South Africa's unemployment rate increased to a new record of 35.5% in the fourth quarter of 2021, a 0.4 percentage point increase on the 34.9% recorded in the third quarter.

This is the highest the unemployment rate has been since Statistics South Africa (Stats SA) started recording quarterly employment statistics in 2008.

Financial services company Nedbank comments that the unemployment figures ballooned as a result of a large number of discouraged jobseekers returning to the labour force on signs of improved economic activity, outpacing the number of jobs on offer.

For comparison, 262 000 new jobs were made available in the fourth quarter, while 278 000 people lost their jobs. This brings the total number of people employed in South Africa to 14.5-million, while 7.9-million job seekers remain officially unemployed.

Nedbank notes that, while economic activity rebounded in the period after being interrupted by multiple shocks in the third quarter, business confidence remained depressed as a result of slow economic reforms and persistent power shortages. This discouraged companies from rushing to expand capacity.

Stats SA further reports in its latest Quarterly Labour Force Survey (QLFS) that, according to the expanded definition of unemployment, which includes those persons who have given up on finding employment, unemployment stood at 46.2% in the fourth quarter.

Unemployment was highest in the Eastern Cape at an official level of 45% (expanded level of 53.2%), while the Northern Cape had the lowest unemployment rate, at 25% officially (50.1% as per the expanded definition of unemployment). Gauteng’s level of unemployment was officially at 36.6%, but 44.4% as per the expanded definition.

In addition, the QLFS reveals that formal sector employment increased by 143 000 jobs in the period, while informal sector jobs declined by 48 000 jobs.

The net increase in employment of 262 000 in the fourth quarter was mainly owing to jobs being created in private households (129 000 jobs) – up 11.4%, 118 000 jobs in the trade industry (4.2% increase) and 73 000 jobs in the community and social services industry – up 2.3%.

"The increase in community and social services probably reflects a spike in temporary jobs to manage the municipal elections in November, while employment in the domestic trade sector was lifted by increased activity in the hotel and tourism industries owing to more lenient lockdown restrictions," Nedbank points out.

The agricultural industry added 38 000 jobs (4.6% more), mining 25 000 (7.3% more) and the finance industry 18 000 jobs – up 0.8%.

Although the boost from the agriculture sector highlighted the industry's importance in terms of job creation, Agri SA employment specialist Lebogang Sethusha says skilled employment in agriculture has not recovered to the level of the fourth quarter of 2020.

“The [fourth quarter of 2021] result shows that 68 000 people were employed in skilled agriculture, compared to the same quarter in 2020 when 85 000 people were employed. This is a 20.6% decrease year-on-year,” she says.

While the quarter-on-quarter results show a level of recovery – with skilled employment at 63 000 individuals in the third quarter of 2021 – Sethusha says there is still much ground to be made up. “It remains a concern that this drop in skilled employment represents a brain drain for the sector.”

Despite the latest employment levels, she says the agriculture sector’s growth continues to be stifled by poor infrastructure, such as road, rail and ports, among many other challenges, such as rising input costs.

“In this difficult climate, the growth in employment in the sector for [the fourth quarter of 2021] shows that the sector is still capable of absorbing labour. Addressing the constraints on growth would enable the sector to create even more employment opportunities during this difficult period as the economy recovers from the Covid-19 pandemic,” says Sethusha.

Decreases in jobs during the period were mainly attributed to the manufacturing sector, where 85 000 jobs were shed – a 6.1% reduction; the construction sector being 2.1% down with 25 000 jobs lost; 14.7% fewer jobs (14 000) in utilities; and a 1.4% reduction (13 000) in jobs being lost in the transport industry.

In the manufacturing sector, Nedbank notes that load-shedding and power cuts continue to weigh on employment, while subdued fixed investment is still negatively impacting job creation in construction.

All things considered, the bank suggests that 2021’s employment levels point to the economic recovery not being strong enough yet to support employment creation, thereby leading to the bank suggesting an uncertain outlook for the job market going forward.

Nonetheless, Nedbank says that the worst of the Covid-19 pandemic seems to be over, therefore, lockdown disruptions will be fewer and, together with ongoing economic reforms, business confidence should improve, encouraging investment spending and ultimately supporting employment growth.

REMEDY?
Consulting firm The Don Consultancy Group (DCG) chief economist Chifi Mhango, meanwhile, says speedy policy implementation and proper alignment of South African government job creation initiatives are key to dealing with the challenges of rising unemployment.

“Job creation and retention involves active participation of both private and public sector through investment into the economy, in a conducive-environment,” he says.

However, an environment of high electricity costs, unreliable electricity supply, rising logistical costs and an inefficient railway system, serves only to inhibit job creation and retention initiatives, as it is unsustainable to invest in such an economy, says Mhango.

Although the South African government has continued to provide industrial incentives to attract investment into the country’s economic industrial landscape, the contribution of these efforts towards job creation and retention seems to be lagging, as data suggests, he adds.

In this regard, Mhango suggests a diversification of the South African exports basket towards value-added products, identification of new markets among the growing African economies to support production growth and urgently addressing electricity supply challenges and costs.

In addition, he says a managed approach towards administered logistical costs and its railway inefficiencies will also be helpful; as will an alignment of policies across government to support small, medium and micro-enterprises; an improved pace of government policy implementation with localisation as one of the key elements; and the restoration of public confidence in State-owned entities.