South Africa’s Jobless rate escalated to 8 years High, blames on poor policy

South Africa’s jobless rate has escalated to an eight-year high, bringing into question whether ambitious targets to halve unemployment by 2020 can be achieved.

The economy lost a staggering 355,000 jobs even as thousands of new entrants including those who came of working age and those who actively started to look for jobs, flooded the labor market.

This resulted in the unemployment rate jumping to 26.7%, or 5.7-million people, in the first quarter from 24.5%, or 5.2-million, in the previous quarter, Statistics SA’s (Stats SA’s) quarterly labor force survey showed on Monday. The decrease in jobs in the first quarter was the largest since 2010. Notwithstanding the effect of dwindling global demand for commodities and severe drought, the figures suggested that SA’s jobs policies were inadequate, Stats SA statistician-general Pali Lehohla said.

“When the results are like this, it shows that you need to adjust your employment policies. Programmes like the expanded public works programme have not really disturbed the steady unemployment rate,” he said. For as long as SA had people with little to no education and skills, the problem would persist, Mr Lehohla said.

The National Development Plan (NDP) says the economy — through investment in infrastructure and labour-intensive programmes — can grow more than 5% per annum. It also targets a 14% unemployment rate by 2020. But the numbers show the “current macroeconomic policy configuration is off the rails and not delivering results”, said Pan African Advisory Services CEO and economist Iraj Abedian.

With global economic factors not in SA’s favour, the country had to “compensate for it domestically by working harder to prevent the economy from going further south”, Mr Abedian said. Companies are shedding jobs amid rising labour and other costs and because of low economic growth and demand, together with dwindling business confidence. The expanded unemployment rate, which takes into account people who have given up looking for work, was at 36.3%, or 8.9-million people. Economists, however, warned that the latest rise in unemployment should be viewed with caution.

Economists Elna Moolman of Macquarie Securities and Mamello Matikinca of First National Bank said a new master sample was used by Stats SA from the first quarter of last year and that may have influenced the jobless rate. More people are surveyed under the new sample. Despite this, both agreed the high job losses meant that the ability of households to spend and support economic growth would be limited. “The data paint a very negative picture and on their own, are a downside risk to consumer spending and gross domestic product,” Ms Moolman said.

Ms Matikinca said the high jobless rate meant growth in consumer spending would slow.

Both the formal and informal sectors lost jobs in the first quarter. Employment levels declined in eight industries, with the largest losses recorded in trade, manufacturing and construction. Jobs were added by community and social services — a proxy for public service jobs — and agriculture. The rise in the community services industry could partly be due to more jobs created by the Electoral Commission of SA ahead of local government elections, Ms Matikinca said.

The national government could also have hired more people towards the end of the fiscal year and there was usually an increase in temporary workers in higher education at the beginning of each school year to assist with registration and other campus activities. Stats SA said however that despite the quarter-on-quarter drop in employment, it was up by 204,000 in the first quarter compared with last year.

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