Professional services firm PwC has published a new economic outlook which includes forecast scenarios for South Africa’s lockdown levels, and their likely impact on the economy.
The report, published as the country ends a violent week of protests and looting, focuses on both upside and downside scenarios, and includes a baseline assumption.
PwC’s economic scenarios for 2021 are strongly influenced by different perspectives about the third wave of Covid-19 infections.
The severity of the mid-year wave, and the accompanying strictness of associated lockdowns, is primarily determining the nature of the economic recovery.
In addition, the economic forecasts also consider the adverse effect of unrest and load-shedding, as well as the positive impacts of fiscal and monetary stimulus on the economy.
Where things are heading
It was previously expected that, with the vaccine rollout gaining some momentum, South Africa would be able to avoid a return to level 4 lockdown restrictions.
However, due to social distancing fatigue, the more infectious Delta variant of the virus, and only 2.3% of adults fully vaccinated, the third wave of infection is currently worse than previously anticipated – and in particular within Gauteng.
“It is worth noting that the current level 4 restrictions are less strenuous compared to the rules enforced during May last year when level 4 was introduced. We estimate that the negative impact of current level 4 restrictions on the economy is only two-thirds as severe as last year’s original level 4 rules,” PwC said.
PwC’s scenarios assume that lockdown restrictions will ease from August, although they will remain a burden on the economic recovery.
“The country is expected to be back at lockdown level 1 by September under our baseline scenario as the third wave passes – thought we are also vigilant about the risk of a fourth (less severe) wave over the December holidays.”
Combined with other considerations, this outlook would result in an economic growth rate of 2.3% this year. The estimate is 1.4 percentage points lower than what was projected a month ago.
PwC said that the key factors behind this big change are:
- The move to lockdown level 4 which was not previously envisaged;
- A slower anticipated easing of post-peak restrictions as winter moves to spring;
- The impact of recent unrest on regional business activity.
The upside scenario sees fewer days of load shedding for the remainder of the year, and less strict lockdown during winter due to vaccination successes, and a move to a level 1 lockdown from September. This would see the economy grow by 4% this year.
The downside scenario assumes a more severe infection level during the fourth wave and the country stays at a level 2 lockdown or higher for much of the rest of the year. An economic growth rate of only 0.4% is linked to this scenario.
By 10 July, South Africa had 1.36 million fully vaccinated adults – equal to 2.3% of the adult population.
This included nearly 480,000 medical personnel given the one-shot Johnson & Johnson and the remainder having received both doses of the two-shot Pfizer- BioNTech vaccine.
A further 3.78 million adults had received one of their Pfizer doses as the country ramped up its vaccine rollout.
Adults aged 50-59 years officially vegan their vaccinations on 15 July while those in the 35-49 years bracket start on 1 August.
However, despite the accelerated vaccine roll-out over the past two months – including the opening of 314 privately-operated vaccine facilities to augment 2,283 public sites – the third wave remains severe, PwC said.
“By 13 July, South Africa had 192,726 active Covid-19 cases, of which around 40% were in Gauteng.
“On a positive note, the number of active cases was down from a peak of 211,052 on 11 July. The country’s seven-day new infection rate peaked on 7 July and has since trended lower.”