Economy

Job losses in Gauteng 'will have a ripple effect across entire economy' - experts

24 May 2020 - 00:00 By GRAEME HOSKEN
Economists and inequality researchers warn that the loss of 900,000 jobs would be an economic "bloodbath" for the country.
Economists and inequality researchers warn that the loss of 900,000 jobs would be an economic "bloodbath" for the country.
Image: Graphic: RUBY GAY MARTIN

The shockwaves from the possible loss of nearly 1-million formal jobs in Gauteng because of the lockdown will hit the country's economic growth and be felt by households in other provinces too, experts predict.

In scenario planning around the effects of the lockdown on Gauteng, premier David Makhura this week warned that in the worst case, 2-million formal sector jobs could be lost.

The best-case scenario, he said, is that 900,000 formal jobs will be lost by year-end, with economists warning that a quarter of these will disappear forever.

Makhura, who has been pushing for Gauteng to be allowed to move to lockdown level 3 next month, warned businesses this week he would shut them down if they failed to comply strictly with Covid-19 health protocols.

The province has more than 2,400 Covid-19 cases.

Economists and inequality researchers warn that the loss of 900,000 jobs would be an economic "bloodbath" for the country, hurting millions more people in far-flung rural areas who rely on the earnings of relatives working in Gauteng.

KwaZulu-Natal, at 4-million, has the most government grant recipients, and Gauteng - with a total population of 15-million - is next at 2.6-million.

Driving Makhura's job loss fears are the province's rising infection numbers.

StatsSA's latest quarterly labour force  report, released in December 2019, showed only 3.8 million Gauteng residents have formal-sector jobs.

The province's entire labour force is 5-million strong, with just over 1.2-million people working in the informal and agricultural sectors and as domestic workers and gardeners.

Economist Thabi Leoka said losing 1-million or more jobs in Gauteng would be catastrophic for the province and the country.

"Gauteng is a major support system for SA. If the people who lose their jobs are high-wage earners from big economic growth sectors, there will be a major impact on the GDP."

She said the loss of a job was not just bad for a worker and their immediate family.

"It has a negative effect on consumer-driven businesses.

"Fewer working people means fewer people buying items, which is a big problem for SA given that 60% of the GDP is driven by consumption."

Leoka said if the worst-case scenario for Gauteng proved accurate, it would mean that of the 7-million jobs that the Treasury fears will be lost nationwide, 35% would be from the province.

"That's catastrophic. Millions will be forced onto social grants with money that should go to building the economy having to go into social relief."

Johane Dikgang of the University of  Johannesburg's school of economics said the predictions were terrifying. "These losses will have a ripple effect across the entire economy, with the tax base tanking and economic development slowing."

He said consumption-driven sectors were already battling, with spending down because of salary cuts. "Such job losses will  kill off entire sectors of the economy such as restaurants."

Dikgang said the coronavirus job massacre would be worse than in the 2008 global financial crisis "and far closer to that of the 1929 Great Depression". A quarter of the jobs would never be reinstated.

Makhura's spokesperson Vuyo Mhaga said based on modelling done last month, it was estimated up to 500,000 people would lose their jobs.

But if the pandemic lasted longer than current projections and economic recovery was slower than hoped, between 897,000 and 1.8-million jobs would be lost. In the most dire scenario, the number could be
2.4-million.


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