South Africa’s record high unemployment paints grim outlook for already ailing economy – analysts

South Africa’s record high unemployment rate of 29% is a reaction to the poor economic activity in the country, according to several economists.

Stats SA, in its latest Quarterly Labour Force Survey on Tuesday, announced that unemployment rose to 29% in the second quarter, the highest rate since the start of 2008. Joblessness increased 1.4 percentage points from the 27.6% reported in the first quarter.

“We read this as a lagged effect of poor economic activity in the first quarter – unemployment tends to have a delayed reaction to economic activity,” FNB economist Siphamandla Mkhwanazi said in a statement.

Mkhwanazi does not see the situation improving in coming months. “Looking ahead, annual GDP growth is expected to disappoint relative to last year, and this will keep employment growth muted. By extension, this will continue exerting pressure on households’ income and their ability to spend,” Mkhwanazi said.

PwC economists Lullu Krugel and Christie Viljoen attributed the unemployment level to the country’s “economic malaise”. Apart from turning around a weak economy, structural changes must be implemented to create jobs. This includes changes to the quality of governance, the level of competition in many industries, labour market flexibility, and the cost of doing business.

“Reforms in these areas could lift business confidence and private investment, allowing economic growth to follow,” they said in an article they jointly authored.

Action needed

Krugel and Viljoen said there had been “weak momentum” in the action plans made at the Presidential Jobs Summit in October 2018. “Tangible actions from such a high-level committee are now drastically needed.”

READ: SA unemployment rate jumps to 29%, the worst since 2008

Investec economist Lara Hodes said that job losses would aggravate the financial pressure many households are experiencing.

“In order to see any significant job creation in South Africa, economic growth needs to be ignited, underpinned by effective policy implementation and policy certainty, which are required to restore confidence and enhance the investment climate,” she said.

The Steel and Engineering Industries Federation of Southern Africa, meanwhile, is also calling government to implement policy interventions to improve employment levels.

Seifsa economist Marique Kruger said in a note that policymakers need to come up with more targeted interventions to address unemployment. “Against the backdrop of an increase in the official unemployment rate, the persistent high level of unemployment highlights the need for more targeted interventions by policy makers,” Kruger said.

News24