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How did the lockdown affect the economy in South Africa?

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Looking at how the implementation of lockdowns in the wake of the COVID-19 pandemic impacted and was predicted to impact the economy of South Africa as time passed.

Overview

The implementation of strict lockdowns in South Africa from 2020 came as a result of the unprecedented global COVID-19 pandemic. The rapid spreading of the virus influenced the decision for the majority of countries worldwide to implement a lock down in order to contain any further spreading.

Locking down the country meant movement was restricted and economic activity was disrupted. The effects on the economy did not take long to show as vital sectors, businesses, and the labour market took some of their biggest knocks, harshly affecting people’s livelihoods and the state of the economy.

Lockdown effects on the economy

South Africa’s economy came under severe strain as a result of the pandemic. It is a known reality that South Africa’s economy was already not at its optimal functioning before the pandemic hit. The Coronavirus simply made matters worse when the declaration was made of a National State of Disaster to deal with the outbreak.

This meant that strict regulations needed to be put in place, restricting the flow of the economy and the movement of people. The country has since suffered with ongoing efforts to restore, maintain, and move the economy towards growth.

How did the lockdown affect the economy in South Africa?

At one point during the worst of the pandemic, South Africa became the regional epicentre of the virus in sub-Saharan Africa. With the economy taking a massive knock, the country quickly had to come up with financial relief measures to try to contain the rise in poverty, as many found themselves unemployed.

The economy saw a forced reduction in production and demand and restrictions on business operations which then impacted job losses, as some businesses could no longer afford to operate and had to resort to retrenching staff, giving rise to further unemployment.

Global production and supply chains on South African exports were disrupted as well as business investments, since confidence in investment with South Africa declined drastically. These huge factors that drive the economy and on which South Africa depended, became significantly strained.

Government’s relief package

The economic situation required the government to come up with relief measures for those who would be worst impacted by the economic climate.

The relief package included the implementation of the Temporary Employer/Employee Relief Scheme to be executed under the Unemployment Insurance Fund (UIF), debt relief measures for small and medium enterprises who were set to be negatively impacted by the lockdown, and restrictions on business operations as well as the Social relief of Distress measures which afforded a R350 relief grant to the unemployed not receiving social assistance, and disbursed food parcels to helpless, impoverished households.

Unemployment and manufacturing during the lockdown

In the first year of the lockdown, which was 2020, a recorded increase of 701 000 people were unemployed in the fourth quarter of 2020. The unemployment rate increased from 30.8 percent in Q3 of 2020 to 32.5 percent in Q4 of 2020, which went down as the highest unemployment rate since the Quarterly Labour Force Survey started in 2008.

In 2020, total manufacturing production decreased by 11 percent from 2019 before the pandemic and lockdown. The largest negative contributions were made by basic iron/steel and metals, petroleum/chemical products, food and beverages, and others.

How do things stand post the peak of the pandemic and lockdown?

The fourth quarter of 2021 presented a more positive result across the manufacturing, personal services, trade, and agriculture industries. Trade increased by 2.9 percent with eased lockdown restrictions, manufacturing rose by 2.8 percent. Manufacturing, mining, and agriculture recorded the highest growth rates in 2021, with economic activity increasing by 4.9 percent during 2021.

In terms of employment, by the end of quarter four of 2021, the number of employed persons increased by 262 000. The official unemployment rate was 35.3 percent, which showed an increase of 0.4 of a percentage point for Q4 of 2021.

Final thoughts

The global Coronavirus pandemic left a lot of devastation in its wake. The effects of the pandemic, especially in less developed or developing countries, were the worst, specifically on the already struggling economies of said countries. South Africa was not at all spared in this regard.

The implementation of strict lockdown regulations resulted in a reduction of economic activity and production. People lost their jobs while the already jobless and impoverished came under even more strain. Trade and investment decreased as business confidence declined, and key sectors in economic stimulation were impacted the most by lockdowns.

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