Statistics South Africa (Stats SA) reported yesterday (1 June) that employment in South Africa declined by 28 000 jobs in the first quarter of 2021. The data indicated that after the country lost 2,2-million jobs in 2020Q2 and regained 876 000 of these during the second half of the year, job growth stalled in 2021Q1.
Lullu Krugel, chief economist for PwC Strategy& Africa, and Dr Christie Viljoen, PwC Strategy& economist, unpack the numbers.
There were likely some seasonal factors involved in the post-holiday quarter. As such, PwC expects the South African economy to create 384,000 jobs in the remainder of this year, and just over 300,000 during 2022. However, at this rate, we estimate that the total number of employed will only return to 2019 (that is, pre-pandemic) levels by 2025
The official (narrowly defined) unemployment climbed from 32,5% in 2020Q4 to a new record high of 32,6% in 2021Q1. This was a much more moderate increase compared to a median forecast amongst economists of 33,4%.
The smaller increase is attributed to 201 000 people who were looking for work in 2020Q4 shifting to the discouraged workers category – those that have given up on finding a job – by 2021Q1.
These 201 000 South Africans likely lost their jobs during the strictest levels of lockdown last year and were searching for a new job during the second half of 2020. In the absence of success, they have given up on again finding employment. As a result, the expanded unemployment rate – which includes discouraged workers – increased from 42,6% in 2020Q4 to 43,2% in 2020Q1.
On a positive note, half of the 10 sectors tracked by Stats SA recovered jobs during 2021Q1. Small gains were seen in mining (an increase of 12 000 jobs) and manufacturing (an increase of 7 000) due to accelerating export sales of minerals and certain factory goods. The ‘community and social services’ segment also gained (increasing by 16,000) on the back of the continued rollout of the Presidential Employment Stimulus programme.
The big surprise, however, came as some 215 000 jobs were added to the finance sector. In this regard, Stats SA noted that employment increased across the skilled occupations: employment of professionals, managers and technicians increased by 101 000 in the first quarter. (In turn, unskilled and semi-skilled occupations lost 129 000 employment opportunities.)
Looking ahead, PwC’s employment scenarios for 2021 and beyond are based on different perspectives on a third wave of Covid-19 infections. The severity of this mid-year wave, and the accompanying strictness of associated lockdowns, will directly determine the nature of the economic recovery. Under our baseline scenario, South Africa’s economy is expected to grow by 3,2% this year, and add 384 000 jobs.
We now expect total employment to return to 2019 levels (i.e. pre-pandemic) by 2025. 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 more than a decade for the unemployment rate to return to the pre-pandemic level below 30%.
Responding to the structural unemployment challenge
South African employment (both formal and informal) was 8,5% y-o-y lower in 2021Q1 – in other words, one in twelve jobs were lost compared to a year earlier. This will compound the existing challenges seen prior to the pandemic in creating enough value-adding jobs in South Africa. PwC commented last year that South Africa’s key challenges – poverty, unemployment and inequality – have now become more severe through the pandemic and to address them will require government to take an entirely new approach.
We have also commented that in demographically young economies like South Africa, governments are faced with chronically high youth unemployment over the full spectrum of education levels. Stats SA reported that in 2021Q1, three out of four (74,7%) South Africans aged 15-24 were without a job.
According to PwC, there are several 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 SMMEs 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.