The latest GDP data has just been released and as expected, the third quarter of this year saw a rebound after a major contraction in the second quarter.
The country’s gross domestic product saw an expected surge in growth between July and September this year.
It rose by an annualised rate of 66.1% after contracting by 51% during the lockdown in the prior three months.
Manufacturing, trade, and mining were the biggest drivers of growth as lockdown restrictions eased in the third quarter.
However, the recovery remains vulnerable, with power shortages and slow structural reforms likely to weigh on sentiment.
The country needs a growth rate of at least 5% to remedy its unemployment crisis.
But current projected growth for the year is expected to be -8%.
By Lameez Omarjee for News24
If we move to lockdown Level 3, amid fears of a second wave of Covid-19 infections, SA’s economy could shed 200 000 more jobs.
B4SA estimates it would take until 2024 for formal employment levels to return to the pre-Covid levels of employment, if the correct measures are taken.
Government needs to provide certainty that there will not be another hard lockdown to restore and boost investor and consumer confidence.
Another hard lockdown would be detrimental to the SA economy, a shift to lockdown Level 3 in particular would result in 200 000 more job losses, warned Business for South Africa.
The business lobby, representing the majority of SA businesses partnering in their response to Covid-19, on Tuesday issued a statement calling for certainty that government would not implement another hard lockdown amid fears of a second wave of Covid-19 infections.
In the second quarter 2.2 million jobs were shed, as a result of the hard lockdown (lockdown level 5) which lasted five weeks. Economists expect these job figures to recover during the third quarter, coinciding with the easing of lockdown restrictions.
The South African economy is expected to contract anywhere between 7% and 13% this year- its worst performance in 90 years.
B4SA warned that bankruptcies of small and medium enterprises, which increased from 4% last year to 6.5%, could reach over 10% – this as credit extensions and tax relief expire.
“If all nine provinces remain on Alert Level 1 – the lowest alert level – B4SA estimates a 9.3% decline in GDP for 2020,” the statement read. This figure accounts for the fiscal and monetary policy interventions as well as the Temporary Employee Relief Scheme benefit.
One of its downside scenarios which considers SA moving to lockdown Level 3 from mid-November and December – sees a further 200 000 job losses and a 10.6% decline in GDP for the year.
“We estimate that formal job losses have already reached 1.4 -1.6 million, with a further one million lost in the informal sector, and that it will take until 2024 for formal employment levels to return to the pre-Covid level of employment assuming that we pivot the economy onto a sustainable inclusive growth path,” said B4SA’s steering committee chair Martin Kingston.
“South Africa can ill afford additional job losses and compounded economic difficulty,” he added.
B4SA said certainty that there will not be another hard lockdown would help restore and boost investor and consumer confidence.
B4SA has suggested that instead of a hard lockdown government implement targeted interventions by sector. For example, all industries should remain operational – unless specifically identified as “uniquely high risk”.
Other measures include limiting the numbers of people at social and religious gatherings, and possibly reintroducing an extended curfew. “Reintroducing cigarette or alcohol bans should be avoided due to their significant adverse economic effects,” B4SA said. Appropriate behavioural and safety protocols must also be applied to mass public transport.
By Mia Lindeque for EWN
There has been a steady rise in COVID-19 cases in South Africa with the last week showing more than 10,000 new infections.
The cumulative number of cases is now at over 737,000, as experts notice a rise in the numbers in the Eastern Cape, the Western Cape and Gauteng.
READ: SA COVID-19 resurgence no surprise due to ‘complacent’ citizens
Scientists said that this could be attributed to super spreader events.
The Eastern Cape has confirmed more than 4,000 new COVID-19 cases in just the last week.
ALSO READ: SA can learn from Europe’s COVID-19 second wave, say experts
The Western Cape, once the epicentre of the outbreak, has seen an increase of more than 1,600 new coronavirus cases in the last seven days.
In Gauteng, the number has spiked with more than 1,300 over the same period. In the last seven days, 398 people have died, nearly half of them in the Eastern Cape.
ALSO READ: ‘Exhausted’ Swiss doctors reel as second virus wave hits
As the world focuses on the second wave of infections sweeping Europe, there are concerns that the resurgence in cases here at home could increase rapidly as well.
Source: Business Insider SA
Between January and August 2020, South Africans newly working from home showed a serious appetite for office equipment and stationery, with year-on-year growth of 83% recorded.
Of South Africans who buy online, 52% now own laptops, compared to 40% last year.
But broadly speaking, technology sales weren’t great during lockdown, the latest market insight from consumer experts GfK South Africa shows – despite the work-from-home boom. In the first quarter of 2020, technical goods showed a 1% year-on year increase in sales, then revenues plummeted by 25% during hard lockdown (April to July), when the sale of non-essential goods were banned.
