SA’s unemployment rate edged up slightly in the first quarter, with the highest employment losses recorded in energy-intensive and private household sectors, pointing to the impact heightened rotational power outages, high interest rates and accelerating inflation have inflicted on the economy.
Load-shedding averaged stages 4 and 3 in February and March respectively, leading to a flurry of downward revisions of the economic growth forecast — and with interest rates above prepandemic levels, having increased 425 basis points since the start of the hiking cycle, households too have felt direct pressure on disposable income.
The mining and manufacturing industries together contribute about 21% to the total GDP, and shortcomings in logistics infrastructure and load-shedding will affect growth and future employment.
The pressure on the economy is properly captured in the latest unemployment numbers released by Stats SA on Tuesday, showing the joblessness rate increased 0.2 percentage points to 32.9% from 32.7% previously.
The reading, which was slightly below the market consensus of 33%, places SA’s unemployment rate among the world’s highest.
The joblessness rate also continues to be exceedingly high by historical and international standards.
Stats SA data shows that the number of unemployed rose by 179,000 to 7.9-million.
The youth unemployment rate is much worse, reaching 62.1% in the first quarter and 71.2% using the expanded definition, which includes people who were available for work but not looking for a job.
The data shows that the expanded definition of unemployment posted at 42.4% in the first quarter, down from 42.6% in the fourth quarter.
In terms of sectors, major job losses were reported in private households, losing 85,000 jobs over the past three months as well as the mining, construction and manufacturing sectors, which shed 24,000, 11,000 and 2,000 jobs respectively.
Nedbank senior economist Johannes Khosa said the slower demand in most major economies, hurt by the high cost of living, will continue to exert downward pressure on commodity prices and weigh on export-orientated industries such as mining and manufacturing.
“Unfortunately, those two industries are also power intensive and will therefore suffer the most pain from the electricity crisis,” Khosa said.
But while employment in SA remains well below prepandemic levels, at 336 000 jobs below the peak employment level achieved in quarter four 2018 and 228,000 jobs below the level of employment that prevailed before the start of Covid-19, the country has created a significant number of jobs over the past six quarters.
Stanlib chief economist Kevin Lings said this partly reflects the reopening of SA business after the impact of the Covid-19 lockdown measures, and the improved measurement of household employment relative to the months during the worst Covid-19 restrictions.
According to Stats SA, SA has now added back a total 2.04-million jobs since the aftermath of the initial Covid-19 restrictions.
Data shows employment gains in the first quarter largely reflect an increase in the formal nonagricultural sector’s employment recording 208,754 on a quarterly basis, followed by the informal sector’s increase of 107,112 and the agricultural sector’s increase of 27,374 quarter on quarter.
But despite the country’s unemployment rate falling from levels recorded during the pandemic, it remains high.
The overall labour participation rate is below 60%, and at 59.4%, it further emphasizes the fragility of the domestic economy, which is plagued by ongoing rotational load-shedding, significantly impeding activity and weighing heavily on confidence and growth.
As a result, “we expect GDP growth of just 0.2% this year with downside risks apparent”, Investec economist Lara Hodes said.
Africa economist at Oxford Economics Jee-A van der Linde said the unemployment rate is expected to hover at current high levels for as long as the electricity crisis persists.
“Businesses are unable and disinclined to expand operations in the current economic climate, and the business mood has soured notably since the start of 2023,” he said.
Van der Linde said the drop in the RMB/BER business confidence index, which fell from 38 points in the fourth quarter to 36 points in the first quarter as confidence in manufacturing and retail sectors plummeted, shows the economy’s weakened growth outlook also bodes ill for future employment growth.
Don Consultancy Group chief economist Chifi Mhango said the manufacturing sector is clearly still operating below its full capacity in production terms.
“At 77.9% capacity utilisation, this remains below the 80%-and-above levels that are ideal for an economy to advance in terms of GDP growth rate and employment creation, with insufficient demand and shortage of raw materials being some of the main reasons,” he said.
Khosa said another reason for lower levels of employment is that government employment will be limited by the fiscal consolidation path, “which, among other key objectives, prioritises the reduction of the wage bill”.
Update: May 16 2023
This article has been updated with new information and comment.
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