Though most job losses in the first quarter were in the nonagricultural sector, the agricultural sector shed 21,000 jobs, says the Nedbank Economic Unit. Picture: Jackie Clausen
Though most job losses in the first quarter were in the nonagricultural sector, the agricultural sector shed 21,000 jobs, says the Nedbank Economic Unit. Picture: Jackie Clausen

The economic devastation inflicted by the lockdown has already forced several companies to shed jobs as they battle to survive, and more job cuts appear inevitable as the pandemic rages on.

This week, first-quarter data from Stats SA showed unemployment had soared to a 10-year high of 30.1%. The agency's "Quarterly Labour Force Survey" shows the number of unemployed increased by 344,000 to 7.1-million.

But the figures do not reflect the impact of the decimation wrought by the Covid-19 lockdown.

Mamello Matikinca-Ngwenya, chief economist at First National Bank, says SA has yet to grasp the full impact on employment, which will begin to emerge in the second-quarter data. She expects job losses to reach just north of 1-million this year.

The Nedbank Economic Unit expects the figure to be about 1.6-million.

Already several businesses such as Sasol, South African Airways, Comair, SABC and Bidvest Group subsidiary BidAir have begun retrenchment processes or announced plans to do so.

Others such as Tongaat, Eskom, Telkom and Massmart announced job cuts even before the lockdown began at the end of March.

Cell C is considering shedding 40% of its workforce.

Many economists predict retrenchments will continue until at least the end of this year. Matikinca-Ngwenya thinks it will take about five years for the economy to recover.


59%

The unemployment rate for those aged between 15 and 24


Individual hardship

The effects of retrenchments go beyond individual hardship, says Azar Jammine, director and chief economist at Econometrix.

He says that although some of those being retrenched fall below the income tax threshold, there will still be a significant loss of tax revenue.

This extends beyond personal income tax - reduced consumer spending will lead to a cut in VAT receipts, says Sanisha Packirisamy, an economist at Momentum Investments.

Finance minister Tito Mboweni said on Wednesday in the special adjustment budget there would be a gross tax revenue deficit in financial 2021 of more than R300bn.

Matikinca-Ngwenya expects the worst job losses to be in construction, manufacturing, retail and mining.

Jammine says the construction sector has been dormant for some time and it is the smaller service industries such as restaurants, hotels and personal-care practitioners that have "taken a hell of a beating".

According to the Nedbank Economic Unit, while the bulk of job losses in the first quarter were in the formal nonagricultural sector, which shed 50,000 workers, the agricultural sector recorded 21,000 job losses.

Packirisamy says those who are laid off may end up in long-term unemployment as they lose out on exposure to on-the-job training.

She says reskilling employees to work in different sectors poses a significant challenge, which means the post-Covid-19 jobs crisis could bring with it a rise in long-term unemployment, a reduction in labour productivity and increased poverty.

The longer people remain unemployed, the harder it becomes for them to get rehired.

This is particularly the case for young people.

Stats SA says that in the first quarter the unemployment rate for those in the 15-34 age group was 43.2%, which rose to 59% for the narrower 15-24 age group.

Alana Bond, co-founder of Lucha Lunako, a social enterprise that promotes youth employment and skills development through collaboration, partnerships and innovation, says a recent survey by the group found that "young people are facing a disproportionately more uncertain future than those people who have had the time to develop skills and start on their careers".

The survey was conducted between May 22 and June 9 in association with the Bertha Centre for Social Innovation and Entrepreneurship at the University of Cape Town Graduate School of Business and other partners.

It found that besides the immediate financial impact of the lockdown, more than half those polled felt uncertain about their futures and were frustrated by the inability to plan ahead.

More training needed

Almost a quarter of those polled said they had not finished learning important skills they would need to find work, and half said access to free online courses would help them to move forward.

The high cost of data and limited access to Wi-Fi were also cited as a challenge.

About half the respondents said they wanted practical tips and mentoring to plan their futures.

This shows the need for a focus on practical content that provides "tried and tested solutions for moving young people towards their future", says Bond.

"This is not about [only] providing technical skills, but is also about providing places to discuss and motivate young people around what the future can look like.

"We must take note that many young people have lost income and are saddled with student and other types of debt and now have to borrow even more money to survive," she says.

"Financial solutions have to be developed and other solutions, like cheaper data and online learning platforms, must be explored."

Stats SA says "some of the young workseekers are not well-educated and do not possess sufficient skills and previous work experience demanded by employers".

"The economy demands skilled and experienced workseekers, which . lessens the chances for young people to find employment, which ultimately results in some losing hope of ever finding a job (thereby becoming discouraged workseekers)," it says.

"Some of these young people have disengaged with the labour market and they are also not building on their skills base through education and training."

Matikinca-Ngwenya expects a reallocation of labour. "Some people are going to lose their jobs" in retail stores, but the e-commerce sector will grow, creating alternative employment opportunities.

Even when the South African economy does begin to recover, many of the jobs lost now will never be reinstated.

Greater automation

Packirisamy says mechanisation and automation could speed up in sectors that can easily substitute labour with capital, such as manufacturing and mining, which could see an acceleration in mechanisation.

Marique Kruger, an economist at the Steel and Engineering Industries Federation of Southern Africa, says that the Covid-fuelled job losses will delay efforts to reindustrialise the economy, but at the same time they will present an opportunity to rejig employment opportunities in line with new work roles.

Kruger is urging the government to strategically support initiatives that will provide unemployed South Africans with specific skills that will enable them to compete in the job market and be ready for new opportunities.

She says such skills include coding, which would equip people to take advantage of the trend towards digitisation and automation and work in artificial intelligence and data science.

Matikinca-Ngwenya says a lot hinges on whether the five infrastructure programmes announced at the inaugural Sustainable Infrastructure Development Symposium this week do in fact go ahead.

She says if these projects are not ready to go and do not create employment in SA, unemployment data will continue on the current trajectory.

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