Ethel Hazelhurst

SOUTH AFRICA is in line for a demographic dividend, according to Matthew Sharratt, Bank of America Merrill Lynch’s South Africa economist.

Sharratt suggested in a research note yesterday a shift from “growth driven primarily by mid- to upper-income households over the past 10 years to greater growth from lower income households”.

This trend, he said, would boost consumption, adding that Statistics SA had underestimated employment in the informal sector.

The undercount would help explain “robust household spending in the years running up to the 2008/09 recession, as well as its surprising resilience throughout last year”.

Stats SA says unemployment is about 25 percent. But, if discouraged workers are included, the jobless rate rises to 37 percent, according to Sharratt.

However, he questioned the reliability of estimates of the informal sector, which Stats SA says accounts for about 2.2 million of the 13.1 million people employed. Sharratt said a recent study of different approaches to measuring informal sector employment suggested that official statistics could be undercounting by 30 percent or 500 000 people.

The undercount could be even greater “when taking illegal immigration into account. Data on foreign migrants is patchy and could even be misleading due to double counting as individuals move back and forth across borders.”

He said a combination of “upward surprises to consumer spending and public infrastructure spending” should help boost economic growth to an annual 5 percent between 2013 and 2016. However, he warned that growth could moderate thereafter to 4 percent annually, unless efforts were made to close the skills gap.

Sharratt’s projection on growth in gross domestic product for the next two years is based on an expectation of accelerated growth in the number of households moving above the poverty line of R5 000 a month in the period. He said government plans to create low-skilled jobs, address the chronic housing backlog and make credit more readily available to low income households would provide the backdrop.

Sharratt sees “only muted employment creation”, compared with Economic Development Minister Ebrahim Patel’s New Growth Path target of 500 000 jobs a year.

The economy could probably produce “around 1 million jobs over the next three years or 3 million over the coming decade”, he said.

His spending forecasts are based on job growth of between 1.5 million and 2 million posts over the next decade.