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SA needs emergency action to create jobs, World Bank says

Country could potentially halve its jobless rate if it were to increase self-employment.
Image: Bloomberg

South Africa can bolster hiring by temporarily extending tax incentives, suspending rules that increase labour costs and introducing measures to support entrepreneurship and self-employment, according to the World Bank.

While other reforms, including tackling electricity supply constraints, remain pivotal, time-bound emergency measures to support poorer workers and create jobs are needed as the economy recovers from the devastation wrought by the coronavirus pandemic, the Washington-based lender said Monday in its South Africa Economic Update.

Africa’s most-industrialised economy contracted the most in a century last year and lost 1.4 million jobs as restrictions to curb the spread of the virus weighed on output and forced some businesses to cut wages, reduce staff or permanently shut down. “To put this into perspective, it took the country six years to add 1.4 million jobs to its pre-pandemic economy,” the World Bank said.

South Africa’s unemployment rate stood at a record 32.6% in the first quarter of 2021, the third-highest of 82 countries tracked by Bloomberg. The rate has remained above 20% for at least two decades, even though the economy expanded by 5% or more a year in the early 2000s.

Inadequate skills

Analysts blame the problem on an education system that doesn’t equip students with adequate skills to find jobs and strict labour laws that make hiring and firing onerous. Racial disparities that date back to the era of white minority rule and have also left many black South Africans living in so-called townships on the periphery of cities and made it difficult for them to access and retain formal employment.

The World Bank suggested that the government deepen employment tax incentives and temporary relief for industries affected by stop-start lockdowns until a sizeable number of firms become operational again. Both measures should be time-bound and could support 2.3 million jobs at a cost of R18 billion ($1.25 billion) a year, it said.

President Cyril Ramaphosa said Sunday that the Unemployment Insurance Fund will extend temporary support to workers who lost their income due to ongoing restrictions, without giving details. He extended a ban on alcohol sales and several other curbs for two weeks as the government struggles to bring a third wave of coronavirus infections under control.

The government, labour unions and business groups could consider negotiating a temporary suspension of regulations that increase labour costs and impede hiring, the World Bank said. The moratorium, which should last for 12 to 18 months and linked to the pandemic and addressing its economic fall-out, should benefit vulnerable people, who’ve borne the brunt of firings, it said.

Self-employment needed

The World Bank also suggested that South Africa relax rules that hinder entrepreneurship, self-employment and micro- and -small business, scale up programs that provide training for entrepreneurs and provide start-up grants. The country could potentially halve its jobless rate if it were to increase self-employment, which currently account for 10% of total employment, to the 30% average seen in upper-middle-income countries, it said.

“There is a risk that the recovery leaves behind most of the potential economically active population, particularly young job seekers, which would mean that the pandemic permanently impaired the country’s long-term development prospects,” the World Bank said. “Should South Africa not use the crisis as an inflection point, it risks suffering another lost decade.”

South Africa’s annual economic growth rate averaged 1.7% between 2010 and 2019, after increasing by an average of 4% a year from 1999 to 2008, the bank said. Per-capita GDP per has contracted since 2015 and real per-capita income is almost back at levels last seen in 2005, it said.

The World Bank raised its 2021 GDP growth forecast for South Africa to 4% from 3.5% as the country benefits from a recovery in global output, especially in China and the US, two of its main trading partners, and favourable commodity prices.

Structural reforms aimed at restarting private-sector investment and creating jobs are necessary to unlock growth, boost competitiveness, support public finances and improve social and economic outcomes, it said.

© 2021 Bloomberg

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Hahaahahaha

and they needed how many econ econo-pseudo-scientists to make such a “damming” conclusion??

SA is a normal African country in long-term economic decline, after Colonialism. Ruled by African values.

Foreigners use a Western value system to measure us. (Like increased growth, leading to more jobs)

Hence the slow disappearance of western-style luxuries (like tax road, reliable water & elect, services) will have to happen, in order for the country to decline.

More jobs / better economic wealth does not fit in with the narrative of a country returning to the mean economic average of a typical African state.

The unemployment figures prove one thing only. The cost of labour is higher than the marginal productivity of labour. The net value that is added by this additional employee is negative. The labourer is unproductive and unprofitable, although he is producing something.

Labour laws in conjunction with the minimum wage create a legal framework that forces employers to treat employees as beneficiaries of their business and not as contributors to their business. The labour laws redistribute the benefits of the business plan among the workforce, disincentivising the actual owner and robbing the consumers.

The record-high unemployment figure that is steadily rising after 27 years of socialist labour policies proves that employers believe that 40% of the labour force are not worth the minimum wage. When it comes to creating jobs, the opinion of the potential employer is the only opinion that counts. Socialists intentions and promises are irrelevant at best and counterproductive in reality.

Self employment primarily amongst the black population is vibrant

Its called informal employment but it brings in tax free earnings for those who are working this way

Consider that many blacks do not have a bank account, prefer to remain “under the radar” of SARS, one can speculate just how much they earn

Bets on, in many cases its no small change

There will never be an increase in the employment rate so long is in place with its BEE policy

End of comments.

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