South Africa’s unemployment rate for the first quarter of this year rose by a percentage point to 30.1%.
The number of employed persons decreased by 38,000 to 16,4 million between January and March 2020, while the number of unemployed persons increased by 344,000 to 7,1 million compared to the fourth quarter of 2019.
South Africa’s unemployment rate increase by 1,0 percentage point to 30,1% in Q1:2020 compared to Q4:2019. The unemployment rate usually increases between Q4 and Q1 each year.
Chief economist at Stanlib, Kevin Lings, said that these numbers were exceptional.
“The unemployment rate from my perspective jumped quite substantially, it’s now at about 30%. What’s stood out in particular, is that in the past year, almost 900,000 more people have become unemployed and I think that is exceptional and it speaks to our inability to create jobs in a very low-growth environment.”
It’s important to note that these figures capture data from the first quarter of this year.
National Treasury now estimates that job losses could be between 690 000 and 1.79-million due to the impact of the Covid-19 pandemic on the South African economy.
The 690 000 job losses are likely in the event of a quick recovery; the larger figure is a worst-case scenario.
The sectors that will see the largest impact are likely to be:
- Catering and accommodation; and
- Financial and business services.
Avis Budget Rent-a-Car, part of the Barloworld Group, announced that a total of 978 employees would be affected by retrenchment, according to a Fin24 article. This is nearly half of the employees of the company.
Meanwhile, the Bidvest Group’s shares fell more than 5% on Monday after the diversified services and trading company warned of possible job losses as a result of coronavirus-related disruptions across its operations.
This is in addition to running list of companies in South Africa who have gone into business rescue, or foresee retrenchments and job cuts.
- Phumelela Gaming and Leisure (currently in business rescue)
- Afarak Mogale and Afarak South Africa (currently in business rescue)
- SAA (currently in business rescue)
- SA Express (currently in business rescue)
- Edcon (currently in business rescue)
- Comair (currently in business rescue)
- Tiger Brands
- Cell C
- Pam Golding
- Flight Centre
Speaking at the South African Reserve Bank’s (SARB’s) bi-annual Monetary Policy Review briefing earlier this week, Dr Christopher Loewald stated that early projections indicate that the 21-day lockdown, aimed at curbing the spread of the coronavirus, could see around 370 000 job losses and 1 600 businesses being declared insolvent in South Africa.
The Covid-19 lockdown may directly and indirectly result in a 2%-4% contraction of the economy in 2020.
Ratings agencies and the weakening rand
Ratings agency Moody’s downgraded South Africa’s credit rating to junk or sub-investment grade on Friday 27 March.
Subsequently, Fitch downgraded South Africa’s Long Term Foreign-Currency Default Issuer Rating (IDR) from BB+ to BB with a negative outlook. The agency is forecasting a 3.8% contraction for the South African economy in 2020.
As a result, the rand has plummeted to nearly R20/dollar, but has since recovered to R18,65.
Big business in SA to forgo bonuses
South Africa has looked to big businesses during this time to make every effort to keep their staff.
Woolworths yesterday announced its board and executive teams will forego up to 30% of their fees and salaries over the next three months.
The SARB’s Prudential Authority (PA) has asked commercial banks to put a freeze on paying out ordinary dividends or bonuses to executives this year.
IMF versus ANC
Finance Minister Tito Mboweni said last month that South Africa would approach the IMF or World Bank for help fighting the coronavirus “if we run out of finance for health interventions”. However, the ANC, the SACP and Cosatu have made it clear that they do not agree – and that South Africa needs to “safeguard [its] democratic national sovereignty”.
Asking multilateral institutions, especially the IMF, for cash is deeply unpopular with a radical faction in the ANC and trade unions the party uses to rally support ahead of elections, partly because of the stringent conditions that can accompany IMF lending programmes.
By Jewel Stolarchuk for The Independent
18 000 jobs in Deutsche Bank are set to be cut as the German national lender embarks on mass retrenchment exercise. Whole teams at the bank’s Asia-Pacific offices have reportedly been let go, as the lender seeks to transform itself from an investment bank that used to compete with the lenders in Wall Street, after struggling in the aftermath of the financial crisis.
Deutsche Bank employs about 4,700 employees in its Asia-Pacific offices in Singapore, Sydney, Tokyo and Hong Kong. The investment banking team in the region consists about 300 staff members and it is expected that 10 to 15 per cent of these employees and almost all the employees in the equity capital markets division will be retrenched.
According to Reuters, the restructuring plan will ultimately cost 7.4 billion euros (SGD $11.31 billion) and will see the bank cut back on its fixed income operations and axe its global equities business altogether.
Most of those retrenched are working in the bank’s offices in Europe and the United States but some offices from Sydney to Hong Kong were also affected. Retrenched workers are due to sign redundancy packages.
One Deutsche bank employee, an equities trader based in the Hong Kong office who declined to be named, told Reuters that staff were called individually to meetings and that the mood was “pretty gloomy” as the job cuts began. He said: “(There are a) couple of rounds of chats with HR and then they give you this packet and you are out of the building.”
While a Deutsche Bank spokeswoman declined to comment on specific departures, an insider who is familiar with the bank’s Australian operations told Reuters that most of the mergers and acquisitions staff would not be immediately affected but the teams in the four-strong equity capital markets were being retrenched.
The Deutsche bank spokeswoman assured the press that the bank would be directly in touch with employees. She added: “We understand these changes affect people’s lives profoundly and we will do whatever we can to be as responsible and sensitive as possible implementing these changes.”
Deutsche Bank’s Chief Executive Officer Christian Sewing called the retrenchment exercise part of a “restart.” In a letter to employees, he wrote: “We are creating a bank that will be more profitable, leaner, more innovative and more resilient.”
This “restart” comes on the heels of Deutsche Bank’s failure to merge with its rival Commerzbank. In May, Mr Sewing hinted at extensive restructuring as he promised shareholders that he will implement “tough cutbacks” to the investment bank.
How it will impact South Africa
According to an article by Business Insider, the Sandton headquarters employ approximately 70 staff.
- The equity trading desk will be closed completely, with the loss of around 12 jobs
- The fixed income team, which trade bonds, will remain largely unchanged in South Africa
The bank suffered a pre-tax loss of €16-million (R251,5-million) on its South African activities last year, according to the Deutsche Bank annual report.