Economists say the combination of improved sentiment, better electricity production, the formation of a government of national unity (GNU), lower interest rates and a focus on infrastructure development will start to encourage a broader increase in private sector fixed investment and job creation.
This comes after Stats SA data showed the economy created 294,000 jobs in the third quarter, improving the unemployment rate to 32.1% from 33.5% during the period.
However, Stanlib chief economist Kevin Lings said the unemployment rate was still “extremely high” by historical and international standards.
“The lack of a consistent and compelling increase in employment reflected a combination of factors including a persistent skills shortage, sluggish economic growth, poor productivity and a lack of fixed investment spending by the private sector, state-owned enterprises and government.”
Fortunately, Lings said, economic sentiment had improved since the elections in May. He commended the government for continuing to highlight the importance of private-public partnerships in helping to develop ailing infrastructure.
Presenting data of the quarterly labour force survey for the third quarter of 2024, statistician-general Risenga Maluleke said 16.9-million people were in employment in the quarter, compared to 16.7-million in the previous quarter.
There was a decrease of 373,000 in the number of unemployed people to 8-million during the period under review. The expanded unemployment rate, which includes discouraged job seekers, decreased by 0.7 of a percentage point to 41.9%.
The community and social services sector did the heavy lifting, creating 194,000 jobs in the third quarter, while the formal sector created 122,000 jobs, informal sector 165,000, construction 176,000 and trade 109,000.
“Unfortunately, labour market data is not seasonally adjusted, which highlights that it is important to also look at the change in employment over the past year,” Lings said.
“According to Stats SA, the country has created 201,000 jobs over the past year, which is well below the increase in the labour force of 363,000, which is itself flattered by the fact that the number of discouraged workers (people who have stopped looking for work) has risen by 199,000 over the past year,” he said.
“It is also worth highlighting that the increase in employment over the past year was driven entirely by the informal sector. During the past 12 months, the informal sector has added 237,000 jobs, while the formal sector lost 27,000 jobs.
“While the creation of any jobs is encouraging, there is an enormous benefit to adding formal sector jobs, specially in terms of widening the tax base.”
Lings said the unemployment rate remained exceedingly high, specially youth unemployment, measured at 60.2% in the third quarter, or 70.7% using the expanded definition.
“In other words, despite the recovery in the labour market after the impact of Covid-19 dissipated, the economy has failed to keep pace with the growth in the population over an extended period.
“It is also clear that within the labour market, youth unemployment remains SA’s most important economic challenge, highlighting the extreme difficulty young people experience in trying to obtain their first job opportunity irrespective of qualifications,” he said.
“In that regard, the government’s emphasis on infrastructural development and policy reform needs to gain significant momentum to lift the growth rate above 3% a year. This would at least allow for a more meaningful expansion of the labour market across a wide range of skills.”
It is also worth highlighting the increase in employment over the past year was driven entirely by the informal sector.
— Stanlib chief economist Kevin Lings
No load-shedding
Cosatu spokesperson Zanele Sabela said that 294,000 people were employed in the third quarter was “undoubtedly spurred on by the more than 220 days of no load-shedding”.
“But Eskom needs more support if is to plug the financial holes, in particular the alarming levels of municipal debt owed to it. Similar support needs to be given to Transnet to unlock the jobs and revenue-rich mining, manufacturing and agricultural sectors, as well as Metro Rail, which is key to transporting 10-million urban commuters, in particular, to work,” Sabela said.
“The state also needs to expedite capacitation programmes for the 140 struggling municipalities. This must be accompanied by urgent interventions to stabilise and rebuild local government and deliver municipal services. This is key to ensuring government’s bold R943bn infrastructure programme is well spent.”
Oxford Economics senior economist Jee-A van der Linde said though the directional change in the unemployment rate was in line with the organisation’s expectations, “the magnitude of the decline was bigger than we anticipated”.
“We expect SA’s employment rate to continue its decline over the coming quarters on the back of businesses being more optimistic about the domestic economy,” Van der Linde said.
“Though businesses are less gloomy than before the elections in May, there is a lot of ground to be made up. Increased private-public partnerships are widely considered the catalyst for unlocking strong job growth and new investment to boost SA’s growth potential.”
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