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The SA Daily 23 June 2020

Labour, liquidity under duress

  • SA’s small businesses’ labour costs account for a hefty 21% of total production costs, compared to 15% for medium-sized enterprises and 12% for large enterprises. Therefore, small businesses face starker liquidity shortages during this current crisis.
  • Indeed, today’s 1Q20 Stats SA Quarterly Labour Force Survey (QLFS) will reflect a labour market under duress due both to longstanding poor economic conditions as well as the COVID-19 pandemic. The 2019 unemployment rate was an average of 28.7%; this is already significantly higher than the 24.3% average for 1994-2019. And, the IMF sees this rate rising to 35.3% this year and staying around 34.1% in 2021.
  • The youth unemployment rate stood at 58.1% in 4Q19 for age group 15-24 years; it was 35.6% for age group 25-34 years.
  • In 2009, South Africa’s GDP contracted 1.5% y/y due to the global financial crisis and as a result the labour market shed 971,000 jobs from 1Q09 to 1Q10. Of those, 736,000 were jobs of age groups15-24 and 25-34.
  • In addition, most of these job losses were among small and medium-sized enterprises. According to the sme.Africa small business survey, already 62% of small businesses have indicated that COVID-19 has had a huge impact and threatens their businesses, while some have already closed, with cash flow noted as the biggest obstacle.

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