Shock new figures lay bare SA’s plight

Results highlight the devastating economic fallout of the phased lockdown restrictions

Results of a business survey that have never been released before have underscored the hammering the economy has taken from the Covid-19 crisis — including those areas able to operate when SA’s lockdown restrictions were at their most severe.

The University of Stellenbosch Bureau for Economic Research’s “other services” survey, of sectors that account for about a fifth of the economy, showed confidence in the second quarter plunged to the lowest level in the survey’s 15-year history. It also showed an “unmatched drop-off in activity.”

The survey covers industries such as the real estate sector, restaurants and hotels, transport and business services — which incorporates computer services, legal, and accounting, engineering and market research services. It is the first time that the results have been made public, and they highlight the “devastating economic fallout of the phased lockdown restrictions“, the BER said in a statement.

Tuesday’s release came as other data confirmed the depressed state of the economy. The Reserve Bank’s coincident indicator for April, which gives a view of current economic activity, slumped 22% from the previous month and 26.8% from a year earlier.

These were the largest collapses in data going back to 1960, according to Investec chief economist Annabel Bishop. April’s decline gives an early reading on GDP, which Investec expects to contract by 10.1% in 2020, she said. That will be the biggest contraction since at least the Great Depression about a century ago.

The data comes as Reserve Bank governor Lesetja Kganyago and the rest of the monetary policy committee (MPC) deliberate on interest rates. The median prediction of economists in a Bloomberg survey is for the MPC to reduce the repurchase (repo) rate by 25 basis points to 3.50%, adding to 275 basis points of cuts made so far during 2020.

That would be the smallest move since the Covid-19 outbreak and is likely to expose the Reserve Bank to criticism from observers who say it should do even more, given the depressed state of the economy and an inflation rate that has slipped to well below the lower end of the Bank’s 3%-6% target range.

The MPC ’ s decision is due on Thursday.

Though the results of the “other services” survey were “shocking” the decline in activity for business services that could be provided during the worst of the lockdown came as a surprise, said George Kershoff, the BER’s deputy director. Business services incorporate highly skilled workers, who could typically work from home, he said.

The decline reflects a collapse of demand for their services as other parts of the economy for which they provide services were closed. They were also hit by cost cutting and cash conservation measures by both private and public sector clients, including delayed payment of past invoices. In some cases, the nature of the work did not allow for remote working.

The BER opted to make the survey – which it has been conducting internally since 2005 – public given the current heightened uncertainty induced by the Covid-19 pandemic, delays with the publication of some official data, and recent financial support to cover the cost of conducting the survey. The BER now intends to publish it on a quarterly basis, Kershoff said.

The fieldwork was conducted between May 13 and June 1 — incorporating level 4 of the lockdown and the announcement of the switch to the more relaxed level 3 — and covered about 450 senior executives.

Though the businesses surveyed will benefit from the gradual lifting of restrictions, “the road to full recovery and the return to pre-lockdown levels is likely to be slow and bumpy“, the bureau said.

The BER survey followed Monday’s data from Stats SA showing a near total collapse in food and beverages industries, as well as tourism accommodation during April and May. Total income from tourism accommodation declined 98.7% in April and 98% in May compared to the same period in 2019.

A never-before released survey shows services industries, that account for almost 20% of GDP, in dire straits