Statistics South Africa (Stats SA) reported on February 23 that employment in South Africa increased by 333 000 in the fourth quarter of 2020.
The data indicated that after the country lost 2,2-million jobs in 2020Q2, some 876 000 individuals returned to work or found new jobs during the second half of the year.
Lullu Krugel, chief economist for PwC Strategy& Africa, and Dr Christie Viljoen, PwC Strategy& economist, analyse the figures.
Based on our economic scenarios for the year, PwC forecast a net loss of 1,3-million to 1,4-million jobs in 2020 – the final Stats SA figure of 1,397-million was near the top of our range. At this rate, we estimate that it will take three to four years for the total number of employed to return to 2019 (that is, pre-pandemic) levels.
Note that the speed of employment recovery so far, as reported by Stats SA, is slower than that suggested by the National Income Dynamics Study – Coronavirus Rapid Mobile Survey (NIDS-CRAM) released last week. This is due to different samples being used for the respective surveys.
The Stats SA Quarterly Labour Force Survey (QLFS) polls +/- 33 000 households involved in its other household-based surveys, based on representativeness considerations rooted in Census 2011. In turn, the NIDS-CRAM surveys the same +/- 7 000 individuals – a much smaller sample – tracked since 2008. Data from the two sources are therefore not directly comparable.
Despite gains in employment, the official (narrowly defined) unemployment rate increased from 30,5% in the third quarter to a record high of 32,5% most recently. This is largely explained by a decline in the number of people classified as ‘not economically active’. Many of these non-active people were classified as ‘discouraged’ during 2020Q3, meaning that they had given up on finding a job.
In turn, a larger number of them expected opportunities for re-employment as lockdown restrictions eased and the economy reopened during the fourth quarter. As these people returned to the ‘unemployed category’ of active job seekers, the number of unemployed looking for a job increased by 700 000 – and pushed up the unemployment rate.
On an industry level, eight of the major sectors tracked by Stats SA recovered jobs during the fourth quarter, with mining and finance the only areas where employment declined again compared to 2020Q3.
Community and social services jobs increased by 170 000 under the Presidential Employment Stimulus programme. By January this year, the scheme had created or supported 430 000 jobs, with a further 180 000 opportunities currently in the recruitment process. Admittedly, this will fall short of the 800,000 jobs promised in the Economic Reconstruction and Recovery Plan announced in October 2020.
Jobs outlook for 2021
PwC’s employment scenarios for 2021 are based on different perspectives on a third wave of Covid-19 infections. Despite the roll-out of a vaccine programme, medical experts agree that the pace of vaccinations will not enable us to avoid a third wave. The severity of this mid-year wave, and the accompanying strictness of associated lockdowns, will directly determine the nature of the economic recovery.
Our baseline scenario sees lockdown restrictions ease further in March followed by a return to the stricter full Level 3 in May to combat a third wave of Covid-19 infections during winter.
Under our baseline scenario, South Africa’s economy will grow by 3,4% this year, and add 467 000 jobs. We expect total employment to return to 2019 levels (i.e. pre-pandemic) by 2023 or 2024. However, by then, a large number of new workers will have been added to the labour force. As such, PwC expects the narrowly defined unemployment rate to decline only slowly, and it could take nearly a decade for the unemployment rate to return to the pre-pandemic level.
On a positive note for workers, PwC does not expect any adjustments to personal income tax rates when Finance Minister Tito Mboweni delivers the Budget Speech 2021. While the Medium-Term Budget Policy Statement (MTBPS) announced in October 2020 that the National Treasury would hike tax rates in the coming financial year in order to collect an additional R5 billion, this is now seen as unlikely. PwC believes that revenue collections for the current fiscal year will be at least R100 billion higher compared to MTBPS projections.
Responding to the structural unemployment challenge
South African employment (both formal and informal) was 8,5% y-o-y lower in 2020Q4 – in other words, one in twelve jobs were lost. This will compound the existing challenges seen prior to the pandemic in creating enough value-adding jobs in South Africa. PwC recently commented[1] that South Africa’s key challenges – unemployment and inequality – have now become considerably more severe through the pandemic and can no longer be approached in the traditional way.
An entirely new approach by the government is needed to resolve this issue.
We have warned that in demographically young economies like South Africa, governments will be faced with chronically high youth unemployment over the full spectrum of education levels.
According to PwC, there are a number of labour-related considerations for governments to address unemployment and adjust to the COVID-19 new normal:
* Respond quickly to contain the impact – prioritising most vulnerable groups, particularly SMEs who are at risk of business failure and self-employed individuals who may find themselves facing unemployment and underemployment for the foreseeable future, is key.
* Embrace the current situation – to optimise costs, organisations like governments must assess their internal workforce requirements in terms of resource availability and capacity. Many organisations could be experiencing an increase in underemployment levels and should redistribute and redeploy workers based on the demand and supply of available resources.
* Advance prospects of success – governments may consider supporting the unemployed in finding work by implementing country-wide job matching portals/programs, partnering with organisations and giving wage subsidies, and providing start-up support for entrepreneurs with difficulties finding capital.
* Cultivate workforce capabilities – the Covid-19 pandemic has only accelerated the inevitable need to transition to the new normal – remote working, and a more mobile and adaptive economy. There are many skills gaps that arise within the contemporary workforce as new digital trends continue to accelerate the need to enhance digital skills.
* Transform ideas into realities – sustainable and adaptive long-term strategies will act as the backbone for ensuring a successful and swift economic and employment recovery. While many countries continue to make efforts to diversify revenue streams, this pandemic has highlighted the need to accelerate the transition towards a more self-sustainable economy.