South Africa’s unemployment crisis is expected to deepen in the aftermath of last week’s looting and destruction. Thousands of employees in affected sectors face the prospect of unemployment or reduced income even while retailers and other businesses promise to rebuild.
The presidency and national treasury are expected to make an announcement on details of a new financial package to deal with the aftermath of the days of destruction, which may include extending existing relief programmes for businesses and employees.
On Tuesday President Cyril Ramaphosa met with affected business and industry leaders to find a way forward from the economic setbacks as a result of the looting and damage to property. He announced a new social and economic relief package that will support poor households and provide assistance to affected businesses and employees.
The relief will include both the extension and repurposing of some of the Covid-19 relief measures and specific relief for sectors affected by the violence like retail and property.
“These measures should support the work underway to re-open stores, find
alternative retail sites and rehabilitate shopping centres and malls. It is important that, both as government and the private sector, we prioritise measures for township businesses, small businesses and the informal economy.These are among the hardest-hit and the most vulnerable, and play a significant role in sustaining livelihoods and employment in poor communities,” Ramaphosa said.
The president said there was virtually no part of the economy that had not been affected by the violence “and there is probably no part of the country that will not feel the effects in some form or another because of the way our supply chains work”.
It will take at least two years before the malls that were burnt to the ground re-open, while others will take several months, according to the South African Property Owners Association.
A ratings analyst at Credit Ratings Analytics, Saveshen Pillay, said the past week’s destruction would likely result in more ratings action down the line following Moody’s decision to downgrade the credit rating of five of SA’s municipalities on Friday, 16 July. Johannesburg, Cape Town, Nelson Mandela Bay, Ekurhuleni (whose water entity was downgraded) and uMhlathuze municipalities were affected by the credit downgrade due to concerns around liquidity as revenue collection dropped during the pandemic.
“The number of jobs at risk as a result of this is quite significant and it’s definitely going to affect revenue collections so I think that the ratings actions that will probably come through later this year will have an emphasis on this rioting and looting events,” Pillay said.
The government would have to balance business concerns around security of their investments in the country with addressing the underlying drivers of the looting such as inequality and poverty, he added.
“I think [Ramaphosa] is in a situation where he needs to respond to this and stimulus measures are obviously the first point of call to calm investors’ and ordinary South Africans’ concerns around the impact of rioting and looting on businesses in particular,” said Pillay.
Fitch ratings agency said the direct economic impact of riots in South Africa would be limited.
“However, the violence highlights tail risks to social and political stability and could affect fiscal policy, including public-sector wage negotiations, complicating efforts to stabilise the level of government debt/GDP,” the agency added.
The recovery period is also expected to put the nature of employment in sectors like retail and manufacturing under the spotlight.
Dr Bianca Chigbu at the University of Fort Hare noted that more women work in sales and retail, where jobs are likely to be more affected.
“The number of workers needed in a store can be managed [leading to a reduced number of female workers] to save money,” she said.
Unemployment resulting from the looting and destruction in the formal retail sector will be disproportionately felt by women despite their historical under-representation in the country’s labour market. “Clearly, it will be a more challenging time for women in those areas.”
Chigbu believes the available Covid-19 measures will give “much-needed help to those who have been laid off or are unable to earn a living due to the devastation”.
“There will also be income relief measures for businesses whose operations have been stolen and destroyed, as well as for individuals who have been rendered jobless temporarily or permanently as a result. Additionally, NGOs and the government will give food parcels to impacted areas that now lack a store and funds to purchase food. Workers who have lost pay are eligible for pension withdrawal assistance,” she added.
The retail sector employs 20% of South Africa’s workforce, where employment is characterised by non-standard forms of employment. This is defined by the International Labour Organisation as arrangements that deviate from standard employment and include temporary, part-time and on-call work, temporary agency work and other multiparty employment relationships.
The Food and Allied Workers Union (Fawu) said that the main focus now was to encourage rebuilding with businesses. Fawu represents more than a thousand retail workers and thousands more in other affected sectors.
“There’s no position from employers on a need to cut jobs at this point. We have taken the initiative to approach employers on what is needed to rebuild from the unrest so that jobs are not lost,” Fawu deputy secretary general Vuka Chonco told the M&G.
Chonco said existing labour relations would allow for extensive engagements where business will rebuild. Where there are grounds for retrenchments because a business will not open again, however, Chonco said that businesses had to consider ways to support the affected employees.
“This is neither the fault of the employer or employee and it is our job to look after the wellbeing of workers and save jobs,” he said.
The unemployment rate reached its highest point since 2008 when it rose to 32.6% in the first quarter of 2021 from 32.5% in the final quarter of 2020 according to Statistics SA. In the first three months of this year, the number of unemployed people was little changed at 7.2-million people, compared with the fourth quarter of 2020, increasing by 8 000 people.
Consultancy firm PwC in its July 2021 economic outlook report this week said that the unrest in Gauteng and KwaZulu-Natal during the second week of July could reduce GDP growth by 0.4 percentage points this year and had put up to 50 000 jobs at risk. Other estimates are higher and include workers in the informal economy, such as street traders.
Sapoa said that the current damage to KwaZulu-Natal alone would put 150 000 jobs at risk and wipe out R20-billion from the provincial economy.
Some 161 malls, 200 shopping centres, 11 warehouses, eight factories and 161 liquor stores were extensively damaged and looted during the violence and looting that followed former president Jacob Zuma’s incarceration. Around 3 000 stores were looted and 40 000 businesses affected.
“During 2020 and 2021, landlords had to bear the full brunt of the lockdown, and continued making payment of utilities and property rates to municipalities even when properties were not rent-producing,” Sapoa president Andrew Konig said in a briefing following the violence.
Konig drew from the eThekwini economic development and planning committee, which found that R1.5-billion had been lost in stock, while there was a R15-billion loss to property, more than 50 000 informal traders had lost their livelihoods and approximately 1.5-million people had lost their potential to earn an income.
Sapoa’s Malose Kekana said in many cases, the damaged malls in townships mostly inhabited by black South Africans were built to improve the lives of the communities that they served. “Those that are going to be most affected by the loss of income will be the very people that the malls were set up to serve,” he told a media briefing.
The gains in the retail sector are also expected to be hit. The sector had made a positive comeback in the latest data, from a Covid-19-induced slump. First National Bank said month-on-month retail volume sales went up to 2.1% in May, following declines of 0.6% and 4.4% in the two previous months respectively.
The South African Clothing and Textile Workers’ Union said that in Isithebe, KwaZulu-Natal, a new clothing factory was completely destroyed during last week’s violence. It said 600 jobs would be lost, affecting 3 000 families in one of the poorest parts of the country.