Cherish your job, and work hard

Unemployment is much worse than most people think.
The number of people in SA who could eventually enter the labour force? Nearly 39m. Image: Moneyweb

The unemployment rate is actually higher than the 29.1% reported by the media after the release of the latest figures by Statistics SA, and forecasts indicate that it will continue to climb in 2020.

Stats SA seems to have downplayed the much higher ‘expanded’ unemployment rate of 36.9% in its report, following its Quarterly Labour Force Survey conducted in the last quarter of 2019. The so-called expanded definition of unemployment includes unemployed people who have given up hope of finding a job and stopped searching.

Including these discouraged work seekers increases the number of unemployed to nearly 9.6 million, compared with the 6.7 million recognised as unemployed by the strict definition of unemployment used by Stats SA to calculate the 29.1%.

The unemployment statistics also exclude a huge number of people who earn a meagre living in the informal sector: for instance by selling trinkets at traffic lights or offering a car wash in a parking lot. It would be interesting to research how many of the nearly three million workers in the informal sector would consider themselves self-employed and who would not turn down a formal job and the minimum wage.

Read: South Africans describe the pain of unemployment

Unfortunately, unemployment is expected to increase even further in 2020.

The most recent quarterly bulletin from the South African Reserve Bank (Sarb) states that prospects for meaningful employment creation and wage growth in the SA economy are weighed down by sustained weak domestic economic activity and low business confidence.

SA’s where it was during the global financial crisis

The document includes a graph that tracks employment expectations – predicting a further rise in unemployment in the formal sector. The reading on the graph is currently at the same level it was at during the world-wide financial crisis, when banks failed in 2008 and people predicted the end of capitalism.

No, Sarb got the wrong graph, say economists at the Bureau of Economic Research (BER) at Stellenbosch University, who designed this leading indicator. “The graph is the composite index of real employment figures for different sectors,” says Nicolaas van der Wath, an economist at BER.

Source: BER, Stats SA, Sarb

As such, the graph shows that the decline in employment is already happening.

Announcements of large retrenchments by several big companies bear this out.

In just the last few weeks, Massmart, Educor, ArcelorMittal, Telkom, SA Breweries, Tongaat and Samancor have announced plans to retrench workers. This affects a total of nearly 10 000 workers and their families.

SOEs cutting jobs too

State-owned enterprises (SOEs) are not immune either. Eskom has started to offer voluntary packages to employees and it seems likely that its huge work force will have to be cut drastically to ensure its survival. SAA and SA Express have both cut back on their operations and job cuts are likely to follow. The financial situation at other big state companies such as the Passenger Rail Agency of South Africa (Prasa), Transnet and PetroSA points to job losses too.

Even Stats SA, purveyor of unemployment statistics, lamented last week that it contributes a few hundred to the unemployment figures because it does not have enough money to fill vacant posts.

 

Read:
Statistics SA has reached a cash crisis point
An unemployment reality check

Van der Wath says the BER does not compile a composite employment indicator, but calculates one for the manufacturing industry from a quarterly survey of businesses involved in the (mostly labour-intensive) manufacturing industry. This predictive indicator reached its lowest level since 2008 in December 2019.

Moneyweb asked more economists for their views with regards to the outlook for employment and what could be done to improve the dire situation.

We received only bad news.

Izak Odendaal, investment strategist at Old Mutual Wealth, says he prefers Stats SA’s quarterly employment survey (conducted at formal businesses) above the labour force survey that looks at households. “The labour force survey shows that employment has been growing. The formal sector has added around one million jobs over the last year, with employment increasing from nine million to ten million people.

“However, unemployment continues to increase as the labour force is increasing faster [than the rate at which] we can create jobs. The economy is struggling, and businesses are forced to cut costs when business activity decreases and they see their income fall. This leads to reducing employee [numbers].”

Odendaal says the top three factors that would increase employment are:

  • An overall improvement in SA’s economy;
  • The reconsideration of onerous labour legislation by the authorities; and
  • The promotion of specific sectors that rely on labour.

“Our labour regulations are similar to [those of] first world countries,” he says, adding that the reality of low growth and a low-skilled labour force is not compatible with existing regulations.

“We need to make it easier for those sectors that are labour-intensive to create jobs,” says Odendaal.

