Weak economic growth exacerbating unemployment: Experts

Economic experts say while there are other factors contributing to South Africa’s unemployment rate, the current weak economic growth is the main contributor.

Statistics South Africa on Tuesday released the fourth quarter Labour Force Survey which indicates that the unemployment rate remains at 29.1%.

Economists.co.za’s Chief Economist Mike Schussler says this is a high number. “I think normally in the fourth quarter we get a lot of temporary employment, so we see the retail sector take on more people to help with sales. We also see the hotel industry and also the agriculture industry when starting planting season (employing people).

“Normally we create 120 000 to 140 000 jobs in the fourth quarter and this time around we only created an extra 45 000 jobs. So it seems to me that the numbers are going to start getting worse in the first quarter because that is when we start to see school leavers entering the job market,” Schussler explains.

Chief Operating Officer at Centre for Risk Analysis David Ansara shares the same sentiment. Ansara says this is an extremely high level of unemployment compared to other developing economies.

“The longer term trend is negative. What we see is a combination of factors; the first is low economic growth, the unemployment numbers are very tied to the overall GDP figures. The South African Reserve Bank recently released an estimate that they expect 2019‘s growth to be 0.4% and they are looking on the upside 1.2% annual economic growth for 2020. Those low levels of economic growth are really not enough to increase job creation.”

In the video below, recently unemployed queue at the Department of Labour to claim unemployment insurance benefits: 

The Labour Force Survey revealed that the trade, manufacturing and utilities sectors shed more jobs in the fourth quarter. Ansara says the structure of the South African economy has over the past decades taken another shape which speaks to job losses in these sectors.

“If we go back to 1994, you will see that it was very much reliant on the primary industries, so if you look at mining, agriculture, mining was like 11% of the total of employment but if you look at manufacturing it was 27%, but fast forward to today and you have mining pretty much at half the proportion, 4.6%, manufacturing at about 12%. The economy has become much more focused on the tertiary sector, much more services oriented, areas like telecommunications, retail sector , financial services, banking, insurance. This means that workers need to have much high levels of literacy, numeracy and they need to be adequately trained.”

In the audio clip below, Ansara looks into how the South African economy has changed: 

‘Improved education system’

According to Distinguished Research Specialist at the Human Sciences Research Council, Dr Vijay Reddy, an improved education system is key to ensuring that there are people with much-needed skills.

“The jobs that are quite in demand are those that have some sort of Maths and Science basics and we know that our Maths and Science performance in schools is not very high which means that we do not graduate enough people out of the universities and TVET colleges with science, engineering and technology qualifications which means we don’t have enough people to fill the vacancies in the labour market for these kinds of jobs. “

Government has been focussing on securing investment in order to stimulate economic growth and deal with unemployment.  In November 2019, the South African Investment Summit was hailed a success, managing to attract R1.2 trillion in new investments. Reddy says all sectors of the society should play a role in dealing unemployment.

“It is a huge problem in that there about 10 million people who are unemployed, I don’t think that we should underestimate the size of the issue at the moment. I don’t think any one sector can take the responsibility, it has to be government, civil society, business sector, it has to be a joined (effort), it cannot be just on government.”

In the audio clip below, Reddy explains the kind of skills that the economy needs: 

Red tape

Schussler says South Africa needs to get rid of the red tape experienced by the business sector as another solution to unemployment. “We need to learn to become a lot more friendly with business. We have seen for example a country such as Greece who had very left-wing policies, they moved a lot close to the business , became a lot more business friendly and we saw their unemployment rate drop from over 28%  to 16.1%  in a matter of 12  years. So it can be done, the same as Spain and Portugal. We need to become more friendly to business, more attractive to investment, friendly to entrepreneurs.”  In the audio clip below, Schussler highlights some of the solutions to unemployment. 

The graphic below shows the unemployment rate in different quarters of 2019: 

Unemployment Rate in South Africa by SABC Digital News