27.5% of South Africans Are Unemployed – Is Entrepreneurship The Answer?

By  |  November 5, 2018

South Africa’s unemployment woes appear to be worsening as a recent report suggests that the country’s unemployment rate has climbed to 27.5 percent in the third quarter of 2018. There is a rise from the 27.2 percent recorded in the second quarter.

This Tuesday, Statistics South Africa placed the number of persons without jobs in South Africa at 6.2 million in its Quarterly Labor Force Survey, and this was an unwanted rise from the equally alarming 6.1 million unemployed persons accounted for in the second quarter of this year.

More so, the indices from the country’s statistics office suggest a decline in employment opportunities in the formal sector, private households, as well as the agricultural sector, with the only glimmer of hope being the informal sector which recorded some much-needed employment gains.

The whole situation makes for just as worrying a scenario when the definition of unemployment is extrapolated to include individuals who have given up on job searches altogether, as the unemployment figure in this regard has risen to 37.3 percent in the third quarter from the 37.2 percent recorded in the quarter leading up to the one in question.

Though the increase may be marginal on this front, it does call for concern as it has all the makings of a worrying trend- one that appears to be trudging along unabatedly in spite of what might be termed considerable effort on the part of the South African government. In the state-of-the-nation address which he delivered upon his swearing-in, President Cyril Ramaphosa reiterated the commitment of his administration to curb the spate of unemployment in the country when he said that the center of the national agenda in 2018 was the creation of jobs, especially for the youth.

In largely the same manner, former President Jacob Zuma, in his maiden state of the nation address, promised that his administration will see to it that half a million new jobs are created by the end of 2009. At the time, the country’s economy, and indeed, that of the rest of the globe, was reeling from the impact of a major recession. Even though the country was still dealing with the economic crisis at that point in time, Zuma’s state-of-the-nation utterances reignited belief and renewed the hope of millions of South Africans who had been hit by the unemployment problem and were staring down the barrel of poverty.

Although the unemployment rate in the country was already at an unhealthy 24.9 percent when Zuma made that speech, the numbers suggest that the country’s unemployment statistics weren’t particularly faring any better when he left office. The unemployment rate was at a disturbing 26.7 percent in the fourth quarter of 2017, with 5.9 million people believed to be unemployed and actively seeking jobs according to figures released closest to when he left office.

It will be apt say that mobilizing business, labour, and government into taking action to resolve the country’s unemployment struggles has been at the forefront of the agenda of both past and present administrations but the grip of the epidemic on the nation remains just as strong as ever, if not stronger.

In spite of efforts of present and past administrations, the latest statistics on the job front continue to suggest a worryingly high rate of unemployment, and this is a trend that might take some doing to reverse. The country’s high rate of youth unemployment and the social upheaval it might trigger is a cause for concern — one that has been expressed time and again.

The details paint an even more scarier picture which lay hidden in the country’s youth unemployment statistics which is yet to sufficiently see the light of day. Some of these details can be found in figures which suggest that 39 percent of unemployed South Africans have never actually worked before.

It is even more worrying for the young folks where the statistic stands at 60.3 percent. On the other hand, long-term unemployment in the aftermath of job loss appears to be a problem associated mostly with the elderly. A greater share of people who fall into this category is known to have last worked over five years ago, with 50 to 65-year-olds believed to account for 47.4 percent of this share.

South African Unemployment At A Glance

Figures from the World Bank placed the average unemployment rate for all upper-middle-income countries at 6.2 percent as of 2016. For African countries that are categorized in the middle-income class, South Africa appears to be lagging behind in terms of employment as the country registered unemployment rates of 25.9 percent and 27.7 percent in 2016 and 2017 respectively. Other African countries in the same middle-income bracket boast lower unemployment rates with Botswana at 18.4 percent, Namibia at 25.5 percent, and Gabon at 18.5 percent.

“South Africa appears to be lagging behind in terms of employment as the country registered unemployment rates of 25.9 percent and 27.7 percent in 2016 and 2017 respectively”

For most parts of the last decade, South Africa’s unemployment rate has soared steadily to worrying levels. There was something of a false dawn when the rate from a dropped significantly from a staggering 31.1 percent in March of 2003 to 21.5 percent in the last quarter of 2008. This even started talk of the unemployment levels dipping further to 15 percent by the end of 2010.

But this encouraging trend was somewhat short-lived as the rate only surged upwards from that point, and since then, it has shown no signs of slowing down. South Africa’s unemployment rate has only grown in spite of policies formulated and adopted in an effort to curb the trend. The New Growth Path which was adopted in 2011 is one of such initiatives. This program aims to create 5 million jobs and reduce unemployment to 15 percent by the end of 2020. Whether that goal is feasible or a tall order at best, however, remains to be seen.

But in spite of the drawbacks, it is worth mentioning that the New Growth Path policy is believed to have increased employment in the country by 2.2 million since its implementation, placing the number of unemployed persons at around 6.17 million.

However, most of the gloss is taken off the shine of what should ordinarily be considered significant improvement as the achievement is somewhat dwarfed by the fact that the country’s annual unemployment growth rate which hovers precariously around 4.8 percent is twice the projected annual employment growth rate of 2.4 percent.

Unless some drastic measures are taken to bring about significant improvements, it remains to be seen how the ambitious goal of dropping employment levels to 6 percent by 2030, as spelt out in the National Development Plan, can prove anything but wishful thinking.

What Can Be Done?

Efforts geared towards curbing unemployment in South Africa haven’t exactly proved futile but they are still a long way from yielding the desired effect. While it might be true that much has been done, there is still a lot left to be desired.

The government’s employment tax incentive which is aimed at creating jobs for young people have not fared well in particular. If anything, it may have taken the country a step backwards especially as it is on record that youth employment has actually dropped since the initiative came to the fore almost five years ago.

Job creation in South Africa is hamstrung by several drawbacks. According to a recent global competitiveness report, the country’s labour market is bedevilled by such factors as inefficient hiring and firing practices, the poor relationship between pay and productivity, as well as  little cooperation between employers and employees.

This is found to result in an unsavoury situation in which employers replace labour – particularly the less-skilled and experienced ones – with capital. This is also known to discourage employers from hiring new workers. In either case, the youths are the worse hit. But enough of sulking about the problem. The big question is: How can the situation be remedied?

An alternative policy option has been recommended in the form of a transport subsidy for unemployed youths. This idea is believed to have been borne out of the fact that many of these jobs are available in areas that are quite far away from the average South African job seeker and very expensive to reach.

From all indications, poverty and unemployment appear to be two sides of the same coin. The relationship between both trends can be said to be quite startling given that data from the country’s statistics office in 2014-15 suggested that the poorest of the country’s population accounted for a meagre 12.4 percent of the total national income while weighing with a massive 71.9 percent of the country’s unemployed. With this in mind, it can be surmised that the correlation between poverty and expensive transport costs as barriers to the exploration of employment opportunities is somewhat established.

Another solution to unemployment amongst young people lies in self-employment. But even that sector appears to be suffering a decline as it is reported that the number of youth employers or self-employed entrepreneurs in the country dropped to 340,000 from 390,000 between 2008 and 2017.

“As per South African Venture Capitalist, Clive Butkow, In the short term, relaxing policies for new businesses and easing out taxes on startups can encourage self-employment amongst the youth. The culture in South Africa has to change from Red Tape to the Red carpet for startups”

This further underlines the need for the entrepreneurial activities of young South Africans to be put on the front-burner. And government support in the form of entrepreneurship skills training, access to microfinance, and the creation of an enabling environment for business development might help improve the situation.

“There is sufficient capital, but the last mile deployment of funds into the startups has to become smarter. Investment into early businesses that have the potential to generate jobs must be considered. There is definitely a chance to mitigate unemployment with such measures,” added Clive Butkow, CEO of Kalon Venture Partners

However, in the long run, Butkow, adds that fixing the primary education is a better solution to unemployment. The skills required to run a business are not taught in schools and must be added to the curriculum. He says, “Students must be taught to be employers and not employees.”


Feature image courtesy: Mail&Guardian

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