The answer to South Africa’s lack of employment creation lies in getting infrastructure spend going again, and fast, so that economic growth will improve. These were the sentiments shared by Rian le Roux, chief economist at Old Mutual Investment Group, at the release of the latest Old Mutual Savings and Investment Monitor research findings.
Le Roux said that while the Matric pass rate has improved from about 50% in the late Nineties to the current 78.2% level, “it has done nothing for employment”, adding that this points to the fundamental crisis that education in the country faces. “We need to sort out education, now,” he said.
SA’s official unemployment rate has remained stubbornly consistent at just over 25% while expanded unemployment (which includes those who have given up looking for jobs) is at around 36%.
The research showed that only 52% of South Africans feel confident about the local economy. The economy showed signs of distress after it contracted by an annualised 0.6% in the first quarter of 2014 compared to the previous quarter. SA’s annual GDP growth averaged 3.16% from 1993-2014, reaching an alltime high of 7.6% in the fourth quarter of 1994 and a record low of -6.3% in the first quarter of 2009, according to economic data provider Trading Economics.
The International Monetary Fund, which had already downgraded its economic forecast for SA this year to 2.3% from 2.8%, is expected to release its revised forecast later this month. Because of the industrial tensions the country has endured in recent months, it is expected that the forecast will be considerably lower. This comes after the World Bank cut the country’s GDP forecast from 2.3% to 2% for 2014 in June.
“Despite the Government’s contrary comments, there are real fears of little more than lip-service to the National Development Plan. To achieve our high growth potential, we need to, among others, speed up social and economic infrastructure spend, address SA’s highly problematic labour relations and aggressively address underperforming areas in the public service including education,” said Le Roux.