South Africans, it appears, had to improvise, or do without.
The move to Alert Level 4 in May saw a sudden surge in demand for smartphones, tablets and small domestic appliances.
“Consumers snapped up appliances for making quick meals and drinks, including toasters, sandwich makers, coffee machines and microwaves,” says Nicolet Pienaar, head of market insights at GfK South Africa. “Performance for content creation devices such as laptops and tablets was strong, since sharing a device between people in the household was not an option in a time of remote working and home schooling.”
These isolated gains in the technical consumer goods market coincided with 10% revenue growth associated with small domestic appliances and 8% in mid-level information technology systems. But those were offset by steep declines in the supply of multifunctional technical goods, photographic equipment, and telecommunications.
Retailers were quick to capitalise on the announcement of Level 2 lockdown in August, redoubling promotional activity and running tailored marketing campaigns.
That seems to bode well for the upcoming Black Friday and Cyber Monday promotional period.
“After a gruelling year that has hit many South Africans in the pocket, we’re expecting to see demand from two types of consumer over Black Friday: the reset spender, looking for genuine bargains after months of holding back and the revenue spender, looking for deals that let them trade up to premium products,” says Pienaar.
Comparative growth in the second quarter of 2020 is expected to boom, with 69% of brick and mortar retailers anticipating Black Friday sales to be at least as good as they were last year. Additionally, 36% of online retailers anticipate that Cyber Monday will be at least as good as last year, and 36% expect it to be better.
Murmurs of a second “hard” lockdown started last week, and grew louder over the weekend after KwaZulu-Natal Premier Sihle Zikalala said at a press conference that “looking at the statistics around us, we can now safely say that we are definitely going back into a hard lockdown – if there is no urgent and drastic change in behaviour.
“Let me make this clear: a second wave of Covid-19 will be stronger and deadlier, not only in terms of taking human lives, it could deal our economy a major blow,” Zikalala said.
Zikalala was talking about the increasing infection rate in KwaZulu-Natal, but he was backed up by statements from Free State health spokesperson Mondli Mvambi, and Mangaung metro spokesperson Qondile Khedama.
Last week, Minister of Health Dr Zweli Mkhize and his wife both tested positive for Covid-19, and he reiterated his call for preventative hygiene measures and social distancing.
As Europe and the US both battle with a second wave, South Africans have started paying closer attention to the number of cases.
Minister Mkize said at a recent press conference that “our epidemiological reports are showing that in the country, over the last seven days there has been an increase of 9.1% in new cases. Similarly, over the last 14 days, there has been an increase of 10.7%.”
He said that in the last seven days, there was a marked increase in the number of new cases in the Western Cape. The province recorded a 42% increase in new infections, and that the government’s terminology defines this significant spike in new cases as a “resurgence”.
However, President Cyril Ramaphosa on Tuesday addressed the rumours during a question-and-answer session between the president and the National Council of Provinces.
He said that rumours that the country will be placed under another hard lockdown were untrue.
“I don’t want people to be alarmed. That is simply not true. If it gets there, I will advise the nation.”
Source: Supermarket & Retailer
In a presentation ahead of finance minister Tito Mboweni’s Medium-Term Budget Policy Statement (MTBPS) next week, the PBO said that household consumption also dropped markedly by 49.8% in the second quarter of 2020, following a marginal increase of 0.2% in the first quarter.
The sharp decline reflected reduced outlays on all categories of goods, the PBO said. “Spending on durable and semi-durable goods contracted the most because most were classified as non-essential during the lockdown.
“Overall, consumer spending by households contracted by 7.5% from the first half of 2019 to the first half of 2020.”
The PBO said that this decline was consistent with the decline in both consumer confidence and credit extension to households.
This aligns with data from payments clearing house BankservAfrica which shows that the last few months have seen massive disruptions to the country’s average take-home pay, as a number of payments were either suspended, terminated or adjusted.
The average take-home pay in August was R14,008 in nominal terms and R11,893 in real terms. However, it is unlikely that the real average take-home pay will continue on this positive trend as the next two months had a relatively high average real take-home pay in 2019.
“A more meaningful indication of the real salary trend in South Africa at present is the average real take-home pay for the first eight months of 2019, which was R12,200 per month, indicating that the August 2020 number is nearly 2.5% lower than the same reporting period in 2019,” said economist Mike Schüssler.
The PBO’s presentation also shows that there has been a decrease in household debt in the second quarter of 2020 – its first decline since the third quarter of 2002
The ratio of household debt to disposable income increased significantly from 73.6% in the first quarter of 2020 to 85.3% in the second quarter.
“The quarter-to-quarter decline in nominal disposable income exceeded the decline in household debt.
