The true impact of the lockdown on South Africa’s economy – Facts and figures

President Cyril Ramaphosa announced yesterday that South Africa’s COVID-19 alert level will be lowered from level 4 to level 3 by the end of May.

Areas with high COVID-19 infection rates will, however, remain on level 4 at the end of the month to stop the spread of the virus.

Most of the areas with high COVID-19 infection rates are metropolitan areas where most of the country’s business is taking place.

It is therefore no surprise that many economists and business executives are concerned about the economic impact of the prolonged lockdown.

Sygnia CEO Magda Wierzycka said instead of flattening the curve, South Africa has merely delayed it and killed the economy in the process.

“When we peak and really need a lockdown, no one will have the will or the money to comply,” she said.

Independent business community Sakeliga said the lockdown is an economic, humanitarian, and social disaster in the making.

19% of businesses recently polled by Sakeliga expect to go bankrupt within the next month, and 32% within the next three months.

Allan Gray CIO Andrew Lapping said even with the lockdown it is not possible to stop the spread of the virus.

He said the spread will continue for the next few months until it hits a peak. This gives the government a choice:

• They can let people die from COVID-19.
• They can let the same number of people die from COVID-19 and destroy the economy.

“We are urging the government to look at the big picture and see just how many lives are lost through poverty and hardship which is caused by the lockdown,” he said.

To illustrate what these business organisations and executives are so concerned about, MyBroadband gathered the latest public facts and figures about the impact of the lockdown.

Job losses

National Treasury said around 3 million jobs are at risk if the pandemic is contained quickly, while a slow recovery could see 5 million job losses.

A worst-case scenario would push the unemployment rate to over 50% with as many as 7 million South Africans losing their jobs.

Research published by Nedbank forecasts that 1.6 million jobs will be shed in the country in 2020. By comparison, approximately 900,000 jobs were lost after the global financial recession.

Banking transactions

The BankservAfrica Economic Transaction Index (BETI) for April 2020 recorded the biggest decline in its history across monthly, quarterly and annual levels.

The annual rate of decline was 13.9% in April and on a quarterly basis, the decline was 15.2%. Between April and March, the BETI dropped by 12.3% – the biggest monthly decline on record.

The BETI captures interbank electronic payment transactions under R5 million to provide almost immediate feedback on the economic performance of most sectors.

It is therefore the quickest and broadest monthly indicator of economic activity in the local South African economy.

Impact on South Africa’s GDP

In April the South African Reserve Bank (SARB) cut the country’s gross domestic product (GDP) growth forecast. It now expects the economy to contract by 6.1% in 2020.

Business for South Africa has a more native outlook and predicts that the economy can contract by between 10% and 16.7% this year.

Car sales

The latest National Association of Automobile Manufacturers of South Africa figures show that new car sales declined to a record low in April.

Passenger car sales in South Africa declined by 99.6% between April 2019 and April 2020. Local car sales dropped from 24,982 in April 2019 to only 105 in April 2020.

Large declines were also seen in light, medium, heavy and extra-heavy commercial vehicles.

The table below shows the impact of the COVID-19 lockdown in new vehicle sales in April 2020.

Businesses closing down

Numerous South African businesses are closing down or are entering business rescue as a result of the lockdown.

The table below provides an overview of some of the prominent companies which have announced they are entering business rescue or are closing down.

Now read: Certain parts of South Africa will move to lockdown level 3