South African jobs crisis

South Africa must achieve far greater economic growth than the projected 1% for 2024 if it wants to address its high unemployment rate.

This is feedback from NWU Business School economist Prof Raymond Parsons, whose comments come after the release of the second quarter Quarterly Labour Force Survey for 2024.

Statistics SA reported that South Africa’s unemployment rate rose in the second quarter to the highest level since 2022, driven by job losses in the trade and agriculture sectors.

The unemployment rate advanced to 33.5% in the three months through June compared with 32.9% in the previous quarter. The number of people employed fell by 92,000 to 16.7 million. 

Parsons said this outcome was not unexpected, as it came following previous weak economic data that negatively influenced job creation. 

The GDP growth figures in recent quarters have been disappointing, and it was inevitable that poor growth would be reflected in yet higher unemployment. 

“Narrowly defined, one in three of the working-age population is now unemployed. The continued high level of youth unemployment remains of great concern,” he said.

RMB’s Invest in Africa 2024 report recently found that South Africa has an economic and humanitarian crisis to overcome due to its extremely high unemployment rate.

The report ranks African countries according to their attractiveness to investors, and 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 GDP growth forecasts. 

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

Parsons said South Africa’s high unemployment rate is not surprising. The country can only hope to address its unemployment problem by growing the economy, and its current growth trajectory is not enough to achieve this.

“Current forecasts of about 1.0% GDP growth this year are simply not good enough,” Parsons said. 

“The prevailing bad news on the unemployment front can, therefore, only be converted to better news in future if the economic remedies South Africa needs are given high priority.”

He said the latest overall unemployment figures again reinforce the urgency outlined by the Government of National Unity for South Africa to prioritise much higher inclusive, job-rich growth. 

A recent Bureau for Economic Research report showed a strong correlation between economic growth and employment, shown in the graph below:

This is a correlation that President Cyril Ramaphosa highlighted in his Opening of Parliament speech 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.

This is why inclusive growth and job creation are among the three strategic priorities of South Africa’s newly established Government of National Unity.

Parsons explained that the country has already made some progress in achieving stronger growth.

“Already, the prospects for stabilising and eventually reducing the high level of unemployment are being improved by the phasing out of load-shedding, higher infrastructure spending, stronger business confidence, and reduced policy uncertainty,” he said.

“These could, in time, build a sustainable platform for increased job creation in future.”

However, he said the recently released unemployment figures also reinforce the need to expedite those structural economic reforms that will turn the South African economy around sooner rather than later and put it on a much higher growth trajectory.