COVID-19: SA sees decline in formal sector jobs in first quarter of 2020

In its latest Quarterly Employment Statistics update, Stats SA has announced a decline of 3,000 formal non-farm jobs in the first quarter of 2020. Chief Economist at Investec, Annabel Bishop, shared insights on the impact of the COVID-19 pandemic on South Africa's economy in an interview on CNBC Africa. Bishop discussed how the economy was already struggling before the outbreak of COVID-19, with minimal growth and a lack of necessary reforms to drive faster economic expansion. The pandemic's economic fallout has exacerbated the situation, leading to numerous business closures and households depleting their savings to survive. Additionally, the tourism sector has suffered significant losses due to restrictions and lockdowns. Looking ahead, Bishop predicts a GDP contraction of about 10% for the year, with unemployment rates expected to rise to 37% before moderating back to 36%. She highlighted the severe impact of the second quarter on GDP, with a projected 48% contraction. Industrial productivity, including electricity, mining, and manufacturing, has plummeted, further contributing to the economic downturn. The decline in economic activity has resulted in low business and consumer confidence levels, hindering investment and hiring ability. Bishop emphasized the negative implications of these factors on employment figures in the coming quarters. Discussing the IMF's rapid financing agreement of $4.3 billion to South Africa, Bishop explained that the funds would go to the national treasury for COVID-19 relief efforts. While the exchange of dollars for the rand might strengthen the currency temporarily, she emphasized the importance of managing the volatility in financial markets. Bishop highlighted the conditions attached to the IMF loan, including a reduction in government debt as a percentage of GDP and the implementation of expenditure cuts outlined in the special COVID-19 budget. These measures are crucial for future borrowing and maintaining a positive relationship with international lenders. As South Africa navigates through the economic challenges brought on by the pandemic, the road to recovery will require strategic planning, fiscal discipline, and a focus on stimulating key sectors. The impact of COVID-19 has emphasized the need for comprehensive reforms to drive sustainable economic growth and job creation in the country.