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Johannesburg – Low economic growth will continue to weigh heavily on employment levels, said an economist.
Statistics South Africa (StatsSA) on Thursday released the Quarterly Labour Force Survey for the first quarter of 2017. The unemployment rate spiked up 1.2 percentage points to 27.7%, the highest level recorded since 2003.
READ: SA unemployment rate rises to 14-year high
The unemployment level also exceeds the 23% to 24% rate reported during the 2008/09 global financial crisis, explained Kamilla Kaplan, Investec economist.
The conditions are not set to improve as Investec forecasts economic growth to only reach 2% by 2021. This is weak in light of the National Development Plan (NDP) which has a target of economic growth of 5% in order to improve employment rates, Kaplan explained.
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Further, Kaplan said that political developments and the credit rating downgrade coupled with perceived policy uncertainty will continue to drag down business confidence. This in turn would be negative for the prospects of a recovery in private fixed investment and employment.
With business confidence being depressed, it is unlikely that companies will take on expansion and growth strategies which would bode well for job creation, she explained.
Structural reforms
Earlier this week economists on a panel at the Discovery Financial Planning Summit discussed the economy and ways to improve employment levels.
Ettienne le Roux, chief economist at Rand Merchant Bank explained that the “right type” of growth is needed to make inroads in unemployment. During the period between 2003 and 2007 the economy was growing at a rate of 5% for four consecutive years, however unemployment was still high at 21%. Le Roux said that this shows there are structural problems in the economy that need to be addressed.
He pointed out that the education system does not necessarily develop the skills needed to satisfy employment.
This was reflected in the statistics as the majority (58%) of the 433 000 entrants were young people, those aged between 15 and 34. Statistician general Pali Lehohla explained that unemployment remained high among those with an education level less than matric, this is almost a third or 33.1% of people.
National healing
Professor Jannie Rossouw, head of the School of Economic and Business Science at Wits University, said that if the population growth is to remain higher than economic growth then employment will remain a problem as new entrants join the market.
He added that political developments and state capture are among the reasons hampering economic growth. Rossouw explained that investment remained low over distrust in government. He said that President Jacob Zuma should step down and that a new government is needed, which should implement “national healing”.
“To get a grip of the problems in this country we need a government of national healing,” he said.
This should also include structural reforms to the economy. “We need to rethink honesty in the economy and how to do honest business in the economy,” he said.
The South African Federation of Trade Unions (Saftu) shared these views, explaining that problems are being exacerbated by corruption.
“The number of new jobs came nowhere close to the flood of new young entrants into the labour market, who found the doors to employment and an income firmly locked shut,” the federation said.
“We are creating a vast generation of overwhelmingly black, marginalised and angry young people who face a future of poverty, exclusion and hopelessness.” Saftu anticipates the situation to worsen following the downgrade.
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