SA has an unemployment pandemic: We cannot mask it

Nokwanda Mathenjwa holds an MPhil Economics in Industrial Policy, from the University of Johannesburg. She is the President of the Young Global Economists Society and a Mandela Washington Fellow. Photo: Supplied

Nokwanda Mathenjwa holds an MPhil Economics in Industrial Policy, from the University of Johannesburg. She is the President of the Young Global Economists Society and a Mandela Washington Fellow. Photo: Supplied

Published May 27, 2024


By Nokwanda Mathenjwa

Over the past months and leading up to the May 29 elections, political parties have been canvassing and publicly presenting their manifestos, which carry bold announcements of how they will better serve our beloved country should they be instated into political power.

Most analysts foresee the ANC not achieving an outright majority due to declining voter numbers, with coalitions becoming the country’s political norm.

The boldest announcement of each political party is related to what has been crippling our country’s tax base and socio-economic improvements, the stubbornly high unemployment rate.

An unemployed South African man holds a self-made advertising board offering his services at a traffic intersection in Cape Town in this file photo.

The most populous parties, the ANC and the Democratic Alliance have promised the creation of 2.5 million and 2 million jobs, respectively. While the Economic Freedom Fighters promise a boisterous 6.2 million jobs.

Unemployment has been one of the most critical challenges facing our country, recording a post lockdown unemployment rate of 28.84% in 2021.

Statistics South Africa recently released its Quarterly Labour Force Survey for the first quarter of 2024, ending March 2024. According to their results, the official unemployment rate increased by 0.8% from 32.1% in the fourth quarter of 2023 to 32.9%, which means 13.1 million people are unemployed.

Approximately 330 000 people lost jobs, while 22 000 gained jobs, translating to 16.7 million employed people. This means the labour force experienced a net loss of 308 000 jobs.

Statista reports that from 2003-2008 South Africa’s unemployment rate averaged 19.58%, 21.9% during 2009-2014, 23.54% over the 2015-2019 period, and 26.2% for 2020-2022. The youth unemployment rate mirrors this trend over the same period, registering 38.6%, 42.24%, 42.93% and 46.87, respectively.

This shows us that for the two past decades, South Africa has been stuck in the 20% to 30% unemployment margin, which it has been unable to sustainably address. South Africa has an unemployment pandemic, we cannot normalise it with vaccines, social distancing and masks.

The upward resilience of South Africa's unemployment rate upholds itself as the highest in the world. The deeply concerning matter is the increasingly high youth unemployment rate of 45.5%, an increase from 4.9 million to 5.9 million, the second highest in the world. Meaning 63.3% of the country’s population between the ages of 15-34 is unemployed. This lopsided population distribution means the youth will always be at the receiving end of positive or negative economic developments.

Various sources cite varying reasons for this high unemployment; these being the power crisis which has a debilitating effect on households and businesses, population growth in ratio to economic growth, inadequate work experience, the social cost of job hunting, lack of career guidance in schools, and inappropriate and unknowledgeable ways of jobs searching.

The impact of high unemployment results in poverty, social exclusion, which requires finances to maintain, crime that has been on the rise and social instability, mentally and physically.

The effects of unemployment on society and community, therefore, lead to deeper issues of health, crime, lack of relevant skills and entrenched poverty, which burden overall government resources and force the fiscus to spend more to address them. This approach to addressing solutions is unsustainable for South Africa’s shrinking tax base.

According to the International Labour Organisation, the average global unemployment rate settles around 5%, which is substantially lower than South Africa’s. This global average indicates countries' concerted efforts; focus and national agenda to create jobs to ensure citizens not only have the dignity of earning a decent salary but contribute meaningfully to the countries’ economic activity, whether through productivity, consumption or paying taxes.

Achieving the global unemployment rate will be a stretch for the country, which has been growing too slow to absorb labour for a growing population.

However, in 2010 the South African News Agency reported that the government had a target of creating 5 million jobs over 10 years, thus reducing the unemployment rate from 25% to 10-15%. This would have realistically created 500 000 jobs over 10 years. What disrupted this New Economic Growth Path?

