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3 scenarios for employment in South Africa – a grim picture for the recovery of Covid

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Professional services firm PwC has released a new employment report for South Africa, outlining three possible scenarios for the country’s labor market.

PwC’s employment scenarios are based on different perspectives on a third wave of Covid-19 infections hitting the country in 2021.

Despite rolling out a vaccination program, medical experts agree that the pace of vaccinations will not prevent South Africa from experiencing a third wave – which is currently expected to strike around mid-year.

The severity of this mid-year wave and the accompanying severity of the associated lockdowns will directly determine the nature of the economic recovery, PwC said.

“According to our baseline scenario, the South African economy will grow 3.5% this year and create 420,000 jobs. We expect total employment to return to 2019 levels (ie before the pandemic) by 2025. However, by then, a large number of new workers will have been added to the workforce.

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As such, PwC expects the narrowly defined unemployment rate to decline only slowly, and it may take nearly a decade for the unemployment rate to return to pre-pandemic levels. The best-case scenario will see South Africa’s unemployment rate rise to 24% by 2030.

Increase in inequalities

Another problem the country faces is inequality, and more than 25 years after South Africa’s first democratic election, data shows that inequality has increased rather than decreased.

Citing data from the World Bank, PwC said South Africa’s Gini coefficient for consumer spending of 0.63 is higher than the most recent coefficients for any other country.

The Gini coefficient is one of the most common measures of economic inequality with values ​​between 0 and 1, where 0 indicates a perfectly equal distribution.

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“Social mobility is so limited that, assuming constant levels of social mobility, it would take nine generations for the people of South Africa to reach the median income level.

“By comparison, that number (of generations) is seven in China and India, six in Germany and France, five in the UK and only two or three in the Scandinavian countries.”

Although there have been improvements in social protection and coverage of basic services since 1994, poverty levels remain high, PwC said, citing data from Statistics’ most recent living conditions survey. South Africa, conducted in 2014/2015.

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According to this, about half (49.2%) of the adult population lived below the upper poverty line (UBPL).

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“Persistent inequalities and widespread and extreme poverty levels have been exacerbated by Covid-19 and the associated economic decline,” PwC said.

He added that business confidence, as measured by the BER Business Confidence Index, has steadily declined since 2006.

“With the effects of the Covid-19 pandemic, business confidence, as measured by the RMB / BER Business Confidence Index, has been in negative territory consistently since 2014.

“With the effects of the Covid-19 pandemic, the South African economy has contracted by 7.0% in 2020, and will grow by 3.5% in 2021. However, we estimate that it will take around four five years for the economy to return to 2019 Levels. “

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