Analysing the impact of COVID-19 on livelihoods and the economy

August 20, 2020

Representatives of UNDP in South Africa with government partners and members of the sounding board of the SEI report at the launch

GDP will take at least five years to return to 2019 levels. Poverty, unemployment and inequality widens but recovers steadily.  Female-headed households, persons with lower levels of education and the informal sector are hit the hardest. Those with access to technology and digitisation fare better.  Innovative government policies and action are needed for recovery.  COVID-19 IS negatively impacting the attainment of the Sustainable Development Goals.

New research from United Nations Development Programme (UNDP) shows COVID-19 will cause South Africa’s overall GDP to decline by 7.9 percent in 2020 and will recover slowly through 2024, leading to major setbacks in addressing poverty, unemployment and inequality. The Government’s development priorities.

The launch, chaired by UNDP Resident Representative Dr Ayodele Odusola brought together representatives from government, civil society, private sector and academia. UNDP's Resident Coordinator, Ms Nardos Bekele-Tomas in her opening remarks, defined this as not only a health crisis, but also an economic, security, humanitarian and human rights crisis. With this, she invited the audience to help the United Nations to “think and help unpack how we move forward to build back better to empower women, the elderly and those who have been severely impacted by this pandemic” she said. “Never waste a crisis, it is an opportunity for change” she urged as she concluded her remarks.

The study focuses on how COVID-19 will drive temporary and long-term changes in poverty levels in South Africa and on the classification of households that are at risk. The story of Ms Khumbulile Thabethe, a single parent with three children who gave a personal testimony, was a stark reminder of the reality of how a virus, lock down and being a single parent head of a household has impacted our lives.

The Minister of Cooperative Governance and Traditional Affairs, Dr Dlamini-Zuma launched the report, by highlighting that the effects of this virus are bound to be with us with us for some years and that our lives have been altered and altered forever. The reality of apartheid South Africa, inequality, poverty and spatial planning has further exposed vulnerability the virus has confirmed that South Africa continues on a path of two economies with “the most vulnerable being a poor township African woman sometimes with a baby on her back, further exacerbated by gender based violence” she said. She called for a skills revolution complemented by the adoption of a technology strategy and the delivery of a district developing model by promoting gender responsive budgeting. With this, she urged that the study should find its way into every district and municipality.

The Minister of Health, Dr Zweli Mkhize reminded the audience that there is no blue print response to this pandemic, making it difficult to manage. He recognised that COVID-19 has exposed the weakness of development; hence there was a need “to mount a whole of society approach”. He also stressed that rebuilding livelihoods will rebuild the economy.

In her presentation, UNDP Senior Economist, Ms Fatou Leigh indicated that:

  • lower bound poverty levels are also set to increase by 46% in 2020 under the optimistic scenario and as much as 66% in the pessimistic scenario, with 34% of middle-class households likely to fall into the vulnerable class, and about a 44% chance for persons with permanent employment changing to contract type are likely to fall back into poverty.
  • populations hit especially hard are already-impoverished female-headed households, persons with only primary education, persons without social assistance, black populations, and heads of households who have been pushed from permanent to informal employment.
  • About 54% of these households entering informal employment are likely to fall into poverty, as well.  Income inequality is likely to increase due to the skewed negative impacts on already-disadvantaged populations.

The study further observes that the economic sectors that are most disadvantaged by the COVID-19 outbreak include textiles, education services, catering and accommodation (including tourism), beverage, tobacco, glass products, and footwear.  Small and medium-sized enterprises are most negatively impacted.

A panel discussion by representatives from Human Science Research Council, United Nations Populations Fund and the National Planning Commission pointed out some of the limitations of the study and noted that there is no single, silver bullet policy action  to solve the crisis.  Instead, combined policy actions – focusing on populations hit hardest by the outbreak and its consequences – are needed, such as  social protection mechanisms, re-skilling programmes, liquidity measures, tax deferrals, and job support among options for consideration.

The report can be downloaded here

For media enquiries please contact:

United Nations, Rhulani Lehloka: 0663071827 / rhulani.lehloka@undp.org