Coronavirus set to infect SA’S weak economy
Thousands of jobs are on the line as import and export markets along with tourism feel the ripple effects from China, writes Siphelele Dludla
THE CORONAVIRUS will hit South Africa’s industries and lower the country’s growth prospects, PWC economists warn.
In a report issued this week,
PWC said South African industries, including mining, cellphone operators, automotive manufacturers, hospitality and retail establishments, would see an adverse impact of the virus.
Others that could be affected are iron ore, manganese and chrome who account for two-thirds of South Africa’s exports to China by value.
Pwc’s chief economist Lullu Krugel said a Chinese economy with a weaker growth pace and slower metals production would have less demand for those minerals from South Africa.
She said slower growth in
China would hit the South
African economy through several transmission mechanisms.
“First, there is the demand for our minerals and mining products. Second, there is the impact on the balance of trade. And third, there is the potential exchange rate impacts.
“We were expecting slower Chinese growth to hit South Africa at some point towards the end of 2020, but recent developments have accelerated this slowdown. Now we are dealing with suppressed demand a year earlier than we initially thought it would happen.”
The International Monetary Fund’s research shows that a one percentage point drop in the Chinese economy would slash South Africa’s growth prospects by 0.2 percentage points.
Krugel said apart from the cellphone and construction sectors, many other industries would be hit by trade disruption.
She said feedback from PWC clients indicated heightened concern about the disruption in global trade caused by the shutdowns in China.
“Some have indicated that the supply of goods they import from China on a regular basis, has either been delayed or disrupted. This has led to securing alternative sources of inventory in South America and Europe, among others, often at a higher price. Uncertainty also exists about when supply channels will return to normal.”
PWC said the decline in Chinese tourist arrivals in South Africa could be more than 15 percent this year.
Nearly 97 000 Chinese tourists visited in 2018.
The average international tourist spent nearly R11 500 in South Africa during 2018.
“Based on recent tourist expenditure trends and some simplifying assumptions, a possible decline of more than 15 percent in arrivals this year translates into a potential loss of at least R200 million in Chinese tourist spending,” the report said.
“This, in turn, suggests around 1 000 jobs in the tourism and hospitality industry could be on the line. And that many more jobs are on the line in primary and secondary industries affected by the export and import disruption.”
Operations consulting leader Keshava Naidu said PWC recommended that organisations adopt an agile approach to rapidly assessing any vulnerabilities in their supply chain.
“It is imperative that companies clearly understand the impact of upstream disruptions on the end customer, especially from a health and safety standpoint,” Naidu said.