Strategy& economists analyse the rising unemployment rate in South Africa

02 August 2019 3 min. read
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PwC Strategy& Economists have analysed the latest figures form Statistics South Africa to determine the unemployment scenario in the country, and have concluded that the situation is deteriorating. Optimism is at a considerable low among the workforce as well as the policy makers.

High rates of unemployment in the country stem from a variety of economic conditions, although the current environment appears to be exacerbated by the overall economic turmoil that the country is undergoing. According to Statistics South Africa, unemployment rates in the second quarter of this year has been at its highest point since 2003.

Growth in the South African economy is sluggish, which is hindering domestic and foreign investment in the country, leaving little room for growth in employment opportunities. The government has been engaged in concerted efforts to improve this scenario, with support from the private sector, although these initiatives have come to no avail so far.

President of South Africa Cyril Ramaphosa has been working to draw foreign investment in the country, and has made unemployment a key issue in his political campaign. However, his drive in this regard also appears to be exhausted, with PwC Strategy& economists reporting that he is “pessimistic about the country’s employment situation.”

Unemployment rate South Africa

In an article, PwC Strategy& Chief Economist Lullu Krugel and Economist Christie Viljoen quote  Ramaphosa’s State of the Nation Address, which elucidated his outlook on unemployment in the country. 

““[M]any more people are going to lose jobs. And they’ll lose jobs because of technology, globalisation, climate change and a whole number of challenges like low economic growth, as we have seen, in our own country,” quotes the article. The loss of jobs to technology is particularly pertinent in contemporary South Africa.

Reports have suggested that automation and AI are set to put a number of South Africans out of a job, a scenario that can be avoided only if professionals in the country rapidly develop the skills to work in collaboration with new technology. The slow pace of this skill permeation contributes to an increase in the number of “discouraged work seekers,” who find a mismatch in the skills they possess and those in demand across the market.

Krugel & Viljoen call for comprehensive reform to tackle the issue. “Turning the tide on the weak economy is not enough: structural changes are required in order to accelerate employment creation and reduce the unemployment rate. These include 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,“ write the economists.