Real unemployment figures are shocking – even for SA

The official definition of the unemployment rate in South Africa classifies individuals who have ceased to actively look for jobs as “discouraged workers” and unequivocally excludes them from the statistic. This is fundamentally wrong as it’s firstly, exclusionary in nature and secondly, shows a misrepresentation of the true reality of unemployment in South Africa, particularly with regards to the black youth.

With the month of June historically representing a strong symbol of resistance for black South African youth, it’s disheartening that the plight of this specific group of people continues to be the epitome of poverty. Young people from townships, informal settlements and rural areas have seemingly become forgotten and unaccounted for when contextualising the unemployment crisis in South Africa. The official unemployment rate defines jobs seekers as individuals who are aged between 15-64, willing and able to work and have been actively looking for employment in the past 4 weeks.

With Stats SA unable to release the latest Q1’20 unemployment figures, due to data collection challenges as a result of Covid-19, the official unemployment rate remains at the Q4’19 staggering high of 29.1%. The number had not changed from Q3’19, however, the extended unemployment rate figure was recorded was at a high of 39% in Q4’19, which included the addition 3.5 million unemployed people who were not accounted for in the official unemployment definition. This figure is commonly referred to as the “real unemployment rate” by most economists, as it shows the exact number of people who are not absorbed in the labour market.

The extended unemployment rate figure was recorded was at a high of 39% in Q4 2019.

Economist from the University of Witwatersrand’s school of economics and business science, Dori Posel, is among scholars who hold the view that people who are not actively looking for jobs, but say that they want employment, should be included in the official definition of unemployment. She also highlights that the cost of looking for a job in South Africa as expensive and, therefore, should be considered as one of the plausible reasons why people are not actively looking for employment — simply because they cannot afford it.

There is also the major concern of underemployment in South Africa. This occurs when an individual’s skills, which are classified as labour in the factor of production, are under-utilised. In simple terms, workers’ skills, experience and knowledge are not being optimally used by firms and this may result in production not being explored to its full capacity. The most important aspect of underemployment is that in their formative years, workers miss fundamental training to attain skills that will assist them in becoming highly marketable in the future, as well as making them experts and sector specialists in their respective fields. This, however, is viewed by many as a secondary question with the primary concern and priority being the ability of young people to attain employment in the first place.

Furthermore, the burden of unemployment in South Africa rests largely on the youth (aged 15-35 years) who account for 58.1% of the total number of unemployed persons. This is particularly problematic for many reasons. In the short term, unemployment creates a vacuum for young people to engage in counter intuitive activities such as crime and drugs and in the long term, this results in a skills gap and a mismatch between the jobs of the future and the skillsets possessed by the labour market, which will ultimately contribute to the cycle of poverty and inequality levels being exacerbated.

The rise of small businesses
In response to the unemployment crisis, most young people in townships have begun to identify the business opportunities that exist in their communities and have started to provide a service-centric response in this regard. This has seen the emergence of young entrepreneurs in the clothing, food, service and technology industries competing directly with the more formalised businesses in the affluent market, through the use of social media and other the digital platforms.

This positive move by young people to take a more proactive stance towards bettering their own livelihoods has been hailed as a great initiative to combat unemployment. There has, although, been an outcry for government to provide better support to help small and medium enterprises by providing funding schemes through their institutions. Entrepreneurs are of the view that this funding from government will act as an antidote to the rising unemployment rate and a catalyst for growth, with a more immediate effect. In the past, it has been a challenge for young entrepreneurs to get assistance from the government funding agencies, with many citing institutional red tape and bureaucracy as reasons why they are unable to access the proposed funding by government. Recently, many saw the SMME relief fund aimed at assisting small businesses with the effects of Covid-19 as the most proactive stance from government to date.

The department of Small Business Development minister Khumbudzo Ntshavheni has acknowledged that more has to be done with regard to providing more pragmatic and timeous assistance to SMMEs during this period. In a statement published by her department on the 23 May, she announced the second wave of support for informal, micro and small enterprises including cooperatives and spaza shops based in rural areas, as well as in townships. This comes after the realisation that the initial amount and the initial group of entrepreneurs that government had qualified to receive support was not inclusive of the large number of informal traders who work daily to provide food for their families. Seamstresses, panel beaters and small-scale bakeries can now qualify to get the Covid-19 relief assistance package from government at this time.

With this kind of cooperation from the state in assisting small business to maintain profitability even at marginal levels, one is optimistic that this support will continue to prevail even post the lockdown stage but most importantly, that this will present a great opportunity for all stakeholders in South Africa to work together to lower the scourge of youth unemployment, inequality and eradicate poverty for good.

Ntombana Mbele has recently completed her Master’s degree in Economics with special focus on the application of Econometric Modelling in Issues of Industrial Policy and Trade Policy. Her other qualifications include an Honours Degree in Financial Economics and Undergraduate Degree in Econometrics and Investment Management. Mbele is also very passionate about youth development, particularly youth from previously disadvantaged communities.