Double trouble for SA over soaring unemployment

By Drum Digital
11 May 2016

South Africa's alarming unemployment rate is both a crisis and an indictment, and represents double trouble for the country, business groups have warned.

South Africa's alarming unemployment rate is both a crisis and an indictment, and represents double trouble for the country, business groups have warned.  

The Cape Chamber of Commerce and Industry and the Black Business Council (BBC) expressed concern over the country's latest unemployment figures which have risen to a record high, according to Statistics South Africa's Quarterly Labour Force Survey.

South Africa’s official unemployment rate for the first quarter of 2016 stands at 26.7%, representing a 2.2 percentage point increase compared to the last quarter of 2015. This means 5.7 million out of South Africa’s 36.4 million people of working age in the country were unemployed during the first four months of 2016.

The largest job losses were recorded in the manufacturing, construction and trade sectors.

The expanded unemployment rate, which includes discouraged job seekers, amounts to 36.3%, or 8.9 million people. The gap between the official and expanded unemployment rates increased from 7.2% in the fourth quarter of 2008 to 9.6% in the first quarter of 2016.

The Cape Chamber of Commerce and Industry cautioned that the rise in the unemployment rate represents double trouble for South Africa.

Firstly, having nearly six million people out of work creates a massive social problem with consequences that are difficult to predict and, secondly, it underlines the poor performance of the economy, it said.

“This double trouble will be very difficult to overcome,” said the chamber's president Janine Myburgh.

“Business confidence is low and the government has been very slow in implementing the structural reforms the National Development Plan recommended for economic growth.”

These changes include labour market and industrial relations reforms.

“Our priority should be to remove all obstacles to job creation. The approach to business should be ‘What can we do to encourage you to employ more people?’. Instead, the approach was to over-regulate and prescribe to business on how it should go about running companies."

Myburgh said the long-term problem is education which, despite massive investment, is not producing the required results.

She also criticised policies and legislation which discourage foreign investment, such as the new expropriation bill and the requirement that security companies from overseas should dispose of 51% of their shares to local investors.

“We must also ask ourselves how (much) jobs ‘mistakes’ like the unnecessary visa regulations have cost the tourism industry and the country,” Myburgh said.

“What we need is less interference in the economy. This will improve business confidence and we will see more investment and skills training leading to economic growth,” she said.

The BBC warned that if not addressed, unemployment could reverse many of the country's gains since democracy was attained.

"It is both a crisis and indictment on us all that more than 520 000 people have been added to the unemployment pool between the fourth quarter of last year and the first quarter of this year," said CEO Mohale Ralebitso.

He said the need for structural reform in the economy cannot be overemphasised.

"We also need to get to grips with better enabling the informal sector and elementary workers who are the most vulnerable to a negative economic climate."

Ralebitso called on the private sector to implement urgent interventions, like making use of accumulating Skills Development Levies and the Employment Tax Incentive, which incentivise employers to not only improve the absorption rate but also enhance skills among the employed to boost their global competitiveness.

"We cannot expect to have any productivity improvements and flexibility in the labour market if we are not helping the employed improve their marketability while improving the feeder network in parallel."

He also recommended more radical transformation measures, such as the accelerated development of black industrialists.

"This will not only boost economic growth in key sectors most affected by the job losses, but furthermore diversify the employment opportunities available as more players participate in the market," Ralebitso said.

"To this end, we urge that government substantially grow funding for the likes of the National Empowerment Fund so they can continue to play their catalytic role and build a deeper pipeline for the Black Industrialist programme, while accelerating existing Black Industrialists."

The BBC implored the private sector and government to work together aggressively to create an environment conducive to job creation and skills development, through measures that stimulate and sustain industrialisation and increased economic growth.

"We need to keep the rainbow nation dream in our sights and not let unemployment, poverty and resultant inequality rob SA of its potential," Ralebitso concluded.

Source: Fin24

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