Running as fast as we can to stay still

ALMOST 10 years ago, South Africa lost one million jobs as the economy sank into recession. From the last quarter of 2008, the economy tanked. At its worst, growth shrank more than 6% in the first quarter of 2009.

The recession did not last a year, but it feels as if we never really recovered. We lost our mojo, that spirit that had spurred the economy on from 2000 until 2007.

Nothing is all good — there were negative consequences to those boom years, such as runaway house prices, and there was a lot of spending — South Africans do like to spend (or at least used to) like there is no tomorrow. So it ended badly, with a nasty consumer-debt hangover.

In the years between late 2009 and now, the economy has grown in fits and starts but it has been unconvincing. Last year, in particular, we had just two quarters of growth. It suggests that we have been in an unofficial recession for longer than the official numbers from Stats SA show.

This week, Stats SA said firstquarter GDP had shrunk 0.7% quarter on quarter, and that, coupled with negative growth in the last quarter of 2016, means we are now in a recession.

Many households would attest that each month you are expected to squeeze more out of your income.

Prices for all things middle class, such as medical aid and medical costs, school fees and services, just keep rising while salaries have remained static or annual increases have not matched the rising cost of living.

It hasn’t helped those who are paying off mortgages or cars or have taken loans that interest rates have also increased.

For wealthier homes that are feeling the pinch there are often options — selling a house for something smaller or opting for a more modest car. Expenditure can be trimmed.

But cutting out little luxuries, which together can add up to substantial spending, means businesses that rely on this spending will hurt.

It’s the spending at restaurants, nail bars, hairdressers, garden centres, coffee shops, movies, or on the pool guy, or the piano and tennis lessons for your children — what could be regarded as superfluous spending — that the middle class does so well.

Unnecessary expenditure, maybe, but it keeps a nice-sized chunk of the economy ticking over. But costcutting, which will accelerate, will have a ripple effect. Small and big businesses getting less business will lay off staff or shut up shop entirely.

And so those who have the least room to manoeuvre will, as always, bear the brunt of the recession, facing even more hardship than they already do.

In some communities, the unemployment rate is well above the national rate of 27.7%.

In rural areas in the Free State, the unemployment rate is 35.9%. And that is in terms of the narrow definition — based on those who have been actively looking for work during the period surveyed.

When it comes to the expanded definition of unemployment — which includes those who have given up looking for work — the rate is 42.2% in rural Free State. That is still better than in rural areas in the Eastern

Cost-cutting, which will accelerate, will have a ripple effect

Cape, where the expanded unemployment rate is 50.2%.

And women fare worse than men, with the country’s expanded unemployment rate among women being 40% and for men 33.3%.

The million jobs lost in the 2008-09 recession were recovered. In fact, by the end of 2013, we had exceeded 2008’s employment levels.

Since the second quarter of 2014, jobs have also been created. But last year, we lost jobs as businesses that were already feeling the pinch trimmed their costs. And as more school-leavers and graduates join the labour force, the unemployment rate has worsened.

It’s like two steps back and one step forward, and then, looking back, we realise we haven’t made much progress, if any.

Looking forward, the future doesn’t seem promising.

Enslin-Payne is deputy editor of Business Times