Statistics on the youth unemployment rate South Africa.

Statistics on the youth unemployment rate South Africa. photo: pexels.com

No quick fix for SA unemployment crisis – economists

Economists expect the SA economy to grow by 3.4% in 2021 and to add 467 000 jobs but the current unemployment crisis will take time to shift.

Statistics on the youth unemployment rate South Africa.

Statistics on the youth unemployment rate South Africa. photo: pexels.com

South Africa’s unemployment rate will only return to pre-pandemic levels in almost a decade and a tighter lockdown expected in mid-2021 will further impact the economy leading economists warned on Tuesday.                                                                                       

PWC economists Lullu Krugel and Dr Christie Viljoen were reacting in a report to the latest Statistics SA Quarterly Labour Fource Survey (QLFS) which showed the official unemployment rate had hit a record high of 32,5% since the start of the survey in 2008.

Impact of Covid-19 third wave on umployment crisis

The economists said that PwC’s employment scenarios for 2021 were 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 economists said in their report.

“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,” the economists said.

Viljoen and Krugel said in their report that they expected the SA economy to grow by 3.4% in 2021 and to add 467 000 jobs. 

“We expect total employment to return to 2019 levels (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,” they said.

Responding to the structural unemployment challenge

South African employment was 8.5% lower in the fourth quarter of 2020 compared to the year before.  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 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,” the economists said.

“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.”

Five tops to address unemployment crisis

According to PwC, labour-related considerations for governments to address unemployment and adjust to the COVID-19 new normal include:

1. Respond quickly to contain the impact by 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.

2. 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 resources.

3. Advance prospects of success. Governments may consider supporting the unemployed in finding work by implementing country-wide job matching portals/programs, partnering with organisations, giving wage subsidies and providing start-up support for entrepreneur.

4. 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 within the contemporary workforce as new digital trends accelerate the need to enhance digital skills.

5. 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, the pandemic has highlighted the need to accelerate transition to a more self-sustainable economy.

Hike in personal income tax not likely

In a note on Finance Minister Tito Mboweni’s Budget 2021 speech on Wednesday PwC said it did not expect any adjustments to personal income tax. “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,” PwC said.

READ: SA’s official unemployment rate hits new record high