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Lockdown Extension Means People Will Lose Their Jobs

With the announcement by President Rhamaphosa before the Easter Weekend that the 21 Day national Lockdown had become a 35 day Lockdown that will last until the end of April, consumers finally began to appreciate how bad things are going to get. Companies who had been planning on doing at least half a month’s work to an eager populous suddenly realised this is not going to be the case. Those who were hoping for at least half a salary during April 2020 now realize this is not going to happen.

The economic ramifications are preferable to the possible human cost of a run away pandemic, of course, but are going to be felt for a long time to come and we have not yet seen the full social and economic effect of the way Covid-19 is going to effect things inn the months ahead. The virus is not going anywhere and fear of it is going to drive consumer behaviour in a big way for the foreseeable future.

 

A Quick History Lesson

Many of us will remember the economic crash of 2008 (when the banks and markets in the USA realized they had overvalued property prices) Which has had a knock on effect felt up until 2020. That market crash was considered one of the worst in recent history. People lost their jobs, their homes and many companies folded amid the market chaos. It is commonly known as the Great Recession.

But a long time ago in the wake of the first world war, after a serious market crash in the time leading up to the second world war, there was a time called the Great Depression. Things were so bad that no one had money, no one had work and it saw the birth of the soup kitchen and bread lines. Mass homelessness gave rise to shanty towns across many countries worldwide (even 1st world countries like USA).

It took increased taxation on foreign goods,  dropping the gold standard for banking as had been done in the USA (where banks had to have the value of all the money they loaned to consumers), changing the way farming was regulated and a slow upturn in gold prices to save SA from total ruin.

In Germany, the Depression gave rise to the popularity of the Nazi Party and Adolph Hitler who dragged the country out of the recession onto a war footing. That ended up plunging the world into a war that prolonged the economic reprecussions.

Get Ready For a Rough Ride

With the economy suppressed for months leading up to the lockdown and now the extension cutting at least 5 weeks income from most households the initial shock is going to be hard. The banks are kindly offering short term solutions like payment holidays to consumers which, sadly, will see them indebted to the banks for considerably longer (since interest and fees are still gonna be added while people don’t pay). Bond payers could end up paying for an extra couple of years to make up those months.

Another factor is that it is not going to be life as usual once the lockdown ends as consumers who didn’t get paid are unable to spend money they don’t have. This means people will only spend funds on essentials. No luxury spending for a while. This means that many businesses are going to be hit with persistent low sales.

‘it is not going to be life as usual once the lockdown ends as consumers who didn’t get paid are unable to spend money they don’t have’

For those who simply lost their jobs or whose companies are unable to survive it means living off UIF in the months ahead. Finding new work is going to be very tough in a market with hundreds of thousands extra unemployed people suddenly added to the pool of unemployed. Already SA has an unemployment problem (one of the most severe in the world). Then there are those who simply cannot claim UIF. Many foreign nationals who are illegally in the country as bread winners for family back home are going to be left destitute.

The UN predicts half of Africa will lose their source of income. Local experts predict an extra 1 Million people becoming unemployed due to the Pandemic.

‘Local experts predict an extra 1 Million people becoming unemployed due to the Pandemic’

Tough times are ahead as all these consumers are not going to be running out using the services of businesses, not going to be making impulse purchases and will be delaying spending wherever possible. Money is not going to be circulating.

With peoples unable to pay their bonds there is going to be a glut of homes on auction, pushing regular property sales prices down, which pushes property values down.

It creates a whirlwind of economic turmoil and we better get ready for it. Plan now and be prepared to make the big changes you hoped to never have to make. It is not going to be business as usual.

‘now is the time to head to a Debt Counsellor to talk about entering debt review’

If you have been on the brink, desperately trying to pay all your credit providers and also cover your families monthly needs then now is the time to head to a Debt Counsellor to talk about entering debt review (yes, with payment holiday options included in the repayment plans).