“The outstanding balances of most categories of credit extended to households decreased during the national lockdown.
“This decline in credit extension was probably due to socioeconomic uncertainty about household saving and spending patterns.”
Data from the National Credit Regulator (NCR) from March 2020 to June 2020 shows that the number of credit agreements entered into decreased by 47.73% quarter-on-quarter from 3.93 million to 2.05 million.
In terms of credit granted for the quarter ended June 2020:
- The value of new mortgages granted decreased by R25.95 billion (66.65%) quarter-on-quarter and by R27.20 billion (67.69%) year-on-year;
- Secured credit which is dominated by vehicle finance, decreased by R18.57 billion (47.51%) quarter-on-quarter, and by R20.69 billion (50.22%) year-on-year;
- Credit facilities decreased by R9.71 billion (50.53%) quarter-on-quarter and by R11.60 billion (54.97%) year-on-year;
- Unsecured credit decreased by R15.10 billion (59.64%) quarter-on-quarter and by R18.42 billion (64.32%) year-on-year.
- Meanwhile, credit bureaus held records for 26.96 million credit-active consumers, which showed a decrease of 3.69% when compared to the 27.99 million in the previous quarter.
- Consumers classified in good standing decreased by 559,318 to 16.96 million consumers.
“This amounts to 62.90% of the total number of credit-active consumers, a decrease of 3.19% quarter-on-quarter and 3.65% year-on-year. The number of credit-active accounts decreased from 85.99 million to 85.23 million in the quarter ended June 2020.”
Source: Business Insider SA
Online business registrations are surging in South Africa, FNB says.
The dire financial consequences for many during South Africa’s lockdown have forced business owners to change their strategies and business plans in order to survive, it believes.
Many have used the lockdown period to either open their own personal services, or to formalise existing business for relief funding and operating permits.
Online business registrations are surging in South Africa, says First National Bank, as South Africans change course to adapt to the impact of the coronavirus pandemic on traditional businesses.
The country’s strict lockdown meant that mining and manufacturing ground to a halt for weeks. The impact on the hospitality sector was also devastating, resulting in job losses for many South Africans and a sharp economic decline.
The dire financial consequences for many have forced business owners to change their strategies and business plans in order to survive, with many using the lockdown period to either open their own personal services, or to formalise existing business for relief funding and operating permits, the bank believes.
FNB data shows an increase in the number of businesses using a government initiative where entrepreneurs use the BizPortal.gov.za website to register their new businesses at the Companies and Intellectual Property Commission (CIPC).
Gauteng led with 44% of applications followed by KwaZulu-Natal at 13%, Mpumalanga at 10%, and the Western Cape at 9%.
“We are seeing a strong uptake through this portal as well as an increase in applications through our normal CIPC interactions, where clients can register a company on FNB’s website. This indicates that more and more entrepreneurs want to formalise their businesses in order take advantage of new opportunities presented as a result of Covid and further benefit from financial support provided by both private and public sector,” says Lauren Deva, head of sales for transactional products at FNB Business.
“When the BizPortal started, we initially had an average of 700 registrations a month. However, this significantly increased to 14,000 registrations during the lockdown period, between April and end of August. On average 2,800 businesses were registered per month via the portal,” says Deva.
By Londiwe Buthelezi for News24
Pick n Pay says it lost R2.8 billion in sales because of trading restrictions and store closures during the six months to 30 August.
The retailer, whose first half of the 20201 financial year began just four weeks before South Africa went into lockdown, said liquor and tobacco sales decreased 47.5% over the period, while clothing sales in South Africa only shrank by 4.2%.
Still, the retailer managed to grow its turnover by 2.6% year-on-year, or 1% on a like-for-like basis when new stores aren’t factored in. Turnover from its South African operations increased by 3.4%, or 1.7% on a like-for-like basis. But core retail sales – which include food, groceries and general merchandise but exclude liquor, clothing and tobacco – grew 9.9% in the country, or 7.6% on like-for-like basis.
Growth of online
Pick n Pay said its online store doubled its sales growth during this lockdown, recording a 200% increase in active customers. Pick n Pay expanded its “Click n Collect” services to meet increased demand and launched an online store for its clothing offerings in August.
The group also announced on Tuesday that it has agreed to buy on-demand online grocery service Bottles. The acquisition is expected to be completed by November this year.
“This will enable Pick n Pay to build on the success it has achieved in partnership with Bottles in recent months, and further strengthens what is already sub-Saharan Africa’s largest and most popular online grocery business,” it said in a media statement.
Bottles was launched in 2016 as South Africa’s first alcohol on-demand delivery app, and partnered with Pick n Pay in 2018.
