COVID-19: Social Investors in economic squeeze – Paul Pereira, WHAM! Media

SA’s efforts to contain the spread of the Coronavirus come at a high cost of jobs lost in an economy that was already in recession pre-covid-19. Behind forecasts of vastly increased unemployment lie very human stories of hardship and even despair.

The consequences of economic retreat will surely include significant reductions in private funding available for community development, just as this becomes more necessary. Social investors will need to be strategically nimble if they want to maximise social-returns-on-investments.

Below are some of the “known unknowns” of economic fallout:      

Macro unemployment

Statistics SA records two unemployment rates – the restricted and the expanded definitions. Both deal with adults of economically active age (potential employed, but excluding full-time students, housewives, etc).

The restricted unemployment figure only counts unemployed people who have taken active steps to find a job in the fortnight prior to a survey. Those who haven’t done something to find work in those two weeks, or who have given up looking for work altogether, are included in the expanded unemployment figure.

The percentage of economically active people who are unemployed in the restricted definition usually hovers around 25% in SA. The percentage in the expanded definition (real unemployment) normally sits at about 36%, i.e. 10 million adults.

National Treasury now forecasts unemployment rising up to 50%. In its best-case scenario, 3 million people will be added to the 10m already unemployed. In its worst case, there will be 7 million newly-unemployed[1].  

Small business

A survey done by Consulta for Nedbank (released 13 May) shows that almost 65% of companies with annual turnover of less than R30m had no turnover during the first five weeks of the lockdown.

So far, half have temporarily reduced staff usage through paid or unpaid leave. Another 26.8% have permanently retrenched workers. Fifty-seven percent of small business owners “did not believe they could continue operating over the next six months without having to undergo ‘significant’ changes to their operation, while 10% didn’t think they would survive at all”. 

An Investec research note, also released on 13 May, suggests that “the economy could contract by 15% in 2020”[2].

Interbank transactions

Business Day (14 May) reports that “the BankservAfrica Economic Transaction Index (Beti) – which tracks interbank electronic payment transactions under R5m – saw the biggest decline in its history across monthly, quarterly and annual levels. 

“During April, the Beti declined 13.9%, on an annual basis, 15.2% on a quarter-on-quarter basis, while the index fell 12.3% from the month before. The nominal value of transactions plunged 12.9% to R709.2bn, values not seen since February 2006”[3].

Food security

Just one set of consequences from the above things is found in deteriorating food security (something I will explore further in a follow-up). It’s instructive because it shows how quickly socio-economic circumstances can deteriorate in these extraordinary times.   

  • On 26 April 2020, a Human Sciences Research Council covid-19 survey was released, finding that 34% of respondents had gone to bed hungry during the lockdown. This was up from 28% only a fortnight earlier.

  • The survey found the situation is most dire in homes in informal settlements without a yard, where 46% of respondents said they had gone to bed hungry, followed by 42% in backyard township rooms, and 40% of respondents in hostels or student residences.

  • Just under a quarter (24%) of respondents had no money to buy food. For residents of informal settlements, the figure was 55%[4]

Social investors are going to have to be agile in how they handle a sometimes dramatically altered socio-economic landscape in the next few years. There may be some changes to their actions needed straight away, such as can be found through Mergon’s Gap Fund (see https://mergon.co.za/gapfund/). But social investors might also need to pivot some of their longer term strategies to new priorities, and will look to greater efficiencies when pursuing developmental results.

Pereira runs WHAM! Media, a Nation Builder business partner. May 2020. info@whammedia.co.za


[1] The full National Treasury presentation can be found at: http://www.treasury.gov.za/comm_media/press/2020/JT%20SCoF%20and%20SCoA%20briefing%20COV19.pdf

[2] https://www.businesslive.co.za/bd/economy/2020-05-14-small-businesses-battling-to-survive-pandemic-tsunami-nedbank-survey-shows/?utm_source=&utm_medium=email&utm_campaign=Powerhouse+cities+may+stay+locked+down+%7C+Small+businesses+battling+to+survive+pandemic+tsunami%2C+Nedbank+survey+shows+%7CSA%E2%80%99s+testing+strategy+for+Covid-19+is+not+practical%2C+say+top+scientists&utm_term=http%3A%2F%2Fwww.businesslive.co.za%2Fbd%2Feconomy%2F2020-05-14-small-businesses-battling-to-survive-pandemic-tsunami-nedbank-survey-shows%2F

[3] Ibid.

[4] http://www.hsrc.ac.za/en/media-briefs/general/lockdown-survey-results

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