SA doesn't have world's worst unemployment rate anymore, as factories drive job growth

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South Africa's official unemployment rate declined to 32.9%, the third highest on a global list of 82 countries and the eurozone monitored by Bloomberg. 

The improvement means South Africa’s jobless rate now trails Namibia and Nigeria, though some data are outdated. It held the record from the second quarter of 2021. 

Still, unemployment according to the expanded definition stood at 43.1%, which includes people who were available for work but not looking for a job, compared with 44.1% in the June quarter.

South Africa’s energy-intensive manufacturing sector was the biggest driver of job growth in the third quarter despite record power outages. 

The number of people employed by manufacturers rose by 123 000 to 1.63 million in the three months through September, Statistics South Africa said in a report released Tuesday in the capital, Pretoria. Formal sector manufacturers of basic metals, food, beverages and tobacco products, and wood and wood products added the most jobs in the third quarter, Desiree Manamela, acting chief director for labour statistics, said in an interview. Textile, clothing and leather goods makers in the informal sector also created jobs, she said. 

Jobs in the sector grew even as Eskom imposed power outages on more than half of the days in the third quarter, leading to a record 173 days of blackouts so far in 2022, according to Bloomberg calculations. 

Output from the manufacturing sector, which accounts for about 13% of gross domestic product, was better than expected in the third quarter, according to data published earlier this month. A gauge measuring factory sentiment due Thursday will provide clues on the industry’s performance in the final three months of 2022. 

The official jobless rate in South Africa has exceeded 20% for at least two decades. That’s largely due to sluggish economic growth, and strict labour laws and bureaucratic hurdles that have weighed on the ability of local companies to hire additional workers. Analysts also cite an education system that doesn’t provide adequate skills and apartheid-era spatial planning that makes it difficult for job seekers to enter and remain in the formal workforce. The jobless rate for people aged between 15 and 24, which includes school leavers and graduates of universities and training colleges, stands at 34.5%.

Unmet target

The governing ANC failed to meet its targeted unemployment rate of 14% by 2020. The goal was part of its 2012 National Development Plan, the fifth economic blueprint formally adopted since it came to power almost three decades ago. President Cyril Ramaphosa, who is expected to win a second term as party leader, next month will be expected to champion job creation initiatives.

Joblessness, rising food and fuel prices and an aggressive interest-rate hiking cycle pose a threat to social stability in an economy at risk of recession and that’s still reeling from several Covid-19 lockdowns and deadly riots in 2021. South Africa is one of the most unequal countries in the world, and 14 million people out of a population of 60 million are experiencing food poverty, the World Bank said in an April 2020 report. 

Government corruption, known locally as state capture, became endemic during former President Jacob Zuma’s rule, weighing on the state’s ability to create jobs and support the vulnerable. Zuma, who quit in 2018 under pressure from the ruling party, has repeatedly denied wrongdoing.

Persistently high unemployment will also complicate efforts to reduce fiscal deficits and debt, with the government considering widening the welfare net in a country where almost half of the population receives at least one social grant. South Africa will spend R243 billion, or almost 4% of gross domestic product on welfare, in the current fiscal year, with most of the money going toward child support and pensions, the medium-term budget shows. 

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