[News] Key factors driving unemployment discussed

David Ansara | 29 Sep, 2019
He listed and deeply analysed the following issues: low economic growth; hostile broader economic policy framework; poor education; low skill level, and labour policy as key drivers of unemployment.

The driving factors behind the dire unemployment crisis currently plaguing the country were given a close inspection when the Ward 89 committee brought an expert in to analyse the problem during an interactive meeting at the Roodepoort Civic Centre on Wednesday, 25 September.

David Ansara, a chief operating officer from the Centre for Risk Analysis (CRA) and a regular speaker at conferences and events where he discusses the political economy of South Africa and future scenarios for the country, painted a very informative but grim picture of the situation we are in when he conducted his presentation on unemployment.

He listed and deeply analysed the following issues: low economic growth; hostile broader economic policy framework; poor education; low skill level, and labour policy as key drivers of unemployment.

Before elaborating on each point, he gave indications about where the country sits in relation to unemployment under both the narrow and expanded definitions of unemployment.

“South Africa has very high levels of unemployment. In the second quarter of the year, Statistics South Africa released data that showed that 29 per cent of the economically active population is unemployed – that’s basically about 6,8 million people, with only 16 million people being employed under the narrow definition of unemployment. With the expanded definition, which is much broader, the unemployment rate is about 38 per cent, which effectively amounts to 10 million people without employment,” he explained.

He also explained that the rate of unemployment affected youngsters of different age groups. “If you are between 15 and 24 years old, the unemployment rate is 56 per cent. And if you are between 25 and 34 years old, the unemployment rate is 35 per cent,” he said as he simplified the data. He added that this is a staggeringly high unemployment rate compared to other countries in the world.

On analysing the contributing factors, he said:

Low economic growth: “We have low economic growth in South Africa and there is a direct relationship between economic growth and unemployment. Last year, economic growth was 0,7 per cent, but for the last four to five years, South Africa hasn’t grown more than 2 per cent, meaning our unemployment rate has steadily increased and the economy has become less productive and less competitive.”

Hostile broader economic policy framework: “The second driver is the economic policy framework. Many industries, such as mining, are heavily regulated. The Mining Charter puts many conditions on mining companies and that means they have to apply for mineral licences from the State and need to have a 30 per cent equity partner, which result in less investment in the sector.

“And many of the people who are unemployed in South Africa are unskilled or semi-skilled, so we need sectors such manufacturing, mining and agriculture to be able to absorb them.”

He also touched on the issue of land expropriation without compensation as one of the key elements affecting the economy. “In the agricultural sector, farmers are more reluctant to expand their operations, meaning they will hire fewer people. However, the broader economic policy needs to be rectified in order to attract foreign investors,” he suggested.

Poor education: “Although South Africa spends 20 per cent of its national budget on education, the quality of graduates in that education system is poor. If you are a university graduate, your chances of getting a job are better than those of people coming from the basic education system without the mathematics, science and technology which will be needed in the coming new modern economy.”

Labour policy: “We have problems with basic labour relations policies which put severe restrictions on businesses’ ability to fire workers that are under-performing or delinquent. And that means their appetite to hire new workers is diminished.

“The labour policy needs to change,” he suggested. “And one of the unfortunate parts of the labour policy is the national minimum wage (R3 500 or R20 per hour). There are certain exceptions to this, because some people say that it’s not enough money, but if you consider it, earning less than the minimum wage is like earning zero per month,” he said.

He explained how this wage policy contributes to unemployment. “The effect is what an economist would call an ‘opportunity cost’ – when you don’t see the jobs that are being made available because of this. If you have a limited budget to spend on workers and you now have to pay them more, it makes logical sense to hire fewer workers,” he said as he reflected on the numerous retrenchments happening in most industries.

Ward 89 councillor, Amelia Bester, commented on what stood out most for her:

“What came to the fore is that education and training to fill specific needs in society is key. While it is hard for us as a community to influence political will and policy reform, we could strategise around educating our children to fit job opportunities and re-skill ourselves along those lines as well,” she reflected.

Original article here.

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