Stats SA has defended its methodology in determining employment in SA’s informal sector after criticism from the country’s biggest bank by customers.
Capitec, which has 24-million customers, sparked a national debate after CEO Gerrie Fourie said SA’s high unemployment rate is inflated to some extent because activity in the informal market — which some economists estimate to be worth billions of rand of annually — is not fully accounted for in Stats SA’s calculations.
Statistician-general Risenga Maluleke said the unemployment figures the agency publishes are based on what people say when it conducts regular surveys in society, and its data on the informal economy aligns with requirements of the International Labour Organization (ILO).
“Let us be unequivocal: Stats SA does measure the informal sector. It follows the guidelines set by the ILO for defining the informal sector, which is characterised primarily by the registration status and size of enterprises or businesses,” Maluleke said in a statement.
“To qualify as part of the informal sector, employees must be unregistered for income tax and work in establishments with fewer than five individuals. This category also encompasses employers, own-account workers, and those providing unpaid assistance in household businesses who do not register for income tax or VAT,” he said.
“This is measured through the quarterly labour force survey (QLFS). This household-based sample survey collects quarterly data on the labour market.”
While the QLFS is a household-based sample survey on the labour market activities of individuals aged 15-64 years, the quarterly employment survey (QES) is an enterprise-based sample survey drawn from private, non-agricultural businesses as well as government entities.
Simply put, the QLFS surveys the workers, while the QES surveys the employers.
Cape Town-based independent investment research firm Primaresearch suggests low-income households could underreport their employment so as to retain the social assistance they receive from the government in the form of grants. The research indicates there may be a bias to underreport employment by lower-income respondents in the QLFS, possibly motivated by child grants.
“We conclude that the apparent rigidity of the official employment data should be investigated by Stats SA, including issues such as the potential understatement of employment status by lower-income households,” Primaresearch director Shamil Ismail said. “We believe there may be a bias in lower-income segments to underreport their employment status because of the child grant scheme.”
Ismail also argued for a closer inspection of credit data compared to official employment numbers, suggesting the gap between the two suggests an underreporting in employment.
“The credit providers, who are exposed to the real risk of bad debts, are reasonably satisfied with the income sources of 26.6-million credit-active customers. While we do not think the true employment number is that high (some credit-actives may be students or pensioners), we think it is likely higher than the current official tally.”
Prof Michael Kahn, a policy analyst in research and innovation, said: “Capitec’s focus on Mexico [as an example of broader employment data on the informal sector] is timely, but begs the question why the Treasury, the Reserve Bank, Stats SA and the department of trade, industry & competition demonstrate such caution [in viewing SA’s unemployment rate].”
Fourie had pointed to Mexico as an example of a country that has embraced the informal sector to drive employment, with the unemployment rate in the Latin American country falling to an low of 2.2% in March. More than half of the country’s workers are in the informal sector, according to the national statistics agency INEGI.
Maluleke said Mexico also uses ILO standards to account for employment in the informal sector. “The informal sector is measured, tracked and reported on consistently and, if anything, the insights these reports provide should guide and enrich policy, not distort it.”
Minister of trade, industry & competition Parks Tau on Tuesday welcomed the data on how SA’s unemployment rate is calculated.
“This point has been raised by various other quarters with regard to what we should calculate and what we shouldn’t calculate ... I also hold the view that there is a significant undercount, particularly if you take into account the informal sector," Tau told MPs.
“In fact, it’s something that we should all collectively be engaging in resolving so we are able to ... acknowledge the informal sector, but also reinforce the support mechanisms for what is a major contributor to employment in the country,” he said.
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