By Luyolo Mkentane for Business Day
The unemployment rate rose to a near 15-year high in the first quarter of 2019, highlighting the enormity of President Cyril Ramaphosa’s plans to recover the country’s economy.
Ramaphosa said he wants to lead the country out of “nine wasted years”, a tacit reference to his predecessor Jacob Zuma’s term in office, which was marked by increasingly brazen corruption and state capture. Under Zuma’s watch unemployment soared and economic growth faltered, while confidence in the SA economy fell to new lows.
Statistics SA’s quarterly labour force survey revealed on Tuesday that the unemployment rate jumped 0.5 percentage points to 27.6% in the first quarter of 2019.
According to Trading Economics, the unemployment rate averaged 25.66% from 2000 until 2019, reaching a high of 31.20% in the first quarter of 2003 and a record low of 21.50% in the fourth quarter of 2008.
The economy lost 237,000 jobs during the first quarter of 2019. Leading that was the construction sector, which shed 142,000 jobs.
Due to subdued activity in the sector, construction and engineering company Group Five is intending to sell the only profitable assets it owns to help it survive, while Basil Read is in business rescue.
The finance sector trailed behind with 94,000 job losses, community and social services 50,000, and private households 31,000.
The mining sector, one of the pillars of the SA economy, shed 20,000 jobs and agriculture 12,000. Employment gains were recorded in the transport industry with 59,000 jobs, trade 25,000, utilities 16,000 and manufacturing 14,000.
Nedbank chief economist Dennis Dykes said Ramaphosa faced an enormous task in reversing the unemployment rate. “It is extremely unusual and it must be difficult for him because he was left this terrible legacy by the previous administration.”
The country needed economic growth that was labour absorbing, Dykes said, adding that Ramaphosa should create a conducive business environment to allow captains of industry to grow the embattled economy, which grew 0.8% in 2018.
Econometrix chief economist Azar Jammine said Ramaphosa needed to tackle policies that had led to unemployment, such as improving the education system and labour laws, to make them more attractive for business.
He singled out the national minimum wage, which came into effect in January, saying it could be argued that it is one of the factors that contributed to the spike in unemployment.
“The point is, are people going to support him in trying to fix the problems? Cosatu is one of his biggest supporters but it will oppose any amendment of the labour laws,” said Jammine.
Stellenbosch University political analyst professor Amanda Gouws said the rise in unemployment presented Ramaphosa with the opportunity to strengthen his hand and get rid of deadwood and corrupt ministers in his new cabinet.
“He has promised to improve the economy and clean up the rot in government. He has the ability to do that. Those numbers show this is the legacy Zuma left us,” said Gouws.
Ramaphosa appointed investment envoys in 2018 in his quest to raise $100bn in new investments over the next five years.
Nelson Mandela University political analyst Ongama Mtimka said infrastructure investment could help stimulate greater economic growth and help address what he described as SA’s long-term unemployment problem.
“We know there are underlying structural problems in SA that are long term and what makes matters worse is the fact that it’s mostly young people that are unemployed,” he said.
Cosatu spokesperson Sizwe Pamla said Ramaphosa had at most two years to convince the electorate that he had a plan to arrest spiralling unemployment. The 0.5 percentage point increase in unemployment was a wake-up call to the president and his incoming administration, he said.
“It speaks directly to the enormity of challenges awaiting them.”