What You Need to Know About the South African Unemployment Rate
Image Source: FreeImages
The South African unemployment rate is crucial to the country’s labour market strength. It measures the percentage of people in the country willing and able to work but cannot find a job. An increase in this indicator signals a decrease in employment opportunities, while a decline indicates more people have found jobs. The South African labour force as a whole is struggling to find work. According to official StatsSA figures released in May 2018, the country’s unemployment rate stood at 27.7%, up from 25.9% in 2016 and 24.6% in 2015. Moreover, youth unemployment is even worse than these figures suggest because many young South Africans leave school early and enter low-skilled sectors like agriculture or services rather than manufacturing or education — both of which have high youth unemployment rates — meaning that many young people remain unemployed for longer than if they had completed secondary education.
What does the unemployment rate mean for you?
The unemployment rate is a vital indicator of the strength of the country’s labour market. In simple terms, it measures the percentage of people in the country willing and able to work but cannot find a job. An increase in this indicator signals a decrease in employment opportunities, while a decline indicates more people have found jobs. High levels of unemployment can translate into lower wages for employees with jobs. This is because employers have a much wider choice of candidates, so they can afford to bargain harder on salary. However, the situation will be somewhat different if a certain skill set is in short supply. Unemployment can also lead to increased poverty, mainly if people don’t receive social grants. This is because households may have to depend on one income only, which will often be insufficient to cover expenses.
Why is the SA unemployment rate so high?
The exact reason the South African unemployment rate is so high is unclear. However, the rate has been increasing since around 2003, with the few exceptions being when there were minor economic recessions, such as during the 2008 global financial crisis. Studies and reports have been written to explain the rise in SA unemployment. These include A growing skills gap in the workplace: A 2017 study found that the skills gap in South Africa’s workplace has more than doubled since 2003 and is currently estimated at 36%. This means that more than 36% of the country’s workforce is underutilized due to not having the requisite skills for their jobs. This is likely the single biggest reason for rising unemployment in South Africa. Poor education system: According to a 2018 report by the Economist Intelligence Unit, South Africa’s education system is one of the worst among the world’s emerging markets. The report found that the average South African student is among the least well prepared students in the world. This flawed education system may significantly contribute to the high SA unemployment rate.
Who’s to blame for high South African unemployment?
A lack of coordination between government departments, which results in poor implementation of policies, has been blamed for the rise in the SA unemployment rate. A lack of sufficient skills development initiatives, which hinder the ability of many South Africans to find work, has also been cited as a significant contributor to the rising unemployment rate. The South African government has been accused of not doing enough to create employment and even hindering economic growth by adopting populist policies that benefit the ruling African National Congress (ANC) rather than the country as a whole. Moreover, the government has been blamed for not doing enough to help the unemployed, particularly young people, to find work.
Other reasons to be pessimistic about employment in SA
– Skills mismatch: The skills mismatch problem is getting worse, as many existing workers are underutilized in their jobs due to the lack of skills needed to do their jobs. This is a significant threat to South Africa’s productivity, which is already low compared to other emerging markets such as Brazil, China and India.
– Poor education system: As mentioned above, the education system in South Africa is among the worst in the world. This means that many South Africans lack the requisite skills to land good jobs, which may be one of the reasons why the unemployment rate has been rising over the past 15 years.
– Poor infrastructure: The lack of good roads, rail links, and ports has hampered economic growth in South Africa for decades. Poor infrastructure means that goods cannot be transported from one part of the country to another as quickly as they should be. This has a knock-on effect, as goods are more expensive than they should be, and consumers are charged more for the goods they purchase.
– Poorly managed mining sector: The mining sector, once a significant driver of economic growth in South Africa, has been poorly managed by the government in recent years. This has led to a drop in mining output and the loss of many mining jobs, which has, in turn, contributed to the rise in unemployment.
Some reasons for optimism about SA jobs
– Strong service sector: The service sector has been growing rapidly in South Africa in recent years and has been one of the country’s primary drivers of economic growth. This has been reflected in rising employment in the country’s service sector. But this is not just confined to the major cities. Small towns have also been benefiting from the growth of the service sector.
– New technologies: New technologies have been greatly benefiting the South African economy. Autonomous vehicles, for example, have the potential to create more employment than they will take away. Even though this technology is still some way off, it is expected to create more jobs than it will take away due to automation.
– Strong minerals market: The minerals market is expected to remain strong in the near future, as demand for raw materials in emerging economies such as China and India continues to increase. This will likely result in rising mining output and more mining jobs in South Africa.
Bottom line
There are a number of reasons why the South African unemployment rate is so high, ranging from poor government policy to a skills mismatch among workers. Some areas of the economy are expected to drive economic growth and create employment opportunities. This means that the future is not entirely bleak for the unemployed and that there are areas for optimism in the country’s labour market.