The Job Summit hosted in 2018 committed to 275 000 jobs annually. 78 000 jobs were created between September 2018 and September 2019, with job losses in 2020/2021 recording 2.24/1.44 million due to Covid-19. Though the job summit showed positive signs, these were shy of the target. Fifteen years later, as we excitingly approach the national elections we are enticed with different job creation scenarios of between 400 000 to 600 000 jobs per year, which has never been achieved before.

A slow growing economy will unlikely produce these ambitious job targets, South Africa has been recording a growth rate of 1% - 2% over the past decade. In 2021 the growth rate was 4.7%, as a result of expansionary policies for both business and consumers to ease the adverse effects of Covid19 and the hard-lock down. The country’s weakened economic growth reflects the dire impact de-industrialisation has had on our economy over the years.

Investments in the manufacturing sector have been declining, especially labour-intensive industries like clothing, textiles and leather, which has compromised industries’ competitive edge and resulted in a high volume of job losses, due to the growing penetration of cheaper Chinese imports and recent global technology advancements.

China recorded 51.9% of imports into South Africa in 2000 increasing to 75.1% in 2010, and the import penetration rate was 5.9% in 2000 increasing to 28.5% in 2001. This has resulted in a 45% employment loss between 1992 and 2010, which the country has been struggling to recover from, and created a shrinking manufacturing sector.

According to Statistics South Africa, contributing 12% to the country’s gross domestic product in 2019, 13.2% in 2021, and 11.4% in 2022, while a South African Reserve Bank report states the sector contributed 23% to the GDP in the 1980s.

Re-industrialisation is, therefore, imperative to achieve sustainable economic growth, development and employment; however, manifestos have been vague on the pragmatic approaches they will implement to achieve full employment and void of actionable industry programmes. As per the National Development Plan: Vision 2030, a 5.4% average growth rate per year is required to create 11 million jobs over 20 years, that equates to 550 000 jobs annually.

As citizens and voters, we all have diverse questions about these job creation possibilities. Like, what type of jobs will be created? How will these jobs be created? Which key industries will the government prioritise and enable to create these jobs? What incentives and instruments will be deployed?

We need to reinvest in our manufacturing sector capabilities; however, our competitive and comparative advantage disqualifies us from manufacturing all products. Which imported products do we substitute for local production, and which do we continue importing? What will the role of the private sector be? Will jobs be decent, meaningful, and sustainable to employees and the economy, or will they be filling up potholes, restoring electricity cables and painting sidewalks?

With outright rule or coalition governance, without an industry-linked job strategy that intends to create jobs in productive industries, South Africa will remain in a perpetual growth-job conundrum.

The government needs to invest in or create new industries that will sustainably absorb unemployed youth, some of whom will be casting their first vote this year. We need industries that match local product demand; not only government or private services, and eventually export to international markets.

The Asian miracle was achieved with this two-pronged approach; infant industry protection or import substitution industrialisation or localisation as most know it, and export-oriented growth when industries were considered competitive enough to participate in global trade.

To implement this national agenda youth can be organised into cooperative clusters linked to industry ecosystems. These cooperative clusters can include one or both Industrial Policy compositions; horizontal or vertical. Industrial Policy is any type of government policy or intervention to improve a country’s business environment or transform the structure of sectors.

Horizontal or functional policy improves the broader business environment across different sectors like infrastructure development, which has broad spillover effects on other sectors; construction has been one of the job-shedding industries. A country’s economic activity is depicted by infrastructure development or lack thereof.

Vertical or selective industrial policy is directed to the development and promotion of a specific sector and is, therefore, targeted in approach. In achieving its industrial strategy, the youth cooperatives or youth employment economic clusters would need to target industries that have export, employment generation and knowledge creation potential.

These can be new industries to enable economic growth or industries familiar to the economy that have a high impact on job creation and broader economic development. Investing in specific traditional industries such as agriculture, clothing, pharmaceuticals or new industries like renewable energy and 4IR technologies will not only expand industries’ products or services but also develop new and adjacent value chains.

Let’s go out and vote on the 29th of May, let’s make our 30 year mark. Our challenges should not deter, but aggravate us to contribute towards change and transformation. No vote is still a vote.

Nokwanda Mathenjwa holds an MPhil Economics in Industrial Policy, from the University of Johannesburg. She is the President of the Young Global Economists Society and a Mandela Washington Fellow.