JOHANNESBURG – President Cyril Ramaphosa warned of tough economic times ahead and difficult decisions to be made as the government prepared to table a special adjustment Budget that seeks to manage public spending and scale back on projects.
Ramaphosa said yesterday that the job losses from constrained economic activity during the coronavirus lockdown could not have been avoided, as saving lives was critical.
He urged the private sector to be sensitive when dealing with retrenchments, as the government had put in place measures to protect businesses during the lockdown.
“For a country such as ours, which was already facing an unemployment crisis and weak economic growth, difficult decisions and difficult days lie ahead,” Ramaphosa said.
“We would urge that the difficult decisions to be taken are taken with care and with due regard to balancing the sustainability of companies and the livelihoods of workers.
“It is important that whatever is done is underpinned by ensuring a just transition to all concerned.”
South Africa’s unemployment rate is set to climb higher than 29.1 percent after a number of companies announced plans to retrench staff.
Edcon said it planned to lay off 22 000 workers, Cell C 600, and public broadcaster SABC another 600.
The coronavirus pandemic has magnified the country’s weak fiscal position, lack of growth and rising unemployment as economic indicators crashed to all-time lows during the lockdown. The SA Reserve Bank has forecast that economic output would contract 7 percent this year, the worst economic downturn in a century.
The SA Revenue Service warned that the revenue under-recovery could move up to R285 billion lower than the February Budget as a result of job losses.
However, NKC Research analyst Jacques Verreynne said South Africa had good investment opportunities.
Verreynne said resolving the country’s energy crisis and inequality should be primary objectives.
“South Africa’s slow growth trajectory is forecast to continue, though the country does still offer decent long-term value, having the most developed economy on the continent, with a large capital stock, an accommodating business environment and well-developed financial sector,” Verreynne said.
“Solutions to the electricity problem and inequality are among the myriad policy issues that would unlock faster growth.”
Finance Minister Tito Mboweni has to grapple with a Budget deficit projected to be closer to 15 percent of gross domestic product (GDP).
The government raised projections of its gross debt to about 80 percent from a previous estimate of 65.6 percent of GDP.
BUSINESS REPORT