Advisory firm PwC highlights unemployment rate is heading to 40%.
By Lehlohonolo Lehana.
South Africa is expected to generate almost two million jobs by 2030 – but this is not near enough to absorb the people coming into the workforce, data from professional services firm PwC shows.
"Our upside scenario falls short of the 4% real GDP growth needed to bring the unemployment rate back to 30%. Our current macroeconomic outlook sees real GDP growth moderating to a new long-term average of around 1.5% from 2024 onwards.
"Based on our statistical analysis of the relationship between economic and employment growth, this growth pace could create nearly two million jobs by 2030.
"However, at the same time, the country’s labour force will continue growing as more people enter the labour market after finishing secondary and tertiary education. Under our baseline scenario, the new jobs created towards the end of the decade will not be enough to absorb all of these new (unemployed) workers."
As a result, with current trends in mind, PwC expects the narrowly defined unemployment rate to increase to 39.3% by 2030 from 35.3% at the end of last year.
"It is likely that, under this baseline scenario, South Africa will remain in the worst spot globally on both the total as well as youth unemployment rate tables for the foreseeable future.
"The solutions to South Africa’s unemployment conundrum are not easy – but the time to act is now. We need to choose the areas that will have the biggest impact on GDP and jobs growth and where big change is possible without necessarily needing big financial commitments.
PwC said that the big-ticket 'actionable' items are:
- Improving the electricity situation;
- Ensuring that South Africa has the correct skills base to address the needs of the labour market;
- Increasing private sector investment.
Under a reform-focussed scenario, these changes could lift South Africa’s potential long-term economic growth rate from the current 1.5% per annum to above 4% per annum over the next decade.
At a growth rate of 4% per annum from 2025 to 2030, the country's unemployment rate could again fall below the 30% level before the end of the current decade, PwC said.
"Now is the time for such a reform-focussed agenda to take shape: President Cyril Ramaphosa is currently working on a social compact with business, labour, government and social partners to kickstart the economy.
"However, we are not very optimistic that the full suite of necessary reforms will materialise — even if the compact includes the necessary changes, implementation is always an Achilles heel.
"As such, our upside scenario, accounting for at least some reforms, expects real GDP growth of 2% per annum over the medium to long term. This will see the unemployment rate close the decade at 36.9%; even under our upside scenario, joblessness will continue rising."