Social unrest warning for South Africa

South Africa is at high risk of social unrest due to its high unemployment, rising inequality, and increased lawlessness. 

PwC senior economist Xhanti Payi told 702 that South African companies will face increased uncertainty and volatility until the country addresses its major social problems. 

“This is something we just have to accept. Businesses have to do what they can to build resilience,” Payi said. 

South Africa is uniquely exposed to economic volatility and social unrest due to the country’s high level of unemployment, rising cost of living, and decreasing adherence to the law. 

Payi expects the country to experience an increase in the number of strikes, financial volatility, and general instability. 

“These things are going to continue to work against us. Focus has to be on how one builds resilience to this.”

“The important thing is not just to sit around – it is vital to innovate and adapt,” Payi said. 

Businesses have to analyse their companies’ risks and develop strategies to mitigate against them. 

“Many businesses are very, very concerned about disruptions to their operations through strikes and competition,” Payi said. 

Nearly 40% of CEOs surveyed by PwC said they think that in the next decade, their businesses may not exist if they do not build resilience now.

“Disruption is a multi-faceted thing. We see they are also very concerned about social unrest and developments on this front.”

Payi raised the examples of the recent truck burnings in KwaZulu-Natal and Mpumalanga and the taxi strike in Cape Town in early August. 

South Africa is a high risk of widespread social unrest and local businesses cannot ignore this. “Businesses should do as much as they can towards addressing the social challenges and develop strategies to mitigate their effects.”

‘Ticking time bomb’

In July, the United Nations Development Programme (UNDP) warned that South Africa’s high unemployment rate, particularly among its youth, is a “ticking time bomb” that could result in social unrest. 

The UNDP released its South Africa National Human Development Report for 2022 in July, which focused on analysing South Africa’s youth employability. 

“Youth unemployment in South Africa is a multipronged challenge that limits the earning potential of youth, stymies business growth, threatens social cohesion, and puts pressure on public resources,” the report said. 

“There is no doubt that the high unemployment rate is a ticking time bomb.”

The UNDP also warned that South Africa is at risk of another lost generation through the erosion of skills and human capital that comes with prolonged unemployment. 

PwC has previously noted 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. 

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. 

If South Africa fails to address unemployment, it will face growing social unrest, PwC warned.