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The Coronavirus pandemic has had a devastating effect across the globe. In South Africa, scientists have estimated that possibly more than a third of the population had been infected by the virus during the first wave, although mortality rates have been far lower than some of the worst-hit countries.
Coronavirus impact on South African businesses
The impact the Coronavirus pandemic has had on human life is of utmost importance, but the effect it has had on global economies cannot be understated, including the economy in South Africa. According to figures released by Statistics South Africa, the overall number of companies that were liquidated in December increased by 20.5%, resulting in a 14.4% year-on-year increase. The process of liquidation involves permanently closing a business, not just ceasing operation over the pandemic. Most of these liquidations have occurred within the financial and real estate sectors, with catering, accommodation and manufacturing also severely affected.
The liquidations come despite government measures to help businesses survive the pandemic. Companies can apply for money from the UIF (Unemployment Insurance Fund) to help pay their employees. The payment is calculated on a sliding scale as a percentage of the employee’s salary and covers 38% for highest earners to 60% for lowest earners. Businesses can also apply for state-backed loans that will not have to be repaid for six months and had the option of paying just 15% of their expected tax bill six months into the year, instead of 50%.
Unemployment rate in South Africa at record high
These liquidations have contributed to the unemployment rate in South Africa – which was already high even before the pandemic. Unemployment is now at an all-time high of 32.5%, up from the previous three-month figure of 30.8%. The unemployment rate in South Africa has remained above 20% for the last two decades and the pandemic along with a contracting economy has compounded the problem, making it difficult for SMEs to survive and offer vital employment opportunities.
Delays in vaccination programme in South Africa
South Africa has also been slow at delivering the Coronavirus vaccine, vaccinating around 5,000 people per day since February the 17th. Many businesses believe that they could deliver the vaccine on a larger scale much more quickly, but the government has monopolised sourcing and essentially quashed any competition. The potential to return to life before the pandemic hinges on the successful vaccination roll out, and delays are prolonging the negative economic impact caused by social distancing and other measures taken to combat the virus.
South Africa’s Response to the pandemic vs. the UK
Some countries have gone beyond measures that South Africa have put in place to safeguard businesses and jobs. The UK has introduced a furlough scheme that covers 80% of an employee’s salary up to R51,081 per month and this has eased pressure on struggling businesses as it is one less expense to worry about. The government has also introduced the Bounce Back Loan Scheme where small and medium-sized businesses can borrow between R40,645 to 25% of their annual turnover to a maximum of R1,01m. Interest is low at 2.5% per year, and there are no fees or interest to pay for the first 12 months.
These positive schemes introduced by the government and the extension of the furlough scheme have gone some way to protect jobs and businesses, despite the economic uncertainty the pandemic has caused. The unemployment rate in January 2021 stood at 5%, which is a slight fall from 5.1% in December 2020. 2020 was also the best year for business creation, according to data from Companies House, with a 12% jump in new businesses being registered year-on-year – the largest increase since 2011.
Britain leads the way in terms of vaccine rollout and is set to hit its target to jab all cohorts in target groups 1-9 by the 15th April. The economic impact of successfully immunisation is far-reaching. Not only does it mean social distancing measures can be relaxed and people can start travelling, working, and visiting hospitality venues again, but it also means that government spending will be reduced in terms of treating those infected and supplementing income for businesses which could not trade during lockdown.
UK house price prediction revised up in wake of new Coronavirus measures
One industry that has been greatly impacted by the pandemic was the UK property market. At the beginning of the year, Both Halifax and the Office for Budget Responsibility predicted UK house price falls of between 2-5% and 8% respectively. The successful vaccination programme, the extension of the stamp duty holiday and the extension of the furlough scheme have positively affected the outlook for UK property, and industry experts have since revised up their predictions. Knight Frank has upgraded their house price growth prediction from 0 per cent growth to 5%, and Savills now predicts a rise of 4% in 2021.
Research by Savills suggests that markets furthest away from London will perform the best and are expected to grow by 21.1% over the next five years. Opportunities such as these below market value apartments in Salford are attractive because they are affordable with one-bedroom apartments starting from R3.31m, while being minutes away from Manchester which is the UK’s third largest economy. In a similar vein, Knight Frank has revised down their forecast for the prime central London property market due to international travel restrictions and the extra 2% stamp duty surcharge for international buyers that comes into effect in April 2021.
To learn why the time right to get started in UK buy to let investments, by understanding the fundamentals of the UK property market and how savings made through the stamp duty holiday can positively impact the profitability of an investment, Contact One Touch Property today. Those interested in investing will be matched to a consultant who can provide guidance and send information on exclusive projects.
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