Pick n Pay added that it will continue to grow its online footprint through “a comprehensive suite of delivery options, including a pre-scheduled and standing-order delivery service, an expanded Click n Collect offer”, over and above its an on-demand essential grocery and liquor offer
Growing the clothing business
The retailer opened 11 new clothing stores during the lockdown period, but also closed six underperforming stores. Even though clothing retailers have been confronted by drastic change in consumer preferences and fashion – with the lockdown accelerating the move towards athleisure wear – Pick n Pay said it is confident that it will be able to grow its clothing business.
It plans to make “targeted investments” in stand-alone clothing stores and put in additional space for clothing in hypermarkets and supermarkets too. This comes at a time when Massmart is also expanding its offering in “value clothing” after closing the fresh food section in Game stores to make space for basic clothing instead.
By Gaye Davis for EWN
Government on Wednesday revealed a long list of countries deemed to be high risk in terms of COVID-19 and said leisure travellers from these lands would not be allowed into South Africa.
Countries deemed to be high risk included the United Kingdom, the United States of America, India, France, Russia, Switzerland, and the Netherlands.
Ministers on the National Coronavirus Command Council (NCCC) briefed the media on the easing of international travel restrictions with effect from Thursday.
High-skills visa holders, investors, and diplomats from high-risk countries, as well as South African citizens wishing to come home, would, however, be allowed entry – but should adhere to certain conditions.
Home Affairs Minister Dr Aaron Motsoaledi ran through the countries deemed to be high risk due to their COVID-19 infection and death rates.
Government would review the list fortnightly as infection and death rates change and would inform the public accordingly.
China was deemed to be low risk and anyone travelling to South Africa from an African country is permitted to enter.
International Relations Minister Naledi Pandor said all travellers entering South Africa would need a negative COVID-19 test performed no more than 72 hours before departure and would be screened on arrival.
Should they show symptoms, and test positive and could not self-isolate; they would be sent to a state-identified facility. Pandor said travellers would need mandatory travel insurance to cover any costs arising from this.
High-risk countries as at 30 September 2020 are as follows:
- Bosnia and Herzegovina
- Costa Rica
- Czech Republic
- North Macedonia
- Puerto Rico
- United Emirates
- United Kingdom
The sustained reduction of interest rates and relaxation of lockdown levels is providing a significant boost to the recovery of average income and cash flow among salaried middle-class consumers who hold full-time or formal employment. This is according to FNB insights based on the income trends among its Retail and Private Banking customers who earn a monthly gross income of between R10 000 to R60 000.
The Bank states that the financial position of the average middle-income customer is now approximately on par with levels recorded in February 2020, before the implementation of the national lockdown. Additionally, spend patterns of consumers are showing recovery with most categories like groceries and entertainment back to normal except categories like travel that are still significantly lower due to the travel bans instituted during lockdown. In contrast, average income among informally employed and self-employed consumers continues to lag, as a result, this income group may take longer to regain their usual average income levels.
Chief Executive of FNB Retail and Private Banking, Raj Makanjee says: “The lockdown has been the toughest experience for consumers, emotionally and financially. However, the income recovery and improving cash flow among middle-income consumers bodes well for the economy as middle-class consumers have significant spending power. The timely adjustment of interest rates has been instrumental in cushioning consumers who are servicing debt against severe financial difficulty. Similarly, our Cashflow Relief measures have allowed our customers who earned partial or no income during lockdown levels 4 and 5, to manage the impact of this difficult period on their finances,” he says.
According to FNB, the average income of consumers who are employed by SMEs (employing less than 10 people) was impacted the most over the course of lockdown. The Bank estimates that one in two of people employed by these SME businesses have seen a drop of at least 15% in average income. However, only one in five of those employed by larger companies (1000 employees or more) experienced an average income drop of 15% or more.
While the current income recovery trend is encouraging, the Bank is aware that consumers continue to face difficulties as COVID-19 is still part of our everyday reality. As a result, it continues to avail its resources and platform to help customers with money management across its Retail and Private Banking areas. FNB has also initiated money management conversations and interventions to help its customers in making smarter decisions about their finances, find practical ways to free up cash flow in this period and educating customers on their finances to ultimately enable them to make informed decisions.
“By having these meaningful conversations, we gain better understanding of our customers’ situations and have greater insight to practically assist them with freeing up cash flow. Specific spending solutions across our customers’ credit, essential and lifestyle spending are assessed for each customer to determine how best we can assist them, furthermore, we are helping customers to align their spending to the things that are important to them in order to achieve their financial goals.
Additionally, our eBucks Rewards continues to provide real help and timely relief to customers during this period. We’ve also expanded our eBucks benefits for seniors to offer extra support to our senior customers. In the coming weeks, we expect to introduce more platform-based tools to give customers even more control over their budgets” adds Makanjee.