South Africa’s unemployment crisis is worse than it seems

Over 600,000 South Africans enter the workforce every year, and the country’s economy is not growing fast enough to absorb them into the labour market. 

This results in the unemployment rate inexorably rising year-on-year as hundreds of thousands of South Africans, particularly young adults, cannot find work in a stagnant economy. 

South Africa’s economic growth has averaged an annual rate 0.8% for the past decade, with the population growth rate being 1.4% per annum. 

This results in individuals getting poorer year-on-year on a per capita basis and is emblematic of the country’s economic crisis. 

Stanlib chief economist Kevin Lings explained that it points to a fundamental issue in South Africa’s economy and shows that the country’s unemployment crisis will be more challenging to resolve than many think. 

“We now find that our economic growth is averaging less than 1% annual growth, and that is a major, major problem,” Lings said. 

This is not a problem for a country like Japan, which has a shrinking population, but it is a serious problem for South Africa, which has a young, growing population. 

“We have gone back to where we were in 1994 in terms of growth, with a population growing at 1.4% which is relatively high by global standards,” Lings said. 

“We have 600,000 people entering the labour force every year who have to be accommodated with employment and opportunities.”

“If we do not accommodate these people, it translates directly into unemployment, particularly youth unemployment.” 

This is now the crux of South Africa’s unemployment challenge. Even if the country adds jobs, it is not adding enough to absorb its growing workforce. 

At the peak of South Africa’s economic growth in the mid-2000s, when output grew by over 4% a year, the economy added around 500,000 jobs a year. 

Even if South Africa managed this faster growth, the unemployment rate would still increase year-on-year, just at a slower rate. 

“When your economy grows at less than 1%, that is what has fundamentally gone wrong. You cannot absorb new workers and cannot offer the population an opportunity,” Lings said. 

“It is not possible. A business does not employ people for the hell of it. They need to have a thriving and growing business to employ more people.”

“If you do not have economic growth and expansion, you stagnate. That is where South Africa is currently.” 

University graduates can’t find jobs

Another factor in South Africa’s unemployment crisis is the growing mismatch between worker qualifications and the available jobs in the country’s labour market. 

Increasingly, graduates cannot access the few opportunities available in South Africa’s job market as their skills are not what is required from businesses. 

This leaves many students unable to find stable employment after graduation, which constrains economic growth and exacerbates the country’s unemployment problem. 

On top of this, South Africa’s universities are becoming increasingly expensive, pricing many out of higher education in the country. 

Earlier this year, the Organisation for Economic Co-operation and Development (OECD) released the results of its latest economic survey of South Africa. 

The report showed that the lack of graduates with the right skills is one of the major reasons why South Africa’s economic growth has been extremely poor over the last decade. 

It said that South Africa’s labour market is characterised by persistent mismatches between worker qualifications, fields of study, and available jobs. 

This results in a lack of skilled and semi-skilled workers in South Africa’s economy, constraining economic growth. 

According to the latest data, 45% of men and 46% of women in South Africa between 25 and 64 years old had more than a secondary education. 

In comparison, the average for an OECD country is 79% of men and 81% of women. This emphasises South Africa’s poor educational outcomes. 

The organisation added that this reflects severe inadequacies in technical and vocational education and training programmes. 

This is part of a broader issue within South Africa’s higher education sector – the failure of it to align its programmes with the skills demanded by the labour market. 

The OECD also called for more teachers and university lecturers with real-world industry experience and greater use of internships to better prepare students for the demands of the job market.