JOHANNESBURG, July 24, 2020 /PRNewswire/ — The lockdown has two facets. First, citizens were only permitted to leave their homes to buy food, seek medical attention, and collect welfare grants. This resulted in a severe decline in the demand for services. Second, most economic activity halted except for outlined essential services. Furthermore, the unsettled economy and global lockdowns led to declines in investments and trade, causing further recession. Though restrictions eased in May after five weeks, and further in June, allowing the phased reopening of some businesses and industries, many companies have closed down permanently and some services are still limited.
What happened thus far:
One of the largest initial shocks was mining, decreasing by 47,3% year-on-year in April. Due to many operations having ceased or operating at low levels, demand for electricity declined. This reduced the demand for coal. Eskom (South Africa’s state owned power utility) expected to haemorrhage up to R2,5 billion ($150 million) a month in revenue for an undetermined duration.
The agricultural sector was declared a critical industry. Food production value chains were operational, though not optimally, resulting in bottlenecks that led to product losses.
16% of retirement funds had members who requested to access their funds. Claims and insurance premiums were expected to increase, causing additional pressure.
Tax revenue during lockdown was expected to fall by a third. The majority of the loss was due to diminished taxes from the sale of goods and lower income taxes. More than R1,7 billion ($100 million) was lost in sin tax revenue from the ban on alcohol and tobacco.
The relief measure taken by SARB (South African Reserve Bank) to slash the repurchase rate resulted in an automatic reduction in the prime lending rate.
A total of 37 609 bond registrations were recorded at the Deeds Office recently, a 5,6% decrease of last year’s, and 51 315 transfers, a 10,5% decrease from last year.
The Johannesburg Stock Exchange (JSE) operated normally during the lockdown, and recently announced relief measures and extended repayment terms.
SAA (South African Airways), no stranger to losses, having last showed a profit in 2011, has recorded a net loss of R1,97 billion for quarter one. SAA did not operate commercial flights, but only mercy flights to repatriate South Africans stuck abroad and cargo import flights. For this function, SAA recorded revenue of R736 million, compared to R4,7 billion last year. Its operating costs were R2,3 billion, due to overhead costs of repatriation and cargo flights, jet fuel, crew remuneration, landing fees and maintenance of grounded planes.
SARB recently estimated the decline in gross domestic product (GDP) at 32,6%, the largest quarterly decline since 1990 and the lowest GDP since the Great Depression. It was also the first time since 2009 that a South African recession lasted longer than two quarters.
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South Africa vs Lockdown – a Blow-by-Blow Account
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SOURCE SA Shares