South Africa’s big unemployment problem

Employment in crucial sectors of South Africa’s economy has not recovered to pre-pandemic levels, with private companies hesitant to invest in expanding their businesses in the country. 

The Reserve Bank’s Quarterly Bulletin for the last quarter of 2024 outlined the dire situation South Africa’s economy is in. 

South Africa’s employment ticked up slightly in the last quarter of 2024, with formal sector employment increasing by 90,000. 

This was largely driven by job gains in the finance and business services sector, along with meagre increases in manufacturing and construction. 

Increases in these sectors were partly offset by decreases in trade, transport and storage, mining, and community and social services. 

South Africa’s total labour force increased by 0.4% to 25 million in the fourth quarter of 2024, mainly due to an increase in the total number of employed persons, while the number of officially unemployed persons decreased by 20,000. 

As a result, the official unemployment rate decreased slightly from 32.1% in the third quarter of 2024 to 31.9% in the fourth quarter.

This improvement is minimal, with the Reserve Bank comparing South Africa’s unemployment rate to the global average of 5%. 

More crucially, formal non-agricultural employment decreased by a significant 138,700 jobs – an annual decrease of 5.1%. This reversed the gains made in the previous quarter. 

The Reserve Bank said the decline resulted primarily from the termination of temporary employment opportunities in the public sector and continued job-shedding in the private sector. 

Job-shedding in the private sector is particularly concerning as it employs three times the number of South Africans as the public sector. 

The Reserve Bank said it has also become increasingly clear that significant labour market skills mismatches exist in South Africa, with many companies being unable to fill vacant positions.

Private sector sitting on the sidelines

Private sector employment has not recovered to its pre-pandemic levels, with many companies hesitant to invest in the local economy amid heightened uncertainty and poor economic growth. 

South Africa has averaged an annual economic growth rate of 0.8% for the past decade, while its population is growing at 1.5% yearly. 

In the past decade, consumer spending has driven South Africa’s meagre economic growth, and the historic drivers of mining and manufacturing have stagnated.

This is not necessarily a bad thing, as the retail sector accounts for a larger share of GDP and employment.

However, these jobs can be lost just as quickly as they are added, as they require relatively few skills. 

Another problem is that in South Africa a large chunk of this is supported by the government giving out social grants, with 28 million people relying on cheques from the state. 

With this being supported by only 7.9 million personal income taxpayers, the financial equation is unsustainable.

Private businesses are simply unwilling to invest in such a stagnant economy with unsustainable government finances. 

Increased political uncertainty has accompanied this, with the NWU Business School’s Policy Uncertainty Index (PUI) reaching a record high at the beginning of 2025. 

This means that while the private sector has the cash to invest in the local economy, these businesses choose not to and rather let their cash gain interest in a bank account. 

“The private sector is in very good shape. If you look at the cash in corporate balance sheets, this is cash in the bank. It sits at over R1.4 trillion. This is a record high,” Stanlib chief economic Kevin Lings said. 

“We know that South African corporates have a good balance sheet and that there is money in pension funds. There is money waiting to invest in infrastructure.”

“If the government embraced public-private partnerships, we will unlock that balance sheet. I am confident that the government understands this.” 

However, Lings said the government needs to understand what has made these partnerships work in the past and pointed to the electricity sector as the best example to follow. 

“The biggest success story of this is obviously if we look at our electricity development. When they deregulated the sector, the private sector stepped in and has built a huge amount of energy infrastructure.” 

“It demonstrates that if you deregulate, the private sector will step in and invest. The argument is to do that for all the infrastructure where we have a major backlog.” 

“The private sector has the balance sheet, and it wants to invest. If the government stepped away and deregulated sectors to allow the private sector in more, we are convinced that we will get the investment needed to lift the growth rate.” 

“Slowly, very slowly, the government is coming around to that idea, so we are very optimistic on a medium-term basis.”