Unchanged unemployment rate is of no use to the unemployed masses
Economy / 12 February 2020, 10:00pm / Sizwe Dlamini
CAPE TOWN – The unchanged unemployment rate is of absolutely no use to the currently unemployed masses, many of whom have been without jobs or income for years on end.
This is according to Uasa, which said Statistics SA’s announcement on Tuesday that the unemployment rate remained unchanged at 29.1 percent in the fourth quarter of 2019 compared to the previous quarter was good news, but although the numbers did not change the situation on the ground was getting worse.
Uasa spokesperson Stanford Mazhindu said various big companies had sent out Section 189 notices, and some were looked to cut more than 2 000 jobs. He said: “The mismanagement of state-owned enterprises such as Eskom and SAA has business rescuers scurrying to save what can be saved with more job losses highly likely.”
Mazhindu called on President Cyril Ramaphosa, when delivering his State of the Nation Address (Sona), to cut out the sunshine Sona’s of the yesteryears and come up with substantial solutions to remedy the dire situation. “We expect him to save South Africa first.”
Founder of The People’s Dialogue and former mayor of Johannesburg, Herman Mashaba, said despite the promises made by Ramaphosa, and the billions of investment his leadership claimed to have attracted, the reality on the ground had gone from bad to worse. Unemployment increased by 2 percentage points to 10.4 million unemployed South Africans since Ramaphosa took office and this was the true state of the nation.
“The employment statistics reflect an economy in a downward spiral. For the first time since 2008, the official unemployment rate – the narrow definition – remained stagnant from the third quarter to the fourth … This is in contrast to the expected decrease in unemployment that has been seen over this period in the past,” he said.
PwC Strategy& economists said the unemployment figures meant South Africa had the fourth-highest unemployment rate out of 182 countries, after Namibia, Bosnia & Herzegovina and Angola.
Of note was that the National Development Plan aimed for an unemployment rate of 14 percent by this year. “This gives President Cyril Ramaphosa a lot to answer for when he delivers his Sona,” said PwC Strategy& chief economist Lullu Krugel and economist Dr Christie Viljoen in a joint statement.
The South African economy created a net 117 000 formal sector jobs in the fourth quarter. While employment declined in sectors such as manufacturing and utilities, community and social services, which are broadly government employment, climbed by 113 000.
“This will be a tough nut to chew on for Finance Minister Tito Mboweni when he delivers his Budget Speech. There is significant pressure on the state to cut back on its staff costs and the increase in community and social services payrolls late last year will do little to assist the National Treasury in balancing the government’s books,” said Krugel and Viljoen.
Higher unemployment causes a decline in tax revenue because there are fewer people paying income tax and also spending less, hence lower VAT. The government will also have to spend more on unemployment and related benefits, which will leave Mboweni wanting in terms of tax revenue.
The SA Revenue Service (Sars) is under a lot of pressure to collect taxes due to the fiscal deficit. In the 2018/19 fiscal year the tax revenue collected amounted to R1 287.7 billion, which is a growth of R71.2 billion, or 5.9 percent, year on year.
Even though the tax revenue increased, there was still a shortfall against the revised revenue collection target of R1 302.2 billion, resulting in a deficit of R14.5 billion.
As the tax revenue is mainly supported by Personal Income Tax, which is largely collected through payroll taxes, it is evident that payroll taxes will remain a major focus for Sars, according to a report by CN Outsourced Finance.