Labour market review – problem analysis

One of post-apartheid South Africa’s greatest disappointments has been the economy’s failure to create jobs. During this period, despite the economy recording relatively robust economic growth, the official unemployment rate according to Statistics South Africa has increased from a level of 13 per cent in 1994 to a current level of 37 per cent in terms of the broader definition of unemployment which includes those who are unemployed as well as those ‘discouraged workers’ who have given up looking for work out of sheer frustration.

So how bad exactly is this problem of unemployment and can it be remedied?

According to Statistics South Africa, the official size of South Africa’s potential labour force is 17.4 million people. Of these, approximately 13 million people are formally employed whilst roughly 8.5 million South Africans are currently either unemployed, discouraged about their prospects of finding work or are considered underemployed.

As such, nearly half (46 per cent) of the economically active population is idle, with a staggering proportion (74 per cent) of these, under the age of 24.

Officially, there are:

-      4.4 million South Africans who are currently unemployed;

-      2.0 million who are permanently discouraged about their prospects of finding work; and

-      2.1 million who are classified as ‘underemployed’.

-      2.7 million (61 per cent) of those officially unemployed have been out of work for more than a year.

By any measure, unemployment is easily South Africa’s most pressing socio-economic problem.

In terms of who is most affected by the problem, those unemployed are typically young, emanate from previously disadvantaged communities, typically, have never been employed previously, and are desperately seeking out their first job in the formal employment sector.

The paradox of unemployment is that, if you have never worked before and unable to demonstrate some sort of employment track record and work experience to a prospective employer, it is extremely difficult to gain employment in the first place. That elusive first job is the all-important ticket to the game.

Many of South Africa’s socio-political problems trace their roots to this scourge of unemployment. Symptoms associated with the phenomenon of a 37 per cent unemployment rate are as follows:

-      An ever increasing number of disaffected youth. Effectively, for the majority of young South Africans about to enter the job market for the first time, the system will ultimately fail them. They will leave the schooling system with a woefully inadequate, second rate education, ill-equipped to be employed into a stagnant job market that, in the case of most, will not absorb them and will not provide them with the means to earn a living.

-      Increasing levels of disaffected youth have, in turn, led to a radicalisation of the political discourse. The ANC Youth League and its controversial leader, Julius Malema, for example, have become far more vocal and prominent on the political scene with calls to nationalise the country’s mines seemingly gaining popularity amongst the youth. Julius Malema and the overtly left leaning politics of the ANC Youth League are no political accident. There is a vast constituency of frustrated young South Africans, effectively discarded by society, who represent easy pickings for the type of radical, socialist rhetoric espoused by the ANC Youth League, the South African Communist Party and COSATU.

-      The high number of unemployed, often forced to eke out a meagre existence in the informal sector, means not only that there are fewer people contributing to an already overstretched tax base but also that there are more people dependent on social grants, housing subsidies, national health and the like, placing a huge drain on the country’s limited fiscal resources. Already, for every one person contributing tax in South Africa, there are three people who claim social grants at a cost of some R74 billion to the fiscus per annum. Clearly, not a sustainable situation.

-      For some time, South Africa has been bedevilled by one of the world’s highest crime rates. Whilst many regard this as the country’s most pressing problem, there is a strong argument that it is not a problem in and of itself but rather the symptom of a greater problem – unacceptably high levels of unemployment. There is no hard and fast evidence that poverty and crime are inextricably linked – look, for example, at Bangladesh where there is widespread and pervasive poverty but a relatively low crime rate – but, were South Africa to achieve a globally acceptable, single digit unemployment rate, it is hard to imagine that the crime rate would not also drop substantially.

-      One of the issues that has certainly compounded the unemployment problem in South Africa and has created a social dynamic all of its own, has been that of unchecked immigration, legal but mostly illegal, from many war ravaged and less economically attractive sub-Saharan Africa countries.

Over the past decade, literally millions of Zimbabweans have streamed through South Africa’s porous borders to escape the shambles that Zimbabwe is today. Hot on their heels has been a flood of immigrants and refugees from other less fortunate African countries such as the Democratic Republic of the Congo, Somalia, Angola, Nigeria, Malawi, Mozambique and many others.

A number of these immigrants, rightly or wrongly, are perceived to have higher standards of literacy and education than their South African counterparts, are deemed to have a better work ethic, are typically happy to work for a lower wage and are less likely to join a trade union. All of these factors have made these immigrants increasingly attractive to employers in a labour market where semi-skilled workers are in abundant supply.

The results of this dynamic, where millions of South Africans are desperate for work and where a number of ever so scarce jobs have been channelled to immigrants, turned extremely ugly on 11 and 12 May 2008 when xenophobic attacks on foreigners flared in Alexandra township in Gauteng leaving three people dead and one person seriously injured. By 21 May, forty two people had been killed in the xenophobic unrest that had spread across the country.

It was as if a pressure cooker had exploded. Neighbour turned on neighbour, colleague turned on colleague and even South African turned on fellow South African as xenophobic attacks then spread to incorporate attacks on South Africans of a different language grouping or bearing a different accent.

As such, South Africa labours under the burden of xenophobic sentiment which bubbles under the surface in our society and is directly attributable to a lack of job opportunities.

-      Many other social ills can be laid at the door of South Africa’s high level of unemployment. These include an increased number of teenage pregnancies, unacceptably high HIV and AIDS infection rates which tend to be more prevalent in poorer sectors of society, and one of the world’s highest incidences of alcohol and drug abuse.

-      With so many people not working, the consequent levels of consumer spending are suppressed which, in turn, manifests itself in lost opportunities for consumer led economic growth in South Africa. The country’s economic performance currently falls well short of its potential.

Typically, historically, wherever there has been sustained population growth, there has been relative and commensurate growth in economic prosperity. South Africa and most of sub-Saharan Africa are in a fairly unique position globally in that they have a sustainably growing population as opposed to a declining population that most of the developed world is experiencing.

Africa’s increasing population is potentially a great economic advantage. However, in South Africa’s case, this burgeoning population’s potential has been significantly stunted by a hopelessly inadequate education system that prevents it from going on to perform meaningful and productive work on the scale required. Consequently, South Africa’s economic growth falls well short of its potential, effectively perpetuating the cycle of poverty and short delivering on the requirement for jobs.

AUTHOR Richard Pike is the Chief Executive Officer of  Adcorp Holdings Limited. This article is an excerpt from the book Jobs Jobs Jobs published by the Free Market Foundation and may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.


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