Ominous employment number expectations

Analysis from the IRR suggests South Africa’s latest employment numbers – due to be released by Stats SA mid-morning tomorrow (Tuesday) – will not be the good news the country desperately needs.

South Africa should be experiencing a major lift in employment figures, bouncing back from lockdown restrictions in line with other emerging markets like India, Turkey, Brazil, Egypt, Indonesia, and Uzbekistan, which have already returned to pre-pandemic levels.

As South Africa has the world’s worst recorded unemployment rate, even a mere “reversion to the mean”, meaning the return to average outcomes that statisticians expect with the passage of time, should spell a massive increase in news jobs. However, there are several reasons massive jobs growth is unlikely to be reflected in Stats SA’s latest data for the period April to June.

South African people and businesses remained under lockdown-lite restrictions for almost the entire period. To make matters more challenging, increasingly heavy electricity outages kicked in towards the end of the second quarter. Both factors directly inhibited the maximum potential for a big time jobs bounce-back.

The Merchantec Capital CEO Confidence Index asks a range of business captains if they think there will be a South African recession in the next twelve months. 75% said yes in the second quarter of 2022, with the greatest pessimism expressed in basic resources and industrials.

International conditions – albeit a mixed bag – played a part too. China, South Africa’s largest trading partner, saw a slowdown in growth under heavy lockdown restrictions. Also, sustained high prices in oil translated into costs at the pump that harmed consumers and producers.

On the other hand, the war in Ukraine caused a massive realignment of European energy, meaning that local coal exporters benefited from a doubling of global prices and higher trade volumes to Europe too. Major exports like iron ore and gold remained unusually highly priced too.

In addition, consumer inflation in countries like the US and UK increased dramatically, exceeding local levels, granting South Africa a specific, limited, edge in this period.

Absa’s Purchasing Manager’s Index indicated a slightly positive outlook throughout the second quarter.

With a mixed bag of inputs, the most likely outcome is a mixed bag of labour outcomes, which is not good enough. In the mid-2000s South Africa added almost 3 million jobs in six years, through GDP growth approaching an average 5%. Those kind of numbers must be achieved again if South Africa is just to begin to address the basic domestic needs.

Even if some indicators are mildly positive, mixed results should stimulate a reflection beyond the personalities of politics in the heart of policies that cause structural unemployment.

The IRR has sent multiple letters to the office of Minister Thulas Nxesi to demand that the problem be confronted seriously. Every statistically significant poll commissioned by the IRR indicates that most people think unemployment is the biggest domestic problem, and that a meritocratic push back against corruption is essential to the solution.

Said IRR Head of Campaigns Gabriel Crouse: “The remedy for structural unemployment is to liberalise the labour market. Cutting red tape should be the easiest step because it simply requires the government to get out the way of entrepreneurs. Unfortunately, however, Minister Nxesi has called for more stringent labour laws than ever before, indicating that he seems to think the reason jobs aren’t growing fast enough is a lack of red tape. This mistake falls hardest on those unable to making a living by honest work.”

* Afrikaans-language media are requested to retain the abbreviation ‘IRR’, rather than using ‘IRV’.

Media contacts: Gabriel Crouse, IRR Head of Campaigns – 082 510 0360; gabriel@irr.org.za

Mlondi Mdluli, IRR Campaign Manager- 071 148 2971; mlondi@irr.org.za

Media enquiries: Michael Morris Tel: 066 302 1968 Email: michael@irr.org.za