South Africa’s big unemployment problem

South Africa’s employment crisis is even worse than many people think. Temporary jobs made the second quarter’s employment statistics look better than they actually are, with 50,000 people having lost their jobs.

This is according to the Minerals Council of South Africa’s chief economist, Hugo Pienaar, who said the mining sector faced a notable setback in employment in the second quarter of 2024.

In Q2 2024, employment in the mining sector declined by 6,926 workers to 472,153. 

The Q2 decline follows mining job losses of 2,696 in the first quarter of 2024. This implies that relative to the fourth quarter of 2023, mining sector employment declined by a meaningful 9,622 in the first half of 2024. 

“Although there was already talk of significant mining job losses in the second half of 2023, the

formal processes were only concluded earlier this year, with the adverse impact on jobs now being picked up in the Quarterly Employment Statistics,” Pienaar said.

The outcome for mining employment in Q2 contrasts with the total economy – excluding mining – where 49,271 jobs were added in the second quarter. 

However, Pienaar said this data needs to be qualified as the increase in non-mining jobs was almost exclusively the result of the temporary employment of Independent Electoral Commission (IEC) workers tied to the May national elections

Except for a negligible increase in the electricity sector, employment declined in all the other major economic sectors surveyed during Q2 when excluding the temporary IEC workers.

Pienaar explained that, if community services where IEC workers are captured are excluded from the total employment figure, employment declined by more than 50,000 in Q2.

In the second quarter of this year, manufacturing and finance were hit the hardest. 

“Given this nuance, one has to say it was a weak quarter for jobs in an overall sense,” he said.

“This is consistent with stagnant real GDP growth in the second quarter of 2024 and emphasises that the Government of National Unity (GNU) needs to fast-track the structural reforms started in the sixth administration.”

Another factor that points to South Africa’s unemployment crisis being worse than previously thought is expanded unemployment statistics.

The expanded unemployment rate, which includes discouraged work seekers, increased further from 41.9% in the first quarter of 2024 to 42.6% in the second quarter, following nine consecutive quarterly decreases up to the fourth quarter of 2023.

The labour force participation rate remained broadly unchanged at 60.6% in the second quarter of 2024. 

However, the labour absorption rate – the percentage of the working-age population who are employed – decreased to 40.3%. 

This effectively means that the South African economy is unable to absorb a growing number of people looking for work. As the working-age population increases, employment has declined. 

However, looking forward, Pienaar said the recent improvement in the domestic macroeconomic environment bodes well for improved employment prospects in South Africa.

The more conducive macro conditions include the following economic green shoots:

• Load-shedding has been absent since late March 2024. Eskom’s Summer Outlook suggests that power cuts will remain absent.
• The rate of increase for headline CPI inflation moderated to 4.4% year-on-year in August, i.e., below the Reserve Bank’s target of 4.5%. 
• The improved inflation outlook allowed the Reserve Bank to reduce interest rates by 25 basis points in September. Pienaar expects more rate cuts in the next 12 months.
• Investor, business and consumer confidence increased in the third quarter of 2024 following the formation of the GNU. A further improvement in confidence is necessary for higher levels of fixed investment, an important ingredient for higher GDP and employment growth.

“While there is no doubt that an improved macro picture will also benefit the mining sector, industry-specific constraints are likely to continue to weigh on mining jobs,” he warned.