South Africa’s economic recovery, which outperformed forecasts by the International Monetary Fund (IMF), is in danger of regressing as a second wave of the Covid-19 virus − fueled by Christmas socialising and travel − and the planned termination of two large relief programmes hit the country.

The planned effective termination of the Unemployment Insurance Fund (UIF) Temporary Employer/Employee Relief Scheme and the Covid-19 Special Grant is planned for January 2021.

This cautionary note emerged from the third-quarter Real Economy Bulletin (REB), released by Trade and Industrial Policy Strategies (TIPS) on December 10.

The REB conducts a deep dive into the latest economic data and notes that the quarterly data on gross domestic product (GDP) and employment obscure the rapid monthly changes during the pandemic.

The economy shrank sharply in April but regained much, albeit not all, of the lost ground in May and June. Since then, growth has continued at a more gradual pace.

However, in constant rand terms, exports exceeded January figures in the third quarter, driven mostly by higher prices for gold, as well as higher production of platinum and automobiles. Manufacturing sales in September were equal to those in March in constant rand terms, although growth was slowing.

In contrast, despite the lifting of restrictions, accommodation and catering remain “the hardest-hit industries,” with sales still more than 50% below pre-pandemic levels. 

The REB says the pandemic has “deepened inequalities globally” and in particular in South Africa, which already ranks amongst the most unequal societies in the world, and points out that “job losses among formal-sector managers and professionals, who held almost a third of all formal jobs, fell just 1% or around 35 000”.

In contrast, for other formal workers, employment shrank 12%, or around a million.

A similar picture emerges when comparing job losses in formal as compared to the informal sector which saw a 22% decline in employment in the second quarter, and regained 8% in the third quarter.

As a result, the informal sector “suffered a net loss of over 450 000 positions. That equalled almost a third of total job losses, although the informal sector contributes less than a fifth of total employment.”

More broadly, employment rebounded only 4% in the third quarter after dropping 14% in the second quarter. And since more labour-intensive jobs tend to be at higher risk from the infection, the REB says they are unlikely to return until the pandemic is fully under control.

“Indeed, a second wave is likely to see more job losses from catering and accommodation. In these circumstances, the planned termination of key relief programmes in January will see many households going hungry.”