With a barely-there safety net, millions of South Africa’s so-called “working poor” will likely be plunged into the depths of extreme poverty amid an unprecedented national lockdown.
On Tuesday, Labour and Employment Minister Thulas Nxesi confirmed what already seemed to be inevitable: the country’s almost three million informal sector workers will not be covered by the department’s measures to lessen the effect that a 21-day national shutdown will have on the working class.
“The issue of the informal sector, the workers who are not registered with the UIF [Unemployment Insurance Fund] or the Compensation Fund, how will they be assisted? Unfortunately, from our side we [are not] able to deal with this matter, because it is beyond
this particular legislation,” Nxesi said at an interministerial press briefing.
According to Statistics South Africa’s most recent quarterly labour force survey, there were 2 918 000 workers in the informal sector at the end of 2019. This is almost 18% of the total employed workforce in the country.
Stats SA defines these workers as “persons in precarious employment situations”. They are not entitled to basic benefits and do not have a written contract of employment. These are car guards, zero-hour workers and casual labourers.
Although Minister of Small Business Development Khumbudzo Ntshavheni said there would be some relief for informal traders, whatever this relief might be, at best it will only cover less than 35% of the sector — or the approximately one million informal traders.
Last week, the International Labour Organisation (ILO) warned that the economic fallout of the coronavirus outbreak would have a devastating effect on global working poverty. The working poor live close to or below the poverty line.
Nearly 50 years ago, the ILO coined the term “the informal sector” to describe the activities of the working poor.
According to the ILO’s preliminary estimates, under the mid and high scenarios there will be between 20.1-million and 35-million more people in working poverty around the world.
The ILO estimates that unemployment could surpass that experienced during the 2008 global recession, with a possible 24.7-million job losses.
The ILO also warned that unprotected workers — including the self-employed, casual and gig workers — “are likely to be disproportionately hit by the virus as they do not have access to paid or sick leave mechanisms, and are less protected by conventional social protection mechanisms and other forms of income smoothing”.
Around the world, governments have introduced measures to lessen the effects of the pandemic on workers. But many have left informal sector workers out of their immediate plans.
This week the UK government fended off criticisim after it overlooked the country’s five million self-employed workers in its initial plans for workers amid its own national lockdown.
The South African government’s decision to use the UIF, which excludes informal workers, to effectively bail out companies in distress as a result of the coronavirus, is a massive and controversial move.
Recent proposals to use worker safety nets — like the UIF and state pension funds — to keep ailing power utility Eskom afloat have provoked massive debate.
It is also unclear whether the UIF will be able to deal with the potentially millions of claims triggered by the economic effects of the coronavirus pandemic.
In the United States last week, the deluge of unemployment claims reportedly caused IT claims systems in a number of states to crash.
On Tuesday, Nxesi said the UIF claims system will have to be decentralised.
To do this, the department has decided to advance the money to companies and bargaining councils to allow them to pay those employees, Nxesi said.
There will be strict audits “after the big storm, so there is no abuse of the money”.
These benefits will be calculated on a scale, and will not be less than the R3 500 minimum wage.
“The administrative capacity we have at the moment never anticipated these huge numbers, which are likely to come,” Nxesi said. “But if the companies come to the party, the bargaining councils come to the party, we think that we will be able to deal with that influx.”
The temporary employer/employee relief scheme — which is funded by the UIF to assist distressed companies through subsidies — will be “expanded and expedited”, Nxesi said. Companies will be able to draw from benefits through this scheme, provided that they embark on turnaround programmes overseen by the Commission for Conciliation, Mediation and Arbitration.
The minister would not be drawn on the exact amount in benefits workers and companies will be allowed to claim. “We cannot just pronounce figures and raise expectations, and then we cannot fulfil that later on [if] we find that it is too expensive.”