We show how some of the attributes which are considered weaknesses in the South African labour market may make the country less sensitive to the negative economic consequences of the Covid-19 crisis. High Public Sector employment, together with Social Grants, contribute 40% of total SA household income, which should be stable during and after the lockdown.
While the Informal Sector may lose income during the lockdown, it has very low operating costs and we expect the sector to bounce back after the lockdown. Our evaluation of scenarios shows peak job losses could increase the unemployment rate to 31.9%. We argue that SA’s high unemployment base could lower the sensitivity of the economy to further deterioration.
We update our Consumer Wallet model and find surprising resilience, even with substantial job losses. Consumers will benefit considerably from the boost to Social Grants, the lower debt service costs, savings in transport costs and savings on non-discretionary purchases.
Provided the Government’s plans to restart the economy are successful and not delayed, we think that there could be a reasonable recovery in the Consumer Market. Discretionary retailers may remain under pressure in 2020, but the unique events and interventions could result in a more robust consumer base which would benefit all the retailers from 2021, in our view.