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Unemployment rate jumps to 16-year high of 29% in 2019 Q2

31 July 2019 Lullu Krugel, PwC Strategy& Chief Economist for Africa, and Dr Christie Viljoen, PwC Strategy& Economist

Formal employment drops 1.4% in past year

Statistics South Africa (Stats SA) reported on July 30 that South Africa’s unemployment rate jumped from 27.6% in the first quarter of this year to 29.0% in 2019Q2. This was the highest jobless reading since 2003. While there was some increase in employment between the two quarters, largely in the informal sector, the biggest impact on the unemployment rate calculation was a significant decline in the number of discouraged work-seekers. These people are recorded as being unable to find work requiring their skills or who have lost hope of finding any kind of work. The 248,000 (6.3% q-o-q) decline in the discouraged workers count is certainly not due to a spike in the availability of jobs – not in South Africa’s current economic situation. It could be a statistical anomaly or, more likely, a sign of desperation amongst those who previously gave up on finding a job.

Formal employment declined by 49,000 (0.4% q-o-q) as job losses in mining, transport, finance and private households during 2019Q2 outweighed gains in industries such as agriculture, manufacturing, utilities, construction, trade and community services. Job loses were seen across the skills ladder, with declines in the number of professionals, technicians, elementary and domestic workers. From a geographic perspective, formal employment declined in the Western Cape, Northern Cape, North West and Gauteng, with gains in the other five provinces. PwC’s Strategy& Economics estimates that total formal sector employment declined by 1.4% in 2019Q2 compared to a year earlier, while the number of unemployed increased by 9.4% over the same period.

 

Source: Stats SA

South Africa’s economic malaise is weighing heavily on the country’s ability to create employment. The latest Stats SA report indicates that unemployment under the expanded definition – i.e. including people who have given up on finding a job – reached 38.5% of the labour force in the most recent quarter. However, turning the tide on the weak economy is not enough: structural changes are required in order to accelerate employment creation and reduce the unemployment rate. These include changes to the quality of governance, the level of competition in many industries, labour market flexibility, and the cost of doing business. Reforms in these areas could lift business confidence and private investment, allowing economic growth to follow.

However, looking ahead, President Cyril Ramaphosa is pessimistic about the country’s employment situation. In contrast to his recent, jobs-positive election campaigning and State of the Nation Address (SONA), the president warned in a speech on July 23 that “[m]any more people are going to lose jobs. And they’ll lose jobs because of technology, globalisation, climate change and a whole number of challenges like low economic growth, as we have seen, in our own country,” he said. To these factors can be added domestic elements that the president finds less politically palatable to speak about. These include policy uncertainty (on many fronts) weighing on business confidence and investment decisions. 

Another key challenge in addressing South Africa’s poor job growth is the weak momentum in action plans made at the Presidential Jobs Summit in October 2018. In the framework agreement between social partners that was released after the event, stakeholders acknowledged that “the deficiencies of previous summits and agreements has been the failure to monitor implementation, and to take remedial action where insufficient progress was being made”. As such, social partners agreed – without a timeline - to establish a Presidential Jobs Committee that would receive quarterly progress reports on the implementation of the action plans. Tangible actions from such a high-level committee are now drastically needed.

 

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