There are strange dynamics in the labour market in South Africa that do not correlate with the high unemployment rate, writes Thabi Leoka.
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South Africa faces an ongoing youth unemployment crisis. But as many employers struggle to fill the vacancies that are available, it’s clear the problem is bigger than a shortage of jobs.
The number of unemployed people in South Africa increased to 7.9 million in the second quarter of 2023, from 5 million a year ago. Youth unemployment between the ages of 15 and 24 and 25 and 34 years recorded the highest unemployment rates of 60.7% and 39.8%, respectively. Just under 10% of graduates are unemployed and a further 20% of learners from other tertiary institutions are unemployed.
These figures that were recently published by Statistics South Africa are depressing, and even more so when poverty figures are considered. About 18.2 million people in South Africa live in extreme poverty. These are people who live on less than $1.90 (R36) per day.
Youth unemployment must be seen within the context of the future of South Africa. If 34.2% of those within the ages of 15 and 24 are not in employment, education or training, what future are we building?
How will the country produce more businesspeople like Michael Jordaan, who became the CEO of the largest bank in his mid-thirties, or young heads of states as seen in Europe, when potential maverick are steeped in poverty and lack education or training?
How will South Africa compete with other countries in areas such as technology, science and innovation when the youth are not given the same opportunities as their peers in other countries?
Mismatch
And yet there are strange dynamics in the labour market that do not correlate with the high unemployment rate, which currently sits at 36.2%.
Almost 5 million young people are unemployed; yet, there are companies struggling to fill positions in sectors such as manufacturing and mining, where non-skilled or semi-skilled young people are required. Perhaps younger people no longer want to become rock drill miners or work in heavy-duty manufacturing factories, but the alternative is poverty, which has been on the rise, exacerbated by Covid-19. Call centre operators, that typically require low-skilled workers, are seeing high rates of absenteeism due to employees not coming back to work.
Where companies are in desperate need of workers and cannot find them, the impact of automation on employment – already notable – will be even greater. Where possible, companies are already automating what can be automated: In mining, mechanising is rapidly being adopted and machinery is replacing workers. Similarly, vehicle manufacturing body shops are increasingly being run by machines. Pretty soon, call centres will in all likelihood replace at least some of their workforce with meta-humans and AI, to name a few.
And for a country like South Africa, the ongoing shift from human labour to machinery will be deeply problematic, since a troubled education system and an already concerning skills gap means not enough workers are able to seamlessly transition from manual labour to coding, engineering or even servicing machines.
The migration factor
Another factor influencing the mismatch between skills and jobs is the concentration of economic activity in some key areas. Economic activity in the North West is dominated by the mining sector, for example, which tends to employ workers and seek suppliers from the local communities. Miners are finding it challenging to employ new younger workers; yet, the unemployment rate in the province is one of the worst in the country, at 38.4%.
If the expanded definition of unemployment is considered, which includes mainly discouraged workers, the unemployment rate is the worst in the country at 53.5%. Therefore, more than half the working population in the North West is unemployed.
This is a crisis.
Meanwhile, the lure of Johannesburg, and the sense of hope it offers to many, could be a contributing factor to the low interest in employment in some sectors in poorer, less urban cities or towns in the country. This is exacerbated by poor management of numerous municipalities, which drives those who can leave to do so. But it is a vicious cycle, as municipalities that are badly managed, dysfunctional or corruption-ridden rob communities of the opportunity to become economically active.
A lack of investment in critical infrastructure such as roads, hospitals, schools and cultural amenities discourages young people from staying and deters them from moving to these municipalities.
Young people might want different types of jobs than the labour-intensive jobs found in mining or manufacturing, but even if they don’t, the cost of living in remote, under-developed or dysfunctional towns is higher than living in squalor in a big city. The latter gives them hope; the former, despair.
And yet neither option is good enough. We have failed the custodians of the country’s future.
Thabi Leoka is an economist with an interest in macroeconomics, policy and governance.
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