He suggest that we look differently at the problem of structural unemployment – the situation where workers don’t have the right skills for modern jobs – by creating suitable jobs in manufacturing, tourism and agriculture.

“The unemployment rate was high at 23% even when the economy was growing between 2005 and 2007,” he points out.

Dr Chris Harmse, economist and chief investment officer at Rebalance Fund Managers, says exactly the same situation persists now, at the beginning of 2020, as at the end of 2019 when the Sarb was writing its quarterly report and Stats SA was calculating its unemployment numbers.

He highlights the Sarb’s estimate that 200 000 jobs were lost in 2019.

“The reintroduction of load shedding by Eskom has already started to have a negative effect. Manufacturing production during December was already down by more than 5% year on year and retail sales turned negative. The World Bank, the Reserve Bank and rating agency Moody’s all downgraded their growth forecasts.

Read: Women feel the pinch as unemployment rises

“One can therefore expect that another 200 000 jobs in the formal sector will likely be lost in 2020 and we can expect the unemployment rate to increase by almost 2% by the end of 2020 to an overall unemployment rate of nearly 31%,” predicts Harmse.

He says we must also take into account the contagious effect of the coronavirus in China as it might impact on SA’s commodity exports to China. He expects the long awaited downgrading by Moody’s of SA’s sovereign debt to junk may also cause extra pressure on the economy and impact employment.

Dawie Klopper, economist at PSG Wealth, says the single biggest cause for the persistent high unemployment rate is lack of economic growth.

“There is a direct correlation between growth and employment. Unemployment will fall sharply if economic growth increases to above 4%.

“Economic growth is only possible if we can improve business and consumer confidence. That needs certainty,” says Klopper.

He says the debate around the change of Article 25 of the Constitution to allow for expropriation of property must be finalised and Eskom must be fixed once and for all, especially with regards to the role of sustainable energy.

“In fact, allowing the construction of new green energy projects could be SA’s most successful growth story in 2020,” says Klopper.

“In addition, the whole education sector needs urgent attention to ensure that the economy gets qualified people over the long term to ensure long-term growth.” He also lists unyielding labour legislation and regulations as a limiting factor in creating employment opportunities.

Does SA have any chance of winning the battle against unemployment?

Looking a bit wider than only the labour force and unemployment figures suggests a war, rather than a battle.

Estimates from Stats SA put the population aged between 15 and 24 years that could eventually enter the labour force at 38.7 million, compared to the active labour force of 23.2 million economically-active people either employed or unemployed.

A large proportion of the other 12 million is at school or attending other educational facilities, and will be entering the labour market en masse very soon.

In short, work hard and be very nice to your boss and co-workers. And whether employed or running your own business, be very nice to your customers. There are few opportunities out there.

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IMHO the figures are even worse. A significant number of companies started something called FTE – Fix Term Employee, of which I was one. You are basically still a contractor with a fancy job title. This was done to avoid the current regime forcing companies to change contractors into employees. I wonder how much of this fancy footwork Stats SA is considering?

Very sad, but they do the same in the US and UK (zero hours contracts)

For a socialist country with Marxist leaders, our unemployment figures are quite low actually. The unemployment rate in Venezuela is 44% and in Zimbabwe, it is 95%.

When a Central Planning government competes with the private sector it leads to declining economic activity. Economic activity is basically expropriated without compensation and concentrated in the hands of the Central Planners. As the Central Planning authorities sucked all job opportunities into the SOEs and municipalities, they invariably bankrupted these entities. The Central Planners set the unemployment and poverty trap. They used inflated salaries to lure individuals away from the private sector, into the SOE trap, where they will soon experience mass unemployment.

It is quite simple actually, the unemployment rate is an indicator of the health of property-rights in an economy. Unemployment is at 2% where property rights are respected and at 95% where property rights were abandoned. Our rising unemployment rate is merely the result of our decreasing right to own property.

In short – the unemployment rate is a function of the political-economic system. People basically vote for unemployment and poverty, and this is what they have got.

But hey, we will soldier on with all the unworkable socialist policies until complete collapse against all expert advice. ANC (EFF puppets)know better.

