The extended lockdown risks raising South Africa’s dependency rate, as more people come to rely on those lucky enough still to have jobs.
Job losses are mounting, with many industries either not operating at all, or operating at less than full capacity. Household finances will therefore be increasingly stretched as fewer income earners are having to support a growing number of dependants.
Calculations based on Stats SA data show that between 1994 and 2019, South Africa managed to lower the dependency rate – the number of people who are officially unemployed or who choose not to work for every 100 who are employed.
In 1994, 380 people relied on every 100 who had jobs. That dropped to 260 in 2019. One reason for this is that, after the collapse of apartheid, there were many new opportunities for black South Africans to enter the job market. Women entering the job market in greater numbers also helped to lower the dependency rate. But Covid-19 and the impact of the lockdown will reverse these gains.
According to Old Mutual’s recent Savings and Investment Monitor survey on household finances during the Covid-19 crisis, the proportion of people with adult dependants other than their spouse or partner stood at 35% in 2015, but rose to 52% in 2020. Old Mutual also looked at what it defined as the ‘sandwich generation’ – people who are sandwiched between supporting their own children while also helping to take care of their elderly parents and relatives. The sandwich generation increased from 34% in 2019 to 42% in 2020.
Furthermore, consumers with debt are increasingly relying on family members and friends to assist them in dealing with their outstanding payments and debt obligations. According to a study by TransUnion, a fifth (21%) of respondents said that they were borrowing money from friends or family to pay loans and bills.
IRR analysts say South African households are under enormous pressure, as government assistance in the form of grants and other Covid-19 relief measures is not enough to help people through the crisis. Thus, the dependency burden on those who still work is growing bigger every day. The only way to relieve this burden is to create an economic environment that will get people back to work and earning an income sufficient to enable individuals and families to reclaim their independence from government.