The pandemic broke an already broken economy

2020 was not only one of the deadliest, but also one of the costliest years in the history of South Africa.

Covid-19 and the 300 days and counting of lockdown, meant to contain the spread of the virus has cost South Africa millions of jobs, economic growth and tourists, while the alcohol and tobacco ban saw the country lose billions in lost revenue.

Lost employment

Unemployment in South Africa increased by 7.5 percentage points to 43.1% in the third quarter of 2020, compared to the second quarter of the year, according to the results of the Quarterly Labour Force Survey (QLFS) issued by Statistics SA.

Unemployment increased substantially by 2.2 million (52.1%) to 6.5 million compared to the second quarter of 2020, leading to an increase of 2.8 million (15.1%) in the number of people in the labour force.

Formal sector employment increased by 242,000 (2.4%), informal sector employment by 176,000 (7.7%) and private households by 116,000 (11.5%). Employment in agriculture increased by 9000 (1.1%).

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Employment increased in all industries, except utilities and transport, while more jobs were gained in finance (200,000), community and social services (137,000) and private households (116,000).

ALSO READ: SA’s 2020 inflation lowest in 16 years

Compared to the third quarter of 2019, employment contracted in all industries, except mining, where it remained unchanged in the third quarter of 2020. Most job losses were observed in trade (400,000), manufacturing (300,000), community and social services (298,000) and construction (259,000).

Damage to the economy

The South African economy was in peril even before the pandemic struck. With non-essential businesses forced to close down when the lockdown began, the table was set for economic carnage.

According to the World Bank’s Global Economic Prospects report, the South African economy contracted by 7.8% during 2020. It is expected to recover by 3.3% in 2021 and return to a “near potential pace” of 1.7% in 2022.

The pandemic had a worse effect in economies such as South Africa’s, where large outbreaks happened, as well as those that rely heavily on tourism, which put South Africa in the way of even more economic hardship.

The World Bank also noted that output fell sharply in South Africa in 2020, with output estimated to have fallen by 7.8% and pointed out that there is a possibility that some mitigation measures will need to remain in place. This is now a reality and economists are already downgrading their expectations for South African economic growth in 2021.

Small businesses suffered the most during 2020. Finfind and the Department of Small Business Development reported that 42.7% of small businesses in South Africa had closed due to the economic impact of the lockdown.

Tourism also went nowhere

According to the Tourism Business Council of South Africa, the industry saw an estimated R68 billion loss in spend. After the lockdown started on 26 March 2020, all tourism activates stopped.

The SA Tourism report, The Road to Recovery, also states that Covid-19 hit the tourism sector particularly hard with almost no international tourists arriving on South African shores and restricted internal movement for several months. International arrivals were reduced to minimal levels.

A hospitality worker is arrested by police during a protest in the streets around Parliament, Cape Town, on 24 July 2020. Police used stun grenades and water cannons to disperse a gathering of hospitality workers who were protesting against the current lockdown regulations that are crippling their industry. Several arrests were made and many bystanders were also sprayed. The hospitality, restaurant and tourism sectors have been severely affected by the new lockdown regulations with protests against government springing up across the country. Picture: EPA-EFE/Nic Bothma

After the country moved from level 5 to level 1 and international travel borders were opened on 1 October, there has been a very slow recovery in passenger arrivals with total arrivals for October still 91% lower than in October 2019.

These reductions are on par with arrival reductions seen across the globe, with the October world average at -83% and continental reductions ranging from -76% to -97%. Movement of passengers through major airports indicates a greater recovery in domestic air travel compared to both international and regional air travel, according to the report.

Domestic air passenger movement was only 55% to 65% lower in November than in November 2019, with regional and international movement 85% to 91% lower.

The report points out that accommodation trends provide an indication of the level of travel and tourism and therefore it is not surprising that accommodation occupancies plummeted between April to July, but once movement restrictions were eased, there were signs of recovery in all accommodation types.

By the end of October, the greatest recovery had occurred in caravanning and camping (30%), home sharing (-41%) and “other” (-40%) accommodation types, which may indicate a preference for outdoors and smaller establishment types.

The alcohol mix

The Beer Association of South Africa (BASA) noted that the previous two alcohol bans had a devastating impact on the beer industry, with 7400 job losses, R14.2 billion in lost sales revenue and 30% of breweries forced to shut down.

ALSO READ: We have no regrets over ‘helpful’ booze ban, says Mkhize

The alcohol ban saw government lose R7.4 billion in taxes and excise duties, and the third ban is expected to cause untold economic damage to the beer sector and the 415,000 livelihoods it supports.

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