Experts say More than 1-Million Jobs on the Line Thanks to COVID-19 Lockdown

Sourced from Voice of the Cape

According to experts more than one million South Africans can expect to become jobless over the next few months as a result of the deep recession that is expected to slash economic growth by between five and six percent.

Dawie Roodt, chief economist of the Efficient Group says it is going to be at least as bad as the Great Depression that hit the world in 1929 and much worse than the crash of 2008.

“We are going to see at least a million consumers lose their jobs and what is even worse is the fact that it is going to take a long time to recover.”

Neil Roets, CEO of one of South Africa’s largest debt counselling companies, Debt Rescue, says the outlook for deeply indebted consumers is growing darker with every day of the lockdown.

“We fully understand and agree that social distancing has to be maintained and even tightened to save lives but there is no sugar-coating the fact that consumers are heading for disaster.”

“We are lucky in one respect and that is that we have some of the most progressive legislation in the world to help consumers recover from this disaster.”

He says the National Credit Act that was legislated 12 years ago and created the National Credit Regulator and the process of debt counselling in South Africa was ideally placed to help deeply indebted consumers to repay their debt at more favourable terms over a longer period of time without losing assets like homes and motor vehicles.

“South Africa has the best legislation of this kind in the world and is the only country that allows home loans to be included under debt review.

“It has been very helpful in the past to get consumers back on their feet after a debt crisis but it is really going to come into its own now with the widespread economic destruction wreaked by the COVID-19 virus.”

He says there was little to no chance that either government or financial institutions were going to assist in bailing out indebted consumers.

“What we’re hearing at the moment is mostly public relations noise from the banks. Once the virus has been defeated, they will come begging for their pound of the flesh because that is the nature of capitalism.

“There is no chance that the government is going to come to the rescue because it simply does not have the money to do that.”

Loans are going to have to be repaid and credit and store card credit-holders would come knocking on doors for accounts to be settled.

Roets warned consumers against further hoarding. “There is absolutely no reason to believe that there will be shortages of food in the near future. We have seen widespread evidence of consumers buying bulk food on credit and store cards – both of which carry high-interest rates,” he says.

He says it was vitally important that consumers use whatever spare cash they have to pay off high-interest-bearing loans as well as credit and store card as soon as possible and that almost half of all consumers were three months or more behind in their repayments.

“The only measure of relief for consumers who are in over their heads is the legally-binding system of debt review which allows deeply indebted consumers to repay their debts over a longer period of time in smaller instalments often at a discount.

“Lenders are sometimes willing to take a cut if it means they can avoid having to involve debt collectors or foreclosing on the fixed properties of debtors,” says Roets.

“With gross consumer debt at around R2.8-trillion (2018/19 Stats SA), it is clear that South Africans are in for a very rough ride.”

A recent World Bank index has also shown that South Africa is one of the most indebted countries in the world.

“This is going to get much worse this year as more jobs are lost and many consumers facing pay cuts,” Roets concludes.

Edited by Luis Monzon

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