You get the government you deserve – the proletariat have spoken and will continue to vote for the ANC, even when they are starving (which is not far off). BTW, a black swan event, such as the corona virus, will merely speed up the process

One day they might teach a class in Harvard or some other university on how to destroy a country in 20 years. Our population has very little correlation between government and associated policies and the effects of these policies. In other words unemployment is not attributed at grass roots” level to the policies of government. A vast portion of the unemployed population will quote “the reason for unemployment is because there are no jobs.”, unfortunately this is not true the reason is policies, with no jobs” being the result not the cause.

We are creating an environment for civil unrest to flourish and when the war comes, and it will, it will not be a race war it will be an uprising of the “have nots” vs the “haves” lead by a dictator who promises the “have nots” a redistribution of what the “haves” own.

One of our greatest tragedies is not the fact that the previous president is credited with the theft and squadering of 3 Trillion Rand in some circles, but the fact that many of our populace don’t begin to understand how much that amount is or what it could have done to alleviate poverty and create employment.

And still, they go on strike for higher pay! Why don’t they legislate that there must be reciprocally an increase in productivity to match the salary increase demanded?

Perhaps one day, Unions & “workers” will realise that Turn-over & Profit (Nett) are entirely different things

Turnover is what they do in bed and profit is that charlatan they adore every Sunday!

YES, and based on that productivity related salary increase, 90 % of all government employees can pay back at least 75% of their salaries for the privilege they have just to occupy a government building for 8 hours a day to bring their productivity in direct relation to the salary they earn.

currently most employees’ attitude is: the lessor i do, the more i want.

There was a great movie many years ago based on the novel by Graham Green ” How Green Was my Valley”. This should be compulsory viewing for all Union Members, The ANC and EFF.
It chronicled the destruction Unions wrought on the coal mines in Wales.

Stat SA ,like all ANC controlled institutions ,is a farce. Any per son with a few brain cells and a modicum of common sense will know that most people are unemployed and the rate is most likely 50%+. Do not need experts for this.But in typical ANC fashion the true facts are obfuscated and manipulated to suit them-like the inflation rate. All smoke and mirrors. The ANC has lied and denied so much they have lost all credibility.

The additional tragedy to add to that, is those who are unemployed and yet paid a salary by SOEs, courtesy of taxpayers.

Don’t worry EWC and NHI will fix this.

Proudly brought to you by the African National Congress!

Corona virus will change this situation reducing unemployed and employed big time

Time might be right to start a affordable cremation service

This has become a vicious cycle with fewer opportunities for the skilled people. The consequence being that there are fewer and fewer available on the job market.

They are finding greener pastures where their rights will not be trampled by “democratic” hordes.

For example take the NHI hearings. Everyone supported the idea that economically active people should be denied medical aid and pay for the masses.

To be expected when the unemployed outnumber the gainfully employed (which excludes most government employees). The ANC’s tame vote cattle.

Every white person should not be employed in south africa.
They effectively stealing jobs due to their priviledge they had for the last 300 years.

I agree. They should all up and leave a.s.a.p. as they are not wanted here anymore. So I am following your advice, I am leaving, as soon as I can and then you can take over my job … if you have the skills.

Before we got here, there were no jobs and when we’re gone, there will be no jobs. I wonder if you can see a pattern there IAAD54? Most unlikely of course

Great Thinking IAAD54 : My Kids Agree with you : They are off to where they are wanted: With them goes Over a Million Rand a year in their Tax contribution and they leave an unemployed Gardener , Housekeeper etc etc ;
Clearly you are a great Thinker .
Wheres Wally ? We just found him .

We should have stayed away then you would not have had electricity, running water in pipes, cell phones, cars …….you would still be running around naked sticking each other with sharp sticks.

What a mentality!! Boggles my mind certainly not yours.

Be nice to your boss? Be nice to yourself. Financial Planning 101 must be your priority. Have an emergency fund (3-6 months) cash and more importantly have cash offshore.

It will get worse before it improves, if ever.

Society applauds the unsustainable and demands that an endless provision for the over supply. In the past there was a current account for society which was never allowed to be overdrawn. Now there is no accounting. The borrowing is unlimited. The concept of affordability has evaporated before our very eyes. And the society remains mathematically impaired.

End of comments.

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