South Africa’s big employment problem

A lot of work needs to be done to address South Africa’s high unemployment levels, the most important of which will be fixing the economy.

The Bureau for Economic Research (BER) recently released an overview of unemployment in South Africa over the past 30 years.

The BER’s data showed a strong correlation between the country’s unemployment rate and its GDP growth.

This is a correlation that President Cyril Ramaphosa recently highlighted in his Opening of Parliament this year.

“Our experience over the past 30 years has shown that when our economy grows, jobs are created. When our economy contracts, there is no job creation, and jobs are lost,” he said.

Therefore, inclusive growth and job creation are one of the three strategic priorities of South Africa’s newly established Government of National Unity.

The BER pointed out that South Africa is one of the few countries in the world with an unemployment rate exceeding 20%. 

“This review puts into context how much work needs to be done,” the organisation said.

The latest unemployment data from Stats SA showed that South Africa’s unemployment rate rose to its highest level in a year in the first three months of 2024, climbing to 32.9% from 32.1% in the previous quarter.

Unemployment, according to the expanded definition, grew to 41.9%. This definition includes people available for work but not looking for a job. 

Most jobs were shed in the construction industry and community and social services sectors. 

Stats SA also said that weak consumer demand, frequent power cuts and logistics constraints have taken a toll on the country’s economy. 

The BER explained that tertiary sectors are the largest employers in the economy and are experiencing the fastest employment growth. 

However, they are unable to absorb South Africa’s stock of unskilled and semi-skilled labour, for which demand from the manufacturing and construction sectors has declined.

“This highlights South Africa’s structural unemployment problem,” the organisation said.

The graph below, courtesy of the BER, shows South Africa’s unemployment problem.

This problem was also recently highlighted in RMB’s Invest in Africa 2024 report, which ranks African countries according to their attractiveness to investors. 

The report found that 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. 

In RMB’s ranking, South Africa did not crack the top three, ranking fourth behind the Seychelles, Mauritius, and 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 was found lacking was income inequality and unemployment. 

Around 30% of South Africa’s working-age population is unemployed, with the figure even worse for young 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 will need to overcome a substantial economic and humanitarian crisis 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.”