Unemployment could reach 36.5% by end of the year: IDC
Deep recession on the cards as GDP growth projected at -6.3%
The Industrial Development Corporation (IDC) on Wednesday revealed that it anticipates a jobs bloodbath that will result in an unemployment rate of 36.5% by the end of the year.
CEO Tshokolo Nchocho was briefing parliament's portfolio committee on trade industry and competition this afternoon on measures taken by the corporation in the wake of the Covid-19 crisis.
The country's unemployment rate was sitting just above 29% before the national lockdown.
The IDC is expecting the rand to remain under “immense pressure” but to bounce back and strengthen towards its long-term trend line over the five-year outlook period. The institution is also anticipating a deep recession this year, with GDP growth projected at -6.3%.
Nchocho said the corporation had put together R500m of its own money and R300m from the department to tackle the next few months.
Nchocho admitted that the ongoing crisis made the organisation vulnerable given that it relied on repayments from the businesses it sponsored.
“The IDC as an organisation is being impacted by this phenomenon because the IDC is really just an aggregation of the investments and the loans that we have given out there. If I make an example that we have an exposure in total of the order of around R7bn or so: the tourism sector. If that sector comes under pressure, like it is now, those clients find it difficult to make payments to the IDC on their loans or service their equity commitments. Indeed the IDC gets impacted that way,” he said.
So far the IDC has approved R379m worth of emergency Covid-19 funding to six businesses. It has also offered support to businesses by allowing deferred payments for those who are in distress and cannot pay it back. Around 15 applications are currently undergoing due diligence processes and if approved will be valued at R198m.
Nchocho’s presentation came just hours before President Cyril Ramaphosa’s address on Wednesday evening, where he gave an update on the country’s measures and direction on the further opening up of the economy.
Nchocho said while the issue of opening up the economy was a sensitive one, it is a matter which caused constant anxiety.
“Unavoidably, we do think about this all the time as the IDC. It is a delicate one because it is about balancing risk to life but also the economy ... How we have approached it up to now, I am participating in sector forums. So I participate with the mining sector CEOs and tourism sector CEOs and those in the clothing and textiles.
“The nature of our conversations is to say, what is the kind of measures of safety can you come up with as a sector in order to give government and the leadership in the national command council assurance that when you open your specific sector, you will organise adequate safety measures so that people’s lives are not endangered?
“Our interest is to see as much of the economy open up as possible because we are exposed to all sectors of the economy. In terms of level 4, we estimate that probably just over 55% of the sectors that the IDC works in have been particularly opened. That is why I think it is better to take a sector approach to that question.”