alcohol reduced expectation. Tourism imploded when government announced the lockdown,” says Pratt.
He expects little reprieve in the short term, saying that stakeholders need to take urgent steps to rebuild the sector.
“It will be years before we see the number of foreign tourists we have welcomed lately.”
Cornelis van der Waal, chief research officer of Wesgro (which is focused on Cape Town and Western Cape tourism, trade and investment), says it is hard to say how much the industry will be impacted or how fast the recovery will be.
“The simple truth is that everyone in SA and the world will remember the first half of 2020 as one of the largest human and economic crises of recent history.
“Before the crisis, there were approximately 175 000 people employed in the tourism sector in the Western Cape, a lot of them along the Garden Route as a result of the natural beauty, product offering and amazing climate.
“Tourism was doing very well in the Garden Route at the start of the year. January and February saw strong growth in the demand for hotel beds [more than 7%],” says Van der Waal.
He also notes that April is typically the month when international tourists come to SA to spend their dollar and euros.
“Since all international flights have been cancelled it is clear it will have a significant negative effect on the industry.”
Economists might label them entrepreneurs, survivalists, small businesses or self-employed. They are mostly forgotten about against the glare of our fascination with the multi-billion dollar companies of the JSE Top 40.
But together they are just as big and just as important as the large listed retailers.
Listen to Nompu Siziba’s interview with Victor Kgomoeswana: