South Africa’s rising unemployment rate has been a growing concern over the years.
The COVID 19 cloud enveloping South Africa paints a very gloomy picture as millions of people stand to lose their jobs.
Additionally, the depreciation of the rand exacerbates the already dire situation.
According to economist Bradley Cooper, the unemployment rate is highly likely to shoot up from 29.1% up to more than 50% in the next three months.
“Massive job cuts are looming. There is going to be job losses especially in the non essential job sector. There is a need to ensure income security beyond COVID 19 pandemic.
“People have essentially been working from home in the last months. Some businesses have managed to sustain themselves working online. This will highly likely change most Employers’ strategy moving forwad.
This means some workers will highly likely lose their jobs as employers change their modus operandi,” said Cooper
Treasury projects that more than 7 million jobs are expected to be lost.
Wages and salaries will also be cut due to low production levels during the lockdown.
Unemployment to cause economic security
This means that there is going to be huge knock-on economic security of millions of South Africans as the world moves towards embracing virtual working spaces.
This narrative by Coppers is echoed by Hannah J Dawson, Post-doctoral fellow at the Society, Work and Politics Institute (SWOP) at the University of the Witwatersrand and Elizabeth Fouksman a Leverhulme Early Career Fellow at Univerity of Oxford.
The Scholars suggest that the current economic distress brought on by the pandemic is not a brand new crisis. It’s an amplification of what was already a reality for many South Africans.
They further note that this crisis which has deepened economic insecurity around the world will not spare South Africa.
Globally, over 60% of workers are in non-standard employment.
In the United States of America alone, official figures state that more than 30 million people have filed for unemployment benefits in the last 6 weeks,
This devastating economic impact of the Covid-19 pandemic on the American economy will highly likely spill over to South Africa, which has become the hotspot of the pandemic in Africa.
As of 5 April 2020, South Africa had recorded 7 220 confirmed cases of COVID 19 – the highest in Africa.
Unless a vaccine is found and the pandemic contained, there will be massive job cuts.
The spike in the unemployment rate is inevitable.
Cooper added that of great concern is Treasury’s projections that the South African economy could contract by as much as 16.1% this year.
He noted that it spells doom for both the employer and the employee.
“Recession always brings with it dire consequences.
“The Employer will not take the risk of borrowing to pay the employee. The most viable option for the employer will be to retrench. The employee will be the biggest loser,” he said.
National Treasury Projections
The National Treasury, Director-General Dondo Mogajane projected that the country’s unemployment rate could reach 40% due to the impact of the coronavirus pandemic.
Speaking recently during the Eusebius McKaiser Show, Mogajane says; “We may even reach 40% unemployment if things go the way they are and it also depends on which sectors we are talking about.”
Mogajane added that this has never happened and that it will be very difficult to grasp the effects of COVID 19 on the South African economy.
“What we put into projection models, we want to be certain of.
“It’s certain that the economy is going to contract, by how much we don’t know at this early stage. There are many other factors that could influence a projection.
“It could be that growth drops by around 7-8%.
“All we know is that it’s going to be huge. In my personal opinion, without being able to provide a perfect data set, if things go the way they are, unemployment could reach between 30% and 40%,” said Mogajane.
What makes the situation look more gloomy is the fact that it will take time for the economy to recover and operate at full throttle.
What is certain though is many people will remain employed for a very long time hence the need to come up with ways on how to self employ.
President Cyril Ramaphosa last month announced a host of measures to curtail the inevitable job cuts.
Ramaphosa’s 6 months staggered unemployment grant is the greatest indication that all won’t be rosy for employees.
The special grant of R350 will be paid to individuals who are currently unemployed.
These are individuals with no form of employment and do not receive any other form of a social grant or UIF payment.
While the Government is trying to assist provide for the unemployed, it is only prudent to ensure that people create other sources of income to ensure financial independence.
A factor that will significantly contribute to the high rise in unemployment figures is that companies will not even contemplate employing new staff.
This will affect new graduates who seek employment opportunities in the shrinking economic environment
South Africa’s economy has really been hard-hit by coronavirus pandemic.
Rating agencies, Moody’s and Fitch have downgraded the country to junk status.
Innovation will be key for the survival of many employees post-COVID 19.