South Africa is one of the worst countries in the world as far as unemployment is concerned, eclipsed only by a few countries in the Middle East because they forbid women to work.
Richard Pike, the chief executive of leading staffing group Adcorp Holdings, this past week attended a Business Leadership South Africa meeting with the National Planning Commission. He said that if one looked at the number of adults who potentially could work, only 41 out of every 100 were actually working.
Pike told a small group at the University of Cape Town’s Graduate School of Business: “By developing country standards, at least 60 out of each 100 (people) should be working. In developed countries, this rises to about 70.
“One of the greatest disappointments of post-apartheid South Africa is the economy has failed to create jobs on the grand scale we’ve needed.
“This is what gives rise to the radical populist spoutings from organisations such as the ANC Youth League. Julius Malema is no political accident. He is a product of what our society has spawned.
“You don’t have to agree with the ANCYL’s solutions around mine nationalisation and land grabs, but you can’t argue with the accuracy of their identification of unemployment as this country’s most pressing socio-economic problem,” he added.
“I can’t help but believe the majority of problems we talk about – crime, xenophobia, HIV/Aids and the like – are not problems, but symptoms of the issue of unemployment.”
Pike emphatically disputes the official unemployment rate of 25 percent. “We have an unemployment rate, broadly defined, of 37 percent.”
“Of the official labour force of about 17.4 million, according to Stats SA, 4.4 million are unemployed,” he said. “Another 2 million are permanently discouraged about work prospects and another 2.1 million are underemployed. A total of 2.7 million – 61 percent – of those officially unemployed have been out of work for more than a year. A staggering proportion (74 percent) of these are under the age of 24.”
This was not solely a South African problem, Pike said. “Youth unemployment is a global phenomenon. Unfortunately, the longer you are unemployed, the harder it becomes to find a job because of questions about your relevance and experience,” he said.
“Your stereotypical unemployed person is also someone who has never worked before. They’ve come out of school and have been unable to find that all-important first job. This acts as a disincentive to complete school: why bother to matriculate if your prospects of finding work are poor?”
He pointed out that social grants were costing the country about R80 billion a year. “For every person paying tax, there are three collecting social grants,” he added.
“That’s not sustainable as it perpetuates the poverty cycle.”
Referring to the causes of unemployment, Pike said: “It’s almost as if it crept up on us after the global financial crisis. Even though we have returned to growth as an economy, job creation has stagnated.”
He cited extremely restrictive labour legislation – in which South Africa ranked 133 out of 139 countries surveyed in the most recent global competitiveness report – and wage inflation as among the most important reasons for rampant unemployment.
“There are no consequences for poor performance. If a poor performer sits in your company, good luck to you.”
Pike said wage inflation had been completely decoupled from labour productivity. “Wage inflation was a good thing… it indicates prosperity and a rise in the general standard of living,” he said. But last year there was a 14.2 percent real gap between labour productivity and inflation-adjusted remuneration per worker.
Other contributing factors to unemployment were “militant trade union activism – where the number of working days lost due to strike action rose from 2.9 million days in 2009 to 14.6 million last year – and education and training systems that do not deliver”.
“It takes 36 percent fewer workers to produce a given level of output than it did in 1960. During 2009, South Africa’s labour intensity fell by 8.1 percent – the biggest decline in recorded history.” - Jim Freeman