South African workers in trouble

South African workers are in deep trouble, with private sector employment not returning to pre-pandemic levels and salary growth remaining subdued. 

In the second quarter of 2024, South Africa’s unemployment rate unexpectedly rose to its highest level since 2022.

This is despite an increase in temporary employment surrounding the country’s election and an expected boost from the severity of load-shedding significantly declining. 

Looking beyond the latest statistics, South Africa’s unemployment problem is worse than many think, and the economy’s poor performance is impacting even those who are employed.

Data from the Reserve Bank shows that the local economy cannot absorb a growing number of people looking for work. As the working-age population increases, employment has declined. 

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 (15 to 64 years) who are employed – decreased to 40.3%. 

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. 

Data from Altron’s FinTech Household Resilience Index showed that even employed people are facing immense financial pressure. 

Total remuneration for employees has failed to recover to its pre-pandemic levels. At constant 2024 prices, workers were paid just over R870 billion in the first quarter of 2020 compared to R820 billion in the second quarter of 2024. 

The average formal sector salary has also plummeted since 2020 from around R28,000 per month to R27,300 in the second quarter of this year. 

Simply put, the South Africans who have managed to get a job are being paid less than they were pre-pandemic. 

This has come at a time when the cost to service household debt has skyrocketed as a share of total income due to elevated interest rates. 

The primary reason formal employment has not recovered in the post-pandemic years is the reluctance of private sector companies to invest in expanding their operations and workforce.

According to Standard Bank’s chief economist, Goolam Ballim, private companies have largely engaged in what he terms “subsistence investing” over recent years.

This type of investment is focused on maintaining business operations rather than driving growth or increasing employee numbers.

South Africa’s weak economic performance has been a key factor, with businesses reluctant to invest in a country where the average GDP growth rate has been under 1% for the past decade.

As a result, private sector employment remains well below pre-pandemic levels, with many of the jobs lost in 2020 yet to be recovered.

The Reserve Bank reported that private sector employment was largely unchanged at 8.33 million in the first quarter of 2024, barely above the pandemic low of 8.29 million in the second quarter of 2020. 

This stagnation is attributed to companies struggling to create significant employment opportunities due to slow economic growth, ongoing operational and logistical challenges, and weak consumer demand.

The mining industry has been particularly affected, with widespread job losses and restructuring driven by declining commodity prices and rising costs. 

Manufacturing, historically a major source of employment for low-skilled workers in South Africa, has also faced challenges in recent years.

However, there is some optimism, as the Reserve Bank noted growing confidence in the manufacturing sector, particularly as the country seems to have moved past its load-shedding crisis.

The graph below illustrates the decline in private-sector jobs in South Africa.