SA unemployment rate still shockingly high and unlikely to drop soon

Although the South African unemployment rate dipped slightly in the second quarter of the year, it is still shockingly high and has not decreased enough from the pandemic peak of 35.3% reached in the fourth quarter of 2021. And the weak economic environment suggests the future outlook is not any brighter.

Economic research group, Oxford Economics Africa, says the marginal decrease in the unemployment rate means precious little considering the millions of people who remain despondent and jobless. “The economy’s weak growth outlook bodes ill for future employment creation and we forecast South Africa’s unemployment rate will hover at current high levels over the medium term.

“South Africa’s unemployment crisis is also characterised by high youth unemployment, with young people between the ages of 15 and 24 recording an unemployment rate of 60.7% and those between 25 and 34 recording an unemployment rate of 39.8%.”

ALSO READ: SA unemployment down slightly, 45.3% of youth without jobs

The group says a lack of infrastructure investment over the years has limited economic growth potential which means the economy is unable to produce enough jobs to satisfy demand.

In the latest South Africa National Human Development (SANHDR) 2022: Harnessing the Employability of South Africa’s Youth, the United Nations Development Programme (UNDP) looked at youth unemployment in South Africa through a human development lens.

The report was developed by UNDP and the Human Sciences Research Council (SHRC) and highlights that youth unemployment in South Africa is not merely a problem but a defining development challenge that limits the earning potential of youth, stymies economic growth, threatens social cohesion and puts pressure on public resources.

Tackling youth unemployment

Therefore, tackling youth unemployment will mean simultaneously tackling poverty and income inequality. Some of the findings in the report were:

• Although South Africa has a long legacy of colonisation and apartheid and now faces the triple development challenges of slow growth, deep poverty and inequalities, as well as high levels of joblessness, the country has the vision, commitment and capability to overcome its youth unemployment challenge.
• To tackle its high and complex youth unemployment challenge and take advantage of the opportunities of the future of work, South Africa has to extensively invest in the 21st-century skills of its younger generation.
• The new world of work, propelled by the Fourth Industrial Revolution, presents new job opportunities but also poses risks. South Africa must be ready to seize the opportunities of the new world of work while minimising its associated risks.
• All around the world, different countries and regions have been trying to address the challenge of high unemployment through various interventions. South Africa can learn from youth employability experiences in other regions of the world.
• Policy options for overcoming youth joblessness in South Africa are available. Drawing on them and learning from the experiences of other countries, the country should pursue an action agenda for expanding youth employment.

“Prolonged joblessness can lead to a lost generation due to the erosion of skills and human capital and weaning youth from dependence on social grants to productive employment and entrepreneurship is critical to addressing this crisis. Given that knowledge, skills and expertise are the currencies of the 21st century, continuous investment in these elements is critical to meaningful results,” Dr Ayodele Odusolaa, UNDP resident representative in South Africa.

ALSO READ: How to bridge SA’s growing youth skills and unemployment divide

Proposed strategy to tackle youth unemployment

The SANHDR proposed a comprehensive strategy consisting of five key elements to tackle youth unemployment in the country that include:

• Developing strategic approaches for youth to transition into sustainable livelihoods.
• Generating and taking advantage of job opportunities and the demographic dividend.
• Harnessing the potential of the evolving job market.
• Reviving the National Youth Service Schemes.
• Forming partnerships among various stakeholders to address the issue.

Odusolaa says this strategy can be implemented by ensuring that young South Africans can take advantage of new service work, undertake creative careers and care work, pursue social enterprises and access philanthropic funding to position the country to take full beneficial advantage of the fourth industrial revolution.

“The overarching intention of this report is to trigger some robust national discussions around youth unemployment and in the spirit of collaboration with the government and other stakeholders, fund sustainable solutions to this scourge. Without some decisive policy decisions and strategic actions, the report clearly warns that continued youth unemployment threatens the social and political stability of South Africa.”

ALSO READ: SA ‘technically in a recession’ with low growth, high unemployment

Good news, but still significant economic headwinds

Nedbank’s Economic Unit says any decline in the unemployment rate, however modest, is good news but underlying conditions in the job market remain poor and the outlook is uncertain as the economy still faces significant headwinds, which could affect employment adversely.

“Activity in export-orientated industries, such as mining and manufacturing, continues to be undermined by slower demand from major economies, disappointing growth in China and subdued commodity prices.”

Apart from a less supportive global economy, load shedding and other logistical constraints will also continue to undermine mining and manufacturing. Other sectors are also affected by power shortages, which disrupt operations and inflate operating costs.

The unit says activity in industries that serve the consumer market will be hampered by weak household spending amid persistent pressure on household incomes, sticky inflation and higher interest rates.

“Altogether, fading demand and rising costs will hurt corporate profits, which could lead to renewed cost-cutting, with potentially negative implications for new job creation and existing employment levels.”

The RMB/BER Business Confidence Index remained below the 50 neutral level for eight consecutive quarters, with 27 recorded in the second quarter, the lowest reading since Q3 2020. Consequently, the unit says, the private sector will likely remain hesitant to expand production capacity in the short term, limiting the possibility for employment growth.

The unit says public service employment will be limited by the fiscal consolidation path, which also prioritises the reduction of the wage bill. “Given that civil servants secured a higher-than-budgeted wage increase, the wage bill can only be contained by limiting employment growth.”

“The labour force will continue to expand given large pools of new entrants, the unemployed and discouraged workers. Therefore, the unemployment rate is likely to remain structurally high over the medium term and can only be reduced through robust economic growth, which ultimately requires faster implementation of critical economic reforms.”