The rate of unemployment in South Africa is bound to remain high in the medium term as the economy struggles to create jobs on the back of an electricity crisis that suffocates energy-intensive industries which absorb the most labour force.
Statistics South Africa (Stats SA) yesterday said that the unemployment rate edged up slightly by 0.2 of a percentage point to 32.9% in the three months to March, from 32.7% in the fourth quarter of 2022.
This was the first increase in the unemployment rate in more than a year after the economy withstood the disruption caused by KwaZulu-Natal floods, heightened load shedding and the two-week-long Transnet strike last year.
However, Eskom has since intensified its rotational power cuts programme in terms of frequency and levels, with more hours of load shedding implemented already since the beginning of the year than in the whole of 2022.
Stats SA’s Quarterly Labour Force Survey (QLFS) showed that the labour force went up by 437 000 to 24.125 million in the first quarter.
Both the formal and informal sectors recorded increases in employment of 209 000 and 107 000 respectively.
Finance, community and social services and agriculture recorded the largest employment gains.
However, private households, trade, mining, construction and manufacturing recorded job losses.
Mining and manufacturing industries have been experiencing serious production declines for consecutive months as a result of constrained power supply implemented by Eskom to avoid a national blackout.
Nedbank economist Johannes Khosa said the economy would probably avoid a technical recession and the continued increase in employment was comforting despite the rise in the unemployment rate.
Khosa, however, said slower demand in most major economies would exert downward pressure on commodity prices and weigh on export-orientated industries such as mining and manufacturing, which are power-intensive.
“While the government is accelerating efforts to deal with issues at Eskom, it will take years to resolve this challenge completely. Therefore, the cost of doing business will remain high,” Khosa said.
“Under these circumstances, business confidence will remain depressed, and the private sector will most likely limit investment spending and employment growth.
“Added to this, the number of unemployed and discouraged work-seekers who can enter the job market remains high, so even if employment were to increase, the unemployment rate is likely to remain structurally high over the medium term.”
According to Stats SA, the number of employed persons increased by 258 000 to 16.2 million in the first quarter of this year compared to the previous quarter.
However, since the labour force of 437 000 increased by more than employment, the number of unemployed also rose by a sizeable 179 000 to 7.933 million in the same period.
As a result, the unemployment rate according to the expanded definition decreased by 0.2 of a percentage point to 42.4% in the first quarter, down from 42.6% in the fourth quarter.
The youth remained vulnerable in the labour market, with the first quarter of 2023 results showing that the total number of unemployed youth (15-34 years) increased by 241 000 to 4.9 million, while there was an increase of 28 000 in the number of employed youth to 5.6 million during the same period.
According to Stats SA, the number of people who were not economically active for reasons other than discouragement decreased by 209 000 to 13.2 million.
The discouraged work-seekers decreased by 87 000 in the first quarter of 2023 compared to the fourth quarter of 2022, resulting in a net decrease of 296 000 in the not economically active population.
Anchor Capital investment analyst Casey Delport said this figure, which includes those discouraged from seeking work, was concerningly high.
Delport said South Africa faced a significant unemployment problem that continued to pose challenges for the country's economic and social development.
“This points to longer-term, structural issues within the local economy as it is difficult to reincorporate and entice discouraged work-seekers back into the labour force,” Delport said.
“The economy is simply not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans.”
BUSINESS REPORT