Why Covid-19 isn’t at the Core of SA’s Economic Crisis

What an entry into the year 2021, the prolonged level 3 lockdown has indeed sparked concerns among commercial real estate investors, specifically in the hospitality market and retail industry. The announcement has also fueled concerns about the recovery of the South African economy after the big economic scare experienced in the year 2020. 

Is 2021 going to be as economically merciless to the commercial real estate market as 2020?  

It cannot be disputed that the state of economies across the globe is due to the emergence of the coronavirus. The virus has propelled governments of different nations to declare the pandemic a national disaster in their states – as experienced in South Africa. As a result of the declaration, the South African government imposed extremely strict rules to manage the spread of the virus in the form of a lockdown.  

Well, the pandemic is what we, the public, believe to be the cause of the current economic status. The fact that businesses had to close, traveling domestically and internationally had to be halted – limiting international tourism, seems to be the biggest contributor to the current economic crisis.   

But, “The coronavirus is not causing this havoc to the economy of South Africa or that of the world, it is the lockdown that is,” these are the sentiments of the chief economist of the Efficient Group, Dawie Roodt. 

SA Economy on Commercial Real Estate Before Lockdown  

While looking at the impact of the coronavirus on the economy of the country, Roodt says many people have died of the coronavirus and that their lives are important and well in our minds and hearts. However, he believes that it is important for us to note the distinction between the impact of the coronavirus and the impact of the lockdown in our lives and economies.  

Read: Rand Suffers as Lockdown Fears Drive Sell-Off

“The South African economy was in a very deep trouble before coronavirus. On a per capita basis (GDP growth) we have been getting poorer for the past five years. We were in a technical recession before the lockdown and SOE’s have been mismanaged (which affect the growth of our revenue as a county),” Roodt said.  

Speaking at the first part of the three-part series of our Rei Rode webinars with the title South African economy, What the future holds’. Dawie Roodt spoke about the possibilities of the bouncing back of the  South Africa’s economy as we head to the close of 2020. He said “all sorts of things are about to go sour in the economy” of the country because of the lockdown.   

Towards the close of 2020 some commercial real estate investors were looking to plan their 2021 already. At that Roodt thinks it is important that we look closely at the trends that came with 2020. He says we should also look closely at how these trends are impacting our livelihoods in preparation for the future years 2021 included. 

Read: Lockdown Impacts Buying Trends of Generations of Home Buyers

“We know that the economy absolutely collapsed in the second quarter of this year. Two million jobs have been lost already and more seem to be getting lost as the years come to a close. Furthermore, we are probably going to lose more than 100 000 businesses as a result of the possible economic contraction as we head to the year 2021. 

Additionally, South Africa, Chief Economist at Nedbank, Nicky Weimar says the implemented lockdown negatively affected all forms of demand and this had an impact on all industries including the property sector.