Mining
The mining sector is expected to shrink by 19% this year, according to a new report.
  • A new report estimates that the SA economy could shrink by 14% this year - if the country stayed at Level 4 for another week, followed by Level 3 for three weeks, and then remained in Level 2 and 1 for the rest of the year.
  • The economy would take six years to recover at least 80% of value lost during lockdown.
  • The hospitality and recreation industries will shrink by almost 40% this year.
  • For more articles go to www.BusinessInsider.co.za

A new report by the international consulting firm Singular estimates that South Africa could take years to recover from the coronavirus crisis.

Singular estimates that if Level 4 - which started on 1 May - continued for three weeks, followed by Level 3 for another three weeks, and SA then remains at Level 2 and 1 for the rest of the year - the GDP could shrink by 14% this year compared to 2019. The economy would take six years to recover at least 80% of value lost during lockdown, says Lorenzo Tencati, senior partner at Singular.

The SA Reserve Bank expects a contraction of around 6% this year, while the corporate grouping Business for South Africa expects that the GDP will shrink by between 10% and 16.7%. By contrast, SA's economy shrank by only 1.5%% following the 2008 financial crisis.

Singular is, however, cautiously optimistic about South Africa’s Covid-19 response, saying that the local death rate is following the trajectory of “best practice countries such as South Korea”, and that – unlike in other countries like Spain - the local death toll does not appear to be understated. Spain has had an excess of 19,700 weekly deaths of which only 12,401 were attributed to Covid-19. This is not the case in SA, currently SA’s Covid-19 death toll appears to be a true reflection of natural causes.

In South Africa’s favour is its young population - 91% of the population is under 60. A 60 to 69-year-old is 12 times more likely to die from Covid-19 compared to a 40 to 49-year-old. However, there are some two million HIV-positive South Africans who are not on antiretrovirals, whose weaker immune systems could make them more vulnerable.

While the report notes that the national lockdown has been effective in curbing the spread of the virus, the economy has taken an immense knock.

The country entered Level 4 on 1 May. Almost all manufacturing was allowed to return, as well as mining and some retailing.

Some sectors – like automotive manufacturing and some non-coal mining – can only operate at 50%-60% of their usual staff levels, however.

The industry with the biggest blow is estimated to be hospitality. Other sectors expected to be hit hard include mining, retail, and construction. The current crisis could result in year-on-year contraction of 19% in the mining sector, which represents 8% of GDP, with other industries also hard hit:

  • Retail (8% of GDP): 20% contraction
  • Construction (4%): 18%
  • Hospitality (1%): 39%
  • Recreation (2%): 37%
  • Banking and finance (7%): 8%

Tencati says that in case of further extensions of level 4 and level 3 in Covid-19 hotspots, this could contract the GDP by 17% compared to 2019, which will take South Africa seven years to recover this loss.

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