South African unemployment hits 11-year high

Updated July 31, 2019

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The increase in joblessness was preceded by a sharp rise in jobless claims from the Unemployment Insurance Fund . — AFP/File
The increase in joblessness was preceded by a sharp rise in jobless claims from the Unemployment Insurance Fund . — AFP/File

PRETORIA: South Africa’s unemployment rate jumped to its highest since the global financial crisis more than a decade ago, data showed on Tuesday, piling pressure on a shrinking economy and President Cyril Ramaphosas pledge to deliver a turnaround.

The increase in joblessness was preceded by a sharp rise in jobless claims from the Unemployment Insurance Fund (UIF) between 2018 and 2019. Claims rose 21 per cent to 9.2 billion rand, the labour department said.

“The increased payment in the unemployment benefit could be attributed to retrenchments that have plagued the country due to subdued economic growth,” the Department of Unemployment and Labour said.

In February, National Treasury said unemployment payments would increase to nearly 16bn rand by 2021, and while that would be matched by growth in the fund’s assets, it would be offset by liabilities of other social security funds like the Road Accident Fund, which is 242bn rand in the red.

RETRENCHMENT: Job cuts across a host of sectors are set continue into the next few years. On Tuesday, state power firm Eskom reported a more than 20bn rand annual loss, making mooted staff cuts in the region of 7,000 almost inevitable.

At a 2018 job summit that formed the centrepiece of his recovery pledge, Ramaphosa promised to create 100,000 new jobs, but analysts doubt he can achieve the target.

Second quarter unemployment rose to 29pc from 27.6pc in the first quarter, driven by job cuts in private households, transport and mining, data from Statistics South Africa showed.

It was the highest jobless rate since 2008 when the quarterly survey started, statistician general Risenga Maluleke said, adding it would be difficult to create jobs in a shrinking economy.

There were 6.7 million people without jobs in the three months to the end of June, compared with 6.2m people in the prior quarter, Statistics South Africa said its quarterly labour force survey.

“The labour force is currently growing by around 101,000 people per quarter, where as the economy is creating on average 53,000 jobs per quarter,” chief executive of Adcorp Innocent Dutiro said. “This means the economy is generally absorbing only one in two potential workers.”

INVESTORS SPOOKED: Last week two ratings firms warned of the impact on an already dire economic growth outlook of the 59bn rand ($4.15bn) bailout for state power firm Eskom, sending the rand tumbling and raising the price of debt.

That added to pressure coming from Ramaphosas political battles with factions inside the ruling African National Congress (ANC), further dimming growth prospects in the continent’s most industrialised economy.

The unemployment data also showed about 8.2m, or 40.3pc, out of 20.4m people aged 15-34 years, were not in employment, education or training, underlining the social and political dangers posed by the high jobless rate.

Labour unions which supported Ramaphosa’s campaign have threatened to embark on strikes over retrenchments.

“The National Treasury and SARBs superstitious fixation with narrow bands of inflation-targeting and budget-deficit are at the expense of industrial expansion and job creation,” said spokesman of trade union federation Cosatu Sizwe Pamla.

Published in Dawn, July 31st, 2019