By Lehlohonolo Lehana.
PwC South Africa has released its ninth South Africa Economic Outlook report for 2023, focusing on South Africa’s lost demographic dividend and the entrepreneurship needed to win it back.
Key content in this report includes:
– Demographic shifts: Megatrends are impacting the social stability challenges that the world (and South Africa) faces.
– Macroeconomic outlook: Youth unemployment is set to continue rising — unless we do something different.
– Finding the lost demographic dividend: An estimated R137bn in extra household income if we could get the youth unemployment rate back to 2008 levels.
– Closing the employment gap: Entrepreneurialism needs to permeate through all our townships and cities.
– Taking the lead: Leadership skills needed to help the entrepreneurship ecosystem flourish.
– How PwC is helping its clients make a positive societal impact in South Africa, and also how we are involved in upskilling and entrepreneurship programmes in the country.
The report has noted that youth unemployment in South Africa is at shocking levels – despite small gains made in the overall job market and economy in Q2.
PwC’s Megatrends research warns that, if countries are unsuccessful in addressing youth unemployment, they are likely to face increasing social unrest.
According to PwC, youth unemployment levels in South Africa (people aged 15 to 24) sit at 70% when looking at the extended definition (people who are unemployed and have given up working).
Youth in this bracket make up approximately 13% of the labour force, accounting for 2.3 million individuals. Of these, approximately 1 million have simply given up looking for work.
The economic scenarios for South Africa suggest that the youth unemployment rate will continue to rise unless something different is done.
Lullu Krugel, PwC South Africa Chief Economist, says:
“In recent years, South Africa’s social issues have come to the front of public conscience with greater ferocity. With much introspection, larger pockets of society have realised that in order to mitigate and fix the issues being faced by our communities today, a collective effort is needed, as we share a collective responsibility to address issues. Fixing them, however, is a far greater challenge than it was a decade or two ago, given the growth of economic disparity, the rise in social and political polarisation, and the growing lack of trust that the public has in institutions.”
“In this report, we conduct a simulation that brings the current youth and graduate unemployment rates back to the levels seen in 2008. This scenario — with the demographic dividend coming to fruition — would see an extra 1.8 million jobs for young South Africans. We then conducted a Socio-Economic Impact Assessment (SEIA) to quantify the economic value of the potential income for the South African economy. Our analysis found that this could boost the country’s total household spending by R137 billion (around 3.1%) and create another 300,000 direct, indirect and induced jobs. This spending can also add another R36 billion to tax revenues.”
Marthle du Plessis, PwC Africa Workforce of the Future Platform Leader, says:
“Increasing youth employment requires skills development. However, for millions of young people in South Africa, these skills are hard to come by as countless communities lack access to crucial opportunities, which makes preparing for the world of work an almost impossible task. Bridging the skills gap is a complex problem that requires all stakeholders — government, the private sector, education institutions and community organisations — to work together and make the country a more resilient, inclusive and entrepreneurial economic space.”
The alternative to job creation is encouraging entrepreneurship and creating an environment conducive to entrepreneurship to grow this part of the business.
This is currently a struggle in the country, as around 80% of small-and-medium enterprises die within five years of being created. Government’s regulatory requirement has in most instances been a hindrance to this sector.
The scale and speed needed to address this requires a radical approach that is focused on empowering a massive number of new entrepreneurs at a community level.
“Entrepreneurialism needs to permeate through all our townships and cities. However, winning this entrepreneurship challenge will require a coordinated effort across society (government, the private sector, education institutions, community organisations) to build momentum, fully develop and hyper-scale this ecosystem towards creating massive amounts of jobs,” said the report.
The domestic economy needs to grow by at least 2% annually to turn the tide on jobless youth. But the Reserve Bank has forecast South Africa’s economic growth by 0.4% this year and 1% in 2024.
PWC Africa is not far off in its predictions. It anticipates Africa’s most advanced economy will grow by an average of 1.2% between 2024-2030.