SA’s official unemployment rate, which reached a record 34.4% in the second quarter of 2021, is likely to worsen once the impact of the unrest that swept across parts of the country in July is reflected in future data.
The record jobless rate may also widen further as SA’s more than 3.3-million discouraged job seekers, who are not counted in the official rate as they are not actively looking for work, start to return to the labour market as the economy opens up in response to an easing third wave of Covid-19 infections and improving vaccination efforts.
Stats SA’s latest quarterly labour force survey (QLFS), released on Tuesday, showed the number of employed people fell by 54,000 in the second quarter to 14.9-million, while the number of unemployed jumped by 584,000 to 7.8-million.
The effect of those movements pushed the official unemployment rate to the worst level since the survey was introduced in 2008, while Bloomberg said it was the highest among the 82 countries it tracks.
The data is just the latest to highlight how the biggest challenge to face President Cyril Ramaphosa since he took over in 2018 has only become bigger due to a lack of consensus within the ruling alliance on key structural reforms. Then the economy took a blow from Covid-induced lockdowns, and, more recently, violence laid waste to many businesses in KwaZulu-Natal and Gauteng.
Record unemployment in one of the world’s most unequal societies is likely to intensify calls for a basic income grant. The riots, sparked by the arrest of former president Jacob Zuma, were partly attributed to poverty and hunger.
"It’s not a pretty picture at all but what’s worrying is that it doesn’t include the shock unrest we had in July, so it’s probably going to worsen because a lot of the businesses that were damaged are still not operating," said Maarten Ackerman, chief economist at Citadel.
"The message is clear: if the government doesn’t institute structural reforms very quickly to address this crisis, we are going to increase the risk of unrest, which has its roots in inequality," Ackerman said.
SA’s decades-long unemployment crisis has been worsened by the Covid-19 pandemic, which caused a 7% slump in GDP and more than 1.4-million job losses in 2020. Economists say the unemployment rate could worsen once the impact of the violence and looting that erupted in July is captured in third-quarter data.
Johannes Khosa at Nedbank said the rate may also widen as discouraged job seekers start looking for work as the economy opens up after a series of lockdowns. That may reduce the second quarter’s 44.4% expanded jobless rate, which includes discouraged job seekers.
"The economy is recovering gradually but the damage caused by the 2020 lockdown shocks will take time to repair," said Khosa. "The outlook for the job market remains poor. Factors such as persistent power shortages and the uncertain policy environment will weigh heavily on investor confidence."
While the government has made tentative steps towards accelerating economic reforms, such as lifting the threshold at which private companies can generate their own electricity without a licence to 100MW, critics say more needs to be done to encourage investment.
The slow pace of reforms has been undermined by factions within the governing ANC that have lobbied for expropriation without compensation and the nationalisation of some industries — policies seen as negative for economic growth.
"We need macro-policies that act as growth enhancers, not populist policies that do the opposite," said Ackerman.
"Somehow SA needs to find a way to encourage the ease of doing business without abandoning its social policies, which are important for sociopolitical cohesion."
Three of the 10 industries monitored by the QLFS showed declines in the number of employed people, with the biggest declines in finance (278,000); community and social services (166,000); and manufacturing (83,000). The largest increases in employment were in construction (143,000) and trade (108,000).
"The only green shoot I could see is that there were some jobs added in certain sectors like construction," said Ackerman.
"The financial sector lost jobs, however, which is probably a symptom of Covid-19, which has accelerated digitisation."
Financial sector heavyweights ranging from Santam to Standard Bank have indicated that Covid-19 accelerated their push to digitise as customers became more accustomed to electronic interaction.
"The only thing that can save SA from this jobs crisis is to grow the economy, and we aren’t going to get that without reforms," said Ackerman.
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