South Africa’s unemployment rate is a nightmare; President Cyril Ramaphosa says it keeps him awake at night. Certainly, the country’s soaring unemployment rate — published recently in Statistics South Africa’s Quarterly Labour Force Survey — should be giving all of us sleepless nights.
Our unemployment rate stands at 46.2% (including discouraged work seekers), which is the highest since the survey started in 2008. Nearly 12.5-million people are unemployed, and the real nightmare is the disproportionate impact this has on our youth, with three out of four people between the ages of 15 and 24 unemployed.
Our young people are more than the future customers for businesses and the future tax base on which our economy will stand. They need to gain practical skills to keep South Africa competitive in a rapidly changing global economy. Crucially, they must be economically included so that they realise benefits for democracy.
What’s behind our unemployment crisis
Our unemployment crisis is no surprise, and it has been building for decades. While the Covid-19 pandemic decreased the number of people with jobs from 16.3-million to 14.5-million people between 2020-22, the roots of the crisis lie deeper.
There are three main issues behind the crisis.
First, our lingering legacy of apartheid education and a further 28 years of poor management requires radical change. Right now, despite the government spending R440-billion a year on education and skills, our young people don’t have the skills they need to be employable.
Second, our levels of economic growth have barely touched 2% a year in the last 10 years, leaving little to trickle down to the most excluded. South Africa ranks 77th out of 82 countries on the WEF’s Global Social Mobility Index 2020, which shows the ability of a child to experience a better life than their parents. Without access to finance, land, housing, networks or jobs, it takes nine generations for a person born into poverty to reach the middle class.
Third, the global economy is in the midst of major changes, resulting from the impact of new technologies and accelerated by the Covid-19 pandemic. Millions are likely to be left behind unless they can acquire the right skills and experience.
So, how do we reduce unemployment in South Africa?
Ramaphosa and the government are well aware of the need for reforms to boost economic growth. In his address at the SA Investment Conference (SAIC), the president announced a critical package of reforms to unlock economic growth, including restructuring Eskom and the country’s electricity system, auctioning spectrum to provide cheaper and more accessible data, and restructuring our ports and rail network. These are necessary actions to take in the short-term, but from which we will only reap benefits in the long term.
Economic growth is to a country what income is to a household. A country generating more revenue through exports is like household members getting paid jobs. And like any household, the more money its members earn, the more it can spend, invest and save. Successful countries like Vietnam or Singapore achieved high rates of economic growth, which enabled full employment and massively reduced poverty.
To drive economic growth, we need sound regulations, and they must be implemented well. Given that most key sectors depend on state infrastructure (think of the ports currently holding up exports), the quality of public administration needs to be improved to become as smooth, efficient and corruption-free as possible.
Investment in our youth should begin at ground level. That’s where the preparation for the workforce starts. Basic education for schools must be improved — and that means paying attention to the worst 50% of schools, not the best. The best don’t need our help.
All the above are necessary changes to have a positive employment impact in the long term. But more than that, we need to ensure we boost employment numbers in the immediate term, especially for young work seekers. This requires special rules and incentives for the private sector to make it easier and less risky to employ youth in those vital first jobs.
That’s where programmes like the Youth Employment Service (YES) need to be accelerated, to rapidly drive employment in the short term. YES was highlighted by the president in his address at the SAIC as his first example of the social compact being forged between government, labour and business.
The largest jobs impact programme of its kind in the country, YES is a 100% private sector funded initiative established to create job opportunities for unemployed youth. Despite the Covid-19 pandemic, it has worked with nearly 2 000 private companies and numerous implementation partners to get over 75 000 young people into first-time jobs.
This has seen collective salaries of R4.2-billion paid to young workers, 58% of whom are women. These young South Africans have also acquired invaluable formal work experience, which will stand them in good stead as they search for future opportunities. By sponsoring youth jobs, companies boost their B-BBEE scores and their environmental, social and governance (ESG) credentials.
But while jobs and incomes are important, we must also give our youth the tools and skills they need to connect to, and thrive in, the modern digital world. Thousands of YES youth are being placed in positions such as data capturers, business process outsourcing roles, cyber security agents, digital artisans, drone pilots, content creators and software developers. These future-facing sectors can help South Africa emerge as a leading nation in an age of technology.
The president’s pronouncements at the investment conference point in the right direction, albeit years late. But they present an opportunity that we as a country and as a business community should grab with both hands. If we can do that, we may just stave off the looming catastrophe that youth unemployment represents to our young democracy. It’s not just a dream we should all aspire to achieve; it’s a dream that can, and must, be achieved. And then, maybe, we can all sleep a bit easier at night.
– Ravi Naidoo – CEO of the Youth Employment Service