Covid jobs crisis will take years to cure
ECONOMISTS say it will take the country years to recover the jobs lost as a result of the Covid-19 pandemic.
Data from Statistics South Africa (Stats SA) last week showed that unemployment increased 1.7 percentage points to an unprecedented 32.5% in the fourth quarter of 2020 compared with 30.8% in the previous quarter.
Stats SA said this was the highest jobless rate since the start of the Quarterly Labour Force Survey in 2008 as more people entered the labour market and were actively looking for jobs.
Stats SA said the number of unemployed persons increased by 701 000 to 7.2 million in the third quarter.
The number of discouraged work-seekers shot up by 235 000, while the not economically active population decreased by 890 000.
Compared to a year ago, StatsSA said total employment fell by 1.4m.
However, employment also increased in all sectors and all industries in the fourth quarter compared to the third quarter, except for finance and mining.
PwC economist Christie Viljoen said South Africa's unemployment rate ended 2020 at a record high 32.5%, with more than 7 million people who were willing and able to work sitting without a job.
“The Covid-19 lockdown caused a net loss of 1.4 million jobs in 2020 – entrenching the country's challenges with unemployment, poverty and inequality,” he said.
He added that these lost jobs would be one of the biggest negative legacies of the pandemic.
Viljoen said the job losses would see an increase in the number of people who were now dependent on the government for financial assistance.
In addition, he said the number of people contributing to the fiscus by way of personal income tax would also decline.
“This is placing state finances under extreme pressure over the next several years. There will also be pressure on the government to continue providing extended unemployment benefits,” said Viljoen.
He further explained that it would take the country a long time to recover the jobs lost during 2020.
“PwC expects less than 500 000 jobs will be regained in 2021 and it will take around four years before employment is back to 2019 levels.”
In the meantime, Viljoen said the unemployment rate would remain stuck above the 30% level for many years.
Busi Sibeko, who is an economist and researcher at the Institute for Economic Justice (IEJ), said South Africa has had a stubbornly high unemployment rate since 1994, and the situation had reached crisis level even before the Covid-19 pandemic.
She said the crisis was only getting worse.
“What the numbers show is that no ‘jobs bounceback’ has occurred, and the pandemic has caused a net loss of around 1.4 million,” said Sibeko.
Sibeko said South Africa must prepare for an increase in the already disturbingly high rates of poverty and inequality.
“The role of government as a provider of employment in the presence of high unemployment must be reviewed,” she said.
IEJ researcher Sonia Phalatse said it was the economic justice organisation’s position that the latest Medium-Term Expenditure Framework Budget announced last week would worsen the unemployment crisis.
“The highly contractionary macroeconomic stance will retard job creation through a shrinking economy,” she said.
She said the high unemployment rate would damage an already compromised economy, including plunging more people into poverty.
She added that government had reduced funding for industrial policy interventions that were crucial to expanding labour-intensive sectors in the economy.
Phalatse said employment creation programmes, including public works, were allocated a small amount of R33.4 billion in 2021/22, declining significantly to R24bn in 2023/4.
She said the R36bn allocated to industrialisation and exports this year was less than 5% of the budget.
“Small allocations are made to support production in particular sectors, but this will not stop ongoing de-industrialisation, seen by 400 000 manufacturing and construction job losses in 2020, nor grow these sectors,” said Phalatse.
Premier Sihle Zikalala addressed the dire jobs situation in his State of the Province speech last week.
Zikalala said the Covid-19 pandemic and pre-existing economic situation had impacted negatively on jobs, especially for low-skilled workers.
To address unemployment, he said the province would streamline all mass employment opportunities, including the re-purposing of the KZN Department of Transport’s Zibambele and Vukuzakhe programmes.
Zibambele aims to create job opportunities for poor rural families through the maintenance of rural roads, while Vukuzakhe is an emerging contractor development programme that focuses on wealth and job creation in communities that have been most disadvantaged historically.
Zikalala said the purpose of the streamlining exercise would be to ensure that more allocations go to intended beneficiaries and less was spent on management and facilitation.
“All relevant departments, during the presentations of their Budget votes will detail programmes, locations and numbers of jobs that will be created,” he said.
He said a War Room on Job Creation would be established to drive the issue and an update report would be provided to the Legislature on a quarterly basis. Zikalala added that up-skilling was necessary to ensure long-term employment for workers.