South Africa’s biggest crisis 

South Africa has an economic and humanitarian crisis to overcome due to its extremely high unemployment rate and, in particular, the lack of participation of young adults in the economy. 

This is feedback from RMB’s Invest in Africa 2024 report, which ranks African countries according to their attractiveness to investors. 

South Africa did not manage to crack the top three, ranking fourth behind the island nations of the Seychelles and Mauritius, as well as Egypt. 

“Long the continent’s economic powerhouse, South Africa faces major headwinds that have seen other countries supersede it,” RMB said. 

RMB ranked South Africa first in only one category – forex stability and liquidity. The country has lost its top spot in terms of economic output to Egypt and ranks last in terms of GDP growth forecasts. 

Another area where South Africa received the wooden spoon was income inequality and unemployment. 

According to official statistics, 30% of South Africa’s working-age population is unemployed, with the figure even worse for young adults. 

Under different definitions, the country’s unemployment rate even rises above 40% for all adults.

RMB raised particular concerns about the significant problem of youth unemployment in South Africa, with over 44% of adults below 34 years old being unemployed.

This translates into around 4.7 million young adults not participating actively in the country’s economy. 

Thus, the investment bank said South Africa has a substantial economic and humanitarian crisis to overcome in the next few years. 

Some organisations, such as the United Nations (UN), have even warned that this is a ticking time bomb, with soaring youth unemployment often a precursor to social unrest. 

“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 UN Development Programme said. 

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

This warning was echoed by the South African Human Rights Commission (SAHRC) in its report on the 2021 July Riots released earlier this year. 

The riots and destruction that took place in July 2021 saw widespread looting, violence, destruction of property and the disruption of economic activity in KZN and Gauteng.

During this period, 354 people lost their lives, and over 5,500 people were arrested. It was also reported that an estimated 40,000 businesses and 50,000 informal traders were affected, with 150,000 jobs at risk. 

The financial damage caused by the unrest was estimated at R50 billion.

In the report, the SAHRC said organised groups and criminals used lawlessness to upend the rule of law. 

The organisation said the underlying reason for the widespread unrest was high unemployment, which provided fertile ground for looting and violence. 

“The socio-economic challenges in South Africa, such as high unemployment rates, poverty, and spatial inequality, provided fertile ground for the unrest to escalate,” it said. 

Former Minister of Trade, Industry and Competition Ebrahim Patel told the SAHRC, “While it was true that there were those with a different agenda who lit the match, that match was thrown on dry tinder in communities where there were severe unemployment and poverty.”

President Cyril Ramaphosa added, “Socio-economic challenges, such as unemployment and economic inequality, pose threats to national security”. 

The problem appears likely to worsen, with financial services firm PwC noting that unemployment is on an upward trend due to structural constraints that limit economic growth. 

While load-shedding appears to have come to an end, the country has to more than double its current economic growth to outstrip population growth and thus reduce unemployment. 

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.