ECONOMETRIX | Leaders in Economic Insight

The Unemployment Challenge in

South Africa

Dr. Azar Jammine

Director & Chief Economist of Econometrix

Innovation Workshop 8 November 2011

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Proportion of Population by Age Group & Race, 2011

Black Coloured Indian White Total

Age % of Total

0-14 33.4 27.6 22.4 18.1 31.3

15-29 30.5 25.8 26.5 20.2 29.0

30-59 29.9 39.3 40.0 41.1 32.0

60-80+ 6.2 7.3 11.1 20.6 7.7

Total 100 100 100 100 100

Source: Stats SA, Mid-Year Population Estimates 2011

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Working-age population will increase in developing regions (Projections of working-age population by region, 2010-2050)

Source: UNDP

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IMF Forecasts for Growth of Sub-Saharan Countries

2012-2016

Mozambique 7.8

Zambia 7.5

Angola 7.3

Tanzania 7.0

Uganda 6.7

Kenya 6.4

Côte d'Ivoire 6.4

Nigeria 6.2

Democratic Republic of Congo 6.1

Ghana 6.1

Botswana 5.3

Senegal 5.1

Lesotho 4.9

Namibia 4.3

Mauritius 4.3

Malawi 3.9

South Africa 3.7

Zimbabwe 3.0

Swaziland 1.9

Source: IMF WEO, Sep 11

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Electricity

Source: Nasa

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SA in Context of SADC & World

Gross Domestic Product, Current Prices

1995 2009 2010 2030

SA as % of SADC 78.3 60.8 62.9 48.1

SA as % of Sub-Saharan Africa 47.4 31.8 33.8 23.7

Source: IMF

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0 10 20 30 40 50 60 70 80

South Africa

Zambia

Niger

Senegal

Malawi

Mali

Madagascar

Uganda

Botswana

Morocco

Mauritius

Tunisia

Average MLA scores (percentage) ranked by numeracy results

Numeracy average Literacy average Life skills average

Internet Usage

June 2010

Internet Users User Growth (2000-

2010)

Penetration

(% of Popu)

Tunisia 3 600 000 3500.0 34.0

Morocco 10 442 500 10342.5 33.0

Nigeria 43 982 200 21891.1 28.9

World 1 966 514 816 444.6 28.7

Egypt 17 060 000 3691.1 21.2

Algeria 4 700 000 9300.0 13.6

Zimbabwe 1 422 000 2744.0 12.2

Africa 110 931 700 2357.3 10.9

South Africa 5 300 000 120.8 10.8

Kenya 3 995 500 1897.8 10.0

Uganda 3 200 000 7900.0 9.6

Zambia 816 700 3983.5 6.8

Namibia 127 500 325.0 6.0

Botswana 120 000 700.0 5.9

Libya 353 900 3439.0 5.5

Ghana 1 297 000 4223.3 5.3

Angola 607 400 1924.7 4.6

Lesotho 76 800 1820.0 4.0

Cameroon 750 000 3650.0 3.9

Tanzania 676 000 487.8 1.6

Congo, Dem. Rep. 365 000 72900.0 0.5

Source: Internet World Stats

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Quarterly Labour Force Survey : Rates (%)

3rd Qtr 2009 2nd Qtr 2011 3rd Qtr 2011

Unemployment Rate 24.5 25.7 25.0

Employed/population ratio (absorption) 41.3 40.5 40.9

Discouraged work-seekers as % of Labour force 9.6 12.5 12.4

Unemployment Rate incl discouraged Workers 34.1 38.2 37.4

Source: Statistics South Africa

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Quarterly Labour Force Survey

Unemployment Rate by Population Group

3rd Qtr 2011

Black/African 28.9

Coloured 23.6

Indian/Asian 10.8

White 5.6

TOTAL 25.0

Source: Statistics South Africa

Inequality in Education

Proportions of over 20's

Black Coloured Indian White

Educational Qualification 2005 2010 2005 2010 2005 2010 2005 2010

Up to Grade 7 37.9 29.3 29.0 21.0 13.3 9.0 0.6 0.7

Grade 8-10 25.4 26.0 33.8 34.0 21.6 19.9 15.3 14.9

Grade 11-12 28.2 35.6 27.3 33.6 44.3 46.2 45.3 44.9

Degrees/Diplomas 7.6 8.1 8.3 7.3 18.1 15.9 35.6 37.6

Source: Stats SA, General Household Survey

Public Expenditure on Education as % of Total Government Expenditure

2008

Chile 18.2

South Africa 17.8

Indonesia 17.5

Peru 16.4

Brazil 16.2

Argentina 15.0

Colombia 14.9

USA 14.8

Poland 12.0

Russia 11.8

Spain 11.1

Czech Republic 10.5

Hungary 10.4

Italy 9.7

Source: World Development Indicators, 2010

Matric Results Public Schools

2009 2010 % of Total

Started School 12 yrs earlier 1 550 790 1 318 932 100.0

No writing matric 552 073 537 543 40.8

No passing matric 334 718 364 513 27.6

No receiving university endorsement 109 697 126 371 9.6

No receiving university technology endorsement 131 035 146 224 11.1

Other 93 356 91 241 6.9

Part-time matric 39 255 82 835 6.3

Maths > 40% 85 356 81 374 6.1

Maths distinctions 8 713 9 525 0.7

Science distinctions 999 5 962 0.4

Results in Key Subjects 2010

Percentage of those who wrote

Marks >30% >40%

Maths - 30.9

Science 47.0 (36.8) 29.7

Accounting 35.3

Agricultural Science 63.0 32.0

Maths Literacy 86.0 (74.7) 64.7

Geography 40.6

Life Sciences 74.6 (65.5) -

( ) 2009

Average Annual Growth Rate in GDP (%) by Sector

1981-1993 1993-2001 2001-2009

Agriculture * 0.6 1.2 2.0

Mining * -0.2 -0.6 -0.9

Manufacturing * -0.4 3.1 1.8

Electricity * 3.5 1.8 3.2

Construction -2.8 1.8 9.5

Trade Sectors 0.7 3.9 3.3

Transport & Comms 0.8 6.7 5.2

Financial Services 2.0 4.7 6.3

Personal Services 2.6 1.1 3.3

General Government 2.6 0.1 3.1

TOTAL 0.6 2.9 3.7

* Export oriented sectors

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GDP at constant 2005 prices, seas adj, annualised

Q-o-Q Annualised (%) 2011.1 2011.2

Agriculture -3.7 -7.8

Mining & Quarrying -4.0 -4.2

Manufacturing 14.5 -7.0

Electricity 3.3 0.9

Construction 0.0 0.5

Trade & Catering 4.4 4.1

Transport & Communication 3.6 4.1

Finance & real estate 4.8 2.9

Personal Services 2.7 2.8

General Government 1.8 5.7

Total 4.6 1.0

Total excl. Agriculture & mining 5.5 1.6

GDP @ Market Prices 4.5 1.3

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Impediments to Job Creation

Inadequacy of education & skills development

Unfriendly labour market environment

Insufficient focus on small business & entrepreneurship

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Access