South Africa’s ticking time bomb

South Africa is sitting on a ticking time bomb with its unemployment crisis, as over 8 million people remain without jobs, and a further 3 million are discouraged job seekers. 

The country’s unemployment rate rose in the second quarter to 33.5%, the highest level since 2022. 

This is a far cry from the government’s stated goals contained in the National Development Plan (NDP), which aimed to reduce unemployment to 14% in 2020. 

Instead of reaching this target, unemployment hit an all-time high of 35.2% in 2021 and has since remained above 32%. 

This has the potential to create significant social problems for South Africa, with crime likely to remain elevated and unrest not far away. 

Stellenbosch University’s Dr Nthabiseng Moleko explained to Newzroom Afrika just how severe South Africa’s unemployment crisis is and the potential effects if it is not dealt with effectively. 

“In our economy, we have what is called chronic unemployment, where people cannot find jobs for sustained periods of time,” Moleko explained. 

“It is not just a superficial issue. It is a structural issue. The economy is growing slowly and in such a way that it cannot absorb large numbers of unskilled or semi-skilled workers.” 

There is a fundamental mismatch between what businesses need in terms of skills and what the labour market supplies. 

Growth in the mining, manufacturing, and agriculture sectors is vital for employment as these sectors can absorb the millions of unskilled workers in South Africa. 

However, these sectors have come under immense pressure in recent years as load-shedding, logistics inefficiencies, and onerous regulations have stifled their growth. 

“We are now sitting with 8.2 million South Africans unemployed. We are sitting with a further 3 million discouraged work seekers. We are sitting with around six provinces having more than 50% expanded unemployment rates.” 

“So, we are sitting on a ticking time bomb. If we do not deal with this deliberately and in a cohesive manner through the economic cluster with private-sector participation, we will have a social problem,” Moleko said. 

“Unemployment has got to be everyone’s problem going forward. Including both the government and the private sector.” 

South Africa’s unemployment problem is well-documented. However, as Moleko pointed out, it runs deeper than previously thought. 

The Reserve Bank has also flagged a fundamental mismatch between the skills companies are looking for and the skills being provided. 

The bank’s latest Quarterly Bulletin revealed just how deep this problem is, showing that outside of the agricultural sector, unemployment is far higher than what it was before the Covid-19 pandemic. 

The main driver of this has been lacklustre private sector hiring, as companies simply cannot find the skills they need. 

Reserve Bank data showed that 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%. 

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. 

A major concern for South Africa is that much of its employment crisis has been obscured by the agricultural sector’s strong performance in recent years.

This sector plays a crucial role in the country’s employment landscape, as it can quickly absorb a large number of unskilled workers.

It has shown remarkable growth recently, helping to counterbalance declines in manufacturing and mining.

However, as quickly as the agricultural sector can provide jobs, it can also shed them, making it an unstable source of employment for the economy.

This instability is why the Reserve Bank and other financial institutions rely on formal, non-agricultural employment data as a more accurate measure of the country’s economic health.

Unfortunately, this data reveals a grim reality – formal employment remains far below pre-pandemic levels, as shown in the graph below.