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Jobs created in the sub-Saharan African (SSA) region have not
been sufficient to absorb new entrants to the job market and make
up for the job losses incurred during 2020, at the height of the
Coronavirus disease 2019 (COVID-19) pandemic-related lockdown
measures and loss in business activity. The subsequent rise in
unemployment will increase overall poverty levels and the
possibility of more social unrest in the region.
Fiscal space is limited to provide a social safety net to the
most vulnerable in society. Countries in SSA are not only grappling
with rising debt-servicing burdens but also continuing to face
healthcare spending pressures, including the procurement of
COVID-19 vaccines and managing the availability of healthcare
facilities as more contagious COVID-19 variants, such as Delta,
spread across the continent.
The recent approval of a general allocation of International
Monetary Fund (IMF)
special drawing rights (SDRs), equivalent to USD650 billion, is
timely and should be used prudently to address some of these
near-term challenges COVID-19 vaccine procurement, enhancement of
healthcare facilities, and the alleviation of poverty should be
prioritized, in IHS Markit's view. Countries with low foreign
reserves should build their foreign-exchange buffers. SDRs can also
be exchanged for hard currency to meet debt commitments to the IMF
and other lenders. Ultimately, the IMF SDR allocation could ease
near-term external liquidity and fiscal pressures, but more
structural adjustments will be needed to place the SSA region on a
higher growth path.
Employment in almost all sectors of the economy picked up during
January-June 2021 in the SSA region, the latest statistics in the
Standard Bank and IHS Markit purchasing managers' indices (PMIs)
show. Using monthly PMI survey information, IHS Markit compiled an
aggregate weighted employment PMI for SSA. A similar PMI for wages
was compiled. Countries included in the analysis were Ghana, Kenya,
Mozambique, Nigeria, South Africa, Uganda, and Zambia.
The aggregate SSA employment PMI shows that the recovery was the
strongest in the financial sector (banks, real estate, and
insurance), followed by the consumer services sector (media,
retail, and hotels and restaurants). Of this group, retail
employment showed the biggest gains. Employment conditions in the
basic metals (chemicals and resources), consumer goods (automotive,
household products, beverages, and food), and construction sectors
were less favorable, with the aggregate SSA employment PMI reading
for these sectors remaining below the 50-neutral level during the
first half of 2021.
Wage increases accelerated during the first half of 2021, the
aggregate wage PMI for SSA shows. The basic metals sector reported
the strongest recovery in wages, followed by financial services and
consumer services. The consumer services sector reported the
biggest fall in wages over July-December 2020. However, the jobs
created in the sub-Saharan Africa region were not enough to bring
overall unemployment down to pre-coronavirus disease 2019
(COVID-19) pandemic levels. Initial indicators show that Nigeria's
unemployment rate remained at 33.3% in the fourth quarter of 2020,
from 27.1% in the second quarter of 2020. South Africa's
unemployment rate shot up to 32.6% in the second quarter of 2021,
from 27.6% in the second quarter of 2019. Angola's unemployment
rate averaged 30.5% in the first quarter of 2021, from 29.0% in the
third quarter of 2019. Of the smaller economies, Rwanda's
unemployment rate also increased, to average 17.0% in the first
quarter of 2021, from 15.0% in the second quarter of 2019.
More detailed unemployment data in South Africa show that the
poorest in society - namely informal sector workers - have been
severely impacted. Informal sector employment fell by 14.3% year on
year (y/y) during the second quarter of 2021, compared with a 6.3%
y/y fall in formal sector employment. Those countries that have the
fiscal capacity have extended their social support programs. South
Africa's basic income grant (BIG) for the unemployed - introduced
in 2020 - has been extended until March 2022 and amounts to
ZAR350/month (USD23/month), below the food poverty line of
ZAR560/month. The additional government spending will be financed
through a mining tax windfall in fiscal year 2021/22. In the
future, it will be significantly more difficult to uphold this
spending commitment. The slow rollout of the COVID-19 vaccine
program will leave the SSA region vulnerable to the resurgence of
new COVID-19 cases and increases the risk of exposure to new
COVID-19 variants amid an ill-prepared healthcare system. The
recovery in the tourism, aviation, entertainment, and hotel
industries will be delayed as a result.
Posted 24 August 2021 by Thea Fourie, Associate Director, Sub-Saharan Africa Economics, S&P Global Market Intelligence
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