As business, labour, the government and community representatives met this week to share proposals on how to drive an economic revival, new economic data indicates how hard the economy has been hit by Covid-19.
With job losses rising, incomes falling and businesses shutting, especially in the worst-affected sectors, the damage will be hard to reverse. The cancellation of investments by several companies will weigh on the economy's capacity to turn around.
Cosatu, Fedusa and Nactu warned President Cyril Ramaphosa and his ministers at Nedlac this week that unemployment could push past 50% and that there was a danger the economy would go into a depression. They said they were worried that the government was "focused on talking and not implementing".
Business for SA warned of an "economic wasteland" , with up to 2-million jobs lost already, and poverty and inequality rising.
The presidency said that the social partners agreed on the "grave nature of the economic challenge" and the need to act urgently to move the economy forward. A high-level team has been set up to finalise an urgent economic recovery programme.
Nedlac executive director Lisa Seftel said the recovery plan was not being built in a vacuum. She said there were initiatives in place that were advancing economic recovery, including consolidating and expanding local production, especially of personal protection equipment, as well as extending social protection and income replenishment.
Several economists expect the economy to contract quarterly by 50% or more after official data on the retail, mining and manufacturing sectors for June came in worse than expected.
And the July data now available, in sectors such as motor, suggest the third quarter of this year will see only a limited recovery.
SA's economic woes in the second quarter parallel those of some advanced countries. Unlike them, SA was in recession, with an unemployment rate of 30%, even before Covid hit and the country implemented one of the world's most draconian lockdowns.
Latest figures from the UK show an economy shrinking by more than 20% in the second quarter and falling into its deepest recession on record, making its economy the worst hit among developed countries.
Others, such as the US and Germany, have seen their economies contract by more than 8% in the second quarter, though they are recovering fairly strongly as they open up.
In SA, mining output picked up quite strongly in May as the lockdown was lifted but declined by just over 1% again in June, with output levels still 28% below a year ago. On a quarterly basis, the second quarter decline is 76%.
Factory output in June was down 16% compared with a year before, which is better than April's 49% plunge, but this still means a quarterly decline of 30%.
And while the purchasing managers index for July indicates a continued recovery in manufacturing, mainly because of improved global demand, Nedbank's economists warned "the recovery over the second half of the year is unlikely to compensate fully for the complete implosion caused by the shutdown in operations over April", and the medium outlook remained uncertain.
The incoming data ...
— Annabel Bishop
is proving to be worse
Investec economist
With consumer spending making up about 60% of the economy, there was only limited good news in the important retail sales figure for June, which were still down 7.5% on a year previously, compared with 12% down in May.
BankservAfrica's latest transaction index also showed that the level of transactions in the economy was still 9% down for the year.
Economists also see the resumption of power cuts as a bad sign for prospects of economic recovery this year.
Citi economist Gina Schoeman never expected a rapid recovery but said the second quarter was looking more negative than expected, with available data suggesting a 50% second-quarter contraction compared with the Reserve Bank's minus 40% forecast, with the economy shrinking by 9% this year.
A particularly telling leading indicator is fuel sales, Schoeman said, which contracted by 50% in the second quarter.
Investec economist Annabel Bishop is more pessimistic: "The incoming data for the various sectors of the economy so far in Q2 is proving to be worse than minus 50% quarter on quarter, indicating that GDP could contract by potentially closer to 60% or worse in the second quarter due to the extension of the lockdown's various restrictions on economic activity."
Her colleague Lara Hodes said the effects of the pandemic on the already financially constrained consumer had been unprecedented. The unemployment rate was likely to have reached 37% in the second quarter "as many businesses have had to shut their doors permanently or downscale".
BankservAfrica's Take Home Pay index showed the number of monthly salaries paid in June showed an annual decline of more than 20%.
The government's presentation to Nedlac on Thursday showed that average forecasts from a range of international agencies put SA's economy declining by 7.1% this year, which is in line with Reserve Bank and Treasury forecasts.
However, private sector economists are more pessimistic, with the latest Beeld/Bureau for Economic Research consensus forecast, released this week, predicting the economy will shrink by an unprecedented 8.1% this year, turning to 3.2% growth next year.
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