Few employed in sluggish SA economy

The rate of unemployment in South Africa climbed to 27.6 percent in the first three months of the year, according to the latest quarterly Labor Force Survey report released by the government.

Statistics South Africa, or Stats SA, the national statistical service of South Africa, said the rate increased by 0.5 percentage point, which is the highest recorded spike since the third quarter of 2017. An expert attributed the data to the sluggish economic growth experienced in Africa's second largest economy in the last five months.

The number of employed people declined by 237,000 to 16.3 million, while there was an increase by 62,000 in the number of unemployed people to stand at 6.2 million between the fourth quarter of 2018 and the first quarter of 2019, Stat SA said. The South African working-age population increased by 149,000 in the first quarter of 2019 compared to the fourth quarter of 2018.

Compounded by the number of discouraged job-seekers, which stood at 156,000, and the not economically active population by 169,000, this pushed up the number of economically inactive people to 325,000. These are people without any form of employment and are making no serious efforts at finding a job.

A decline in employment was observed in all sectors. The net loss of 237,000 employed people was mainly driven by the construction, finance, community and social services, private households, mining and agriculture sectors.

However, gains were witnessed in the transport, trade, utilities and manufacturing sectors.

Emmanuel Matambo, a researcher at the University of Johannesburg, said the low absorption rate, by 0.7 of a percentage point to 42.6 percent, mirrors the slow growth of the economy.

"In 2017, the economy grew by a paltry 1.3 percent, while last year, it expanded by only 0.8 percent. The country needs to grow by 6 percent for 20 years in order to surmount its current challenges. As things stand, the situation is dire," he said.

Moreover, the country experienced headwinds during the period under review. Besides the general elections, the country experienced an electricity crisis when Eskom, the public utility company, started a series of load-shedding, which saw 2,000 megawatts shed off nationally. There were 26 days of power cuts up to the end of March, which according to Eskom, was to protect the power system from a total collapse or blackout.

Production in the mining sector decreased 1.1 percent year-on-year in March, down 3.4 percent in the first quarter. The manufacturing sector recorded slowed production and decreased by 2.4 percent in the period under review.

Mining contributes about 8 percent to the country's GDP, while manufacturing contributes 13 percent.

While the load shedding tried to spare the industrial sector, Matambo admitted that it may still have had a negative impact on the sector, especially in the perishable goods industry.

"They had to find alternative sources of power or cease production. So while big industry might not be severely affected, this is not the case with smaller industries," he said.

Pundits believe that despite the optimism that the second quarter would record better results, the knock-on effect from the first quarter would push down the numbers. This may also affect the general growth of the economy and the country may likely fall short of forecasted growth

Matambo, nevertheless, he believed that the country's economic performance would be pegged on the size and character of the incoming cabinet and the principals of state-owned enterprises.

Youth unemployment and inequality were some of the critical debated issues during the campaigns in the just-concluded general elections. Stats SA said between the fourth quarter of 2018 and the first quarter of 2019, the percentage of young persons aged 15–24 years who were not employed, getting an education or training increased by 2.1 percentage points to 33.2 percent.

"Of the 20.3 million young people aged 15-34 years, 40.7 percent were not in employment, education or training – an increase by 1.8 percentage points compared to the fourth quarter of 2018," read the report.

Matambo said that increased unemployment is ominous for the future of the country. Inequality, poverty and unemployment are the three main challenges confronting the country, he added.

"The youth are particularly in an invidious position because the government, which they feel comfortable with, is failing to transform the economy from the skewed nature of apartheid economics. For this reason, while some have chosen to support opposition parties or become politically inactive," he said.