EDITORIAL: Never mind the numbers, focus on substance of jobs debate

The storm that followed Capitec CEO Gerrie Fourie’s 10% unemployment claim has died down but the debates he opened up should not. One is about the official statistics — and here we should be asking questions not just about our unemployment numbers but also about our GDP numbers and whether they adequately reflect the informal sector. The other is about the informal sector itself, which needs more focused attention from policymakers and a change of mindset if SA is to close its wide employment gap.

SA’s official statisticians use globally benchmarked methods to survey and calculate the unemployment rate and while it is far from perfect, and the true rate could be less than 32%, it is unlikely it is 10%. It’s not that Capitec doesn’t have a high proportion of clients who earn their money in the informal sector rather than from formal jobs: just that it’s not legitimate to extrapolate the bank’s sample to the national level.

Some worry that South Africans’ notion of a “job” tends to be narrowly defined, but Stats SA asks respondents whether they earned in the past seven days, not whether they worked, so the numbers should capture that. One question though is whether the respondents trust the survey fieldworkers enough to provide proper disclosure of their activities, especially if they are foreigners, so that could be an issue for the numbers. Nor is it just the job numbers that should be scrutinised: informal earnings should show up in national expenditure figures somewhere, but whether SA’s GDP fully captures the effect of the informal sector on its economy is a question.

More important than the precision of the numbers though are the dynamics of the informal sector — and whether SA’s is large enough. The answer is almost certainly no, even if we are undermeasuring a bit. University of Cape Town professor Haroon Bhorat’s work indicates if SA had much more informality it would have much less unemployment. The low level of informality is the “smoking gun”, as he calls it, that explains SA’s extremely high level of unemployment compared with almost any other middle income or developing country.

It’s not that those economies are better at creating formal employment: it is that SA is worse at enabling the informal employment that in other middle income countries serves to close the jobs gap. Wage employment provides 45% of the jobs in the average middle income country, with informally employed people making up another 45% so unemployment is 10%. In SA wage employment is 50% but informal employment is just 16%, hence unemployment of 34%, Bhorat finds, based on a survey of 87 middle income countries.

SA’s crippling regulatory burden is a big part of the constraint on informality. These range from road transport laws that make it illegal to trade on pavements to building regulations that keep informal operators out. But it is municipal bylaws that are the most critical in creating barriers to entry for informal activity, restricting trading, imposing complex and costly licensing and imposing criminal sanctions for breaches.

Also key is the lack of the kind of municipal infrastructure that is needed for these businesses, which are micro, survivalist enterprises, not even small or medium ones. It’s not railways or ports they need to survive but rather lockable storage, ablution facilities and waste removal, lighting, and particularly crime prevention. These should be seen just as much as part of the infrastructure needed to enable economic activity and job creation in the cities as roads or substations.

As Bhorat puts it, cities tend to view informal traders as a nuisance, not as part of the economy. That mindset needs to change if SA is to address its unemployment problem.

What also needs to change is the apartheid spatial geography that locates poor people so far from the economic centres of the cities and makes transport so expensive.

Policymakers at national and local government level must bring a lot more focus to enabling informality as a means to tackling unemployment. Fourie has at least raised the stakes.