South Africa’s unemployment rate is set to increase markedly by the end of the decade, with the worst-case scenario putting it at 37.2% by 2030. This is according to PwC’s South Africa Economic Outlook released in April.
PwC pointed out that unemployment is on an upward trend due to structural constraints that limit growth, particularly load-shedding and deterioration of logistical infrastructure.
These constraints limit potential economic growth in the country, and given the relationship between economic growth and employment, unemployment will rise.
The accounting firm’s baseline growth rate for South Africa is 1.3% per annum over the long term.
This is barely above South Africa’s population growth rate of 1% per annum, meaning incomes will remain stagnant in the long term.
With high inflation, South Africans will be getting poorer in real terms.
Due to South Africa’s poor economic growth, PwC anticipates the country’s unemployment rate increasing from 32.7% at the end of 2022 to 35.5% in 2030.
This is the baseline scenario. The downside scenario has the economy growing at a mere 0.9% per annum for the next decade. In this case, unemployment will rise to 37.2% in 2030.
Even in the upside scenario, PwC sees unemployment rising to above 34% at the end of the decade.
Social unrest warnings
Poor economic performance and the subsequent rise in unemployment exacerbates the social challenges South Africa already faces, PwC said.
If South Africa is unsuccessful in addressing unemployment, it will face growing social unrest.
According to Municipal IQ, the volume of protests in South Africa surged at the beginning of 2023. The surge was mainly attributable to increased load-shedding.
This concern is echoed by business leaders, with two-thirds of Southern African CEOs expecting to face disruptions from social unrest in the next 12 months.
This was revealed in PwC’s 26th Global CEO Survey and Africa Business Agenda Report for 2023.
PwC raised the July riots of 2021 as an example of what social unrest could look like in the next 12 months. There was looting, violence, disruption, and the deaths of 354 South Africans during the riots.
PwC measured the impact of the riots on the South African economy at R50 billion.
Business Leadership South Africa’s CEO, Busi Mavuso, said in February that South Africa faces an “Arab Spring-like revolt” if the government does not take decisive action.
Mavuso said, “we are in deep trouble” and “need meaningful and targeted interventions that will ensure we don’t end up in the doldrums and we don’t end up as another failed African state”.
Allianz’s Social Risk Index (SRI) has identified South Africa as “highly vulnerable to social unrest in the next 18 months”.
Lullu Krugel, the chief economist at PwC South Africa, said the government cannot solve these problems alone. The public sector “needs the private sector”.
“Businesses need to demonstrate their ability to create value, build trust, and contribute to solving important problems,” Krugel added.
For businesses in Southern Africa, business as usual and focusing solely on profitability has become obsolete.
The private sector in South Africa needs to be proactive and force the agenda to tackle social issues. Otherwise, they will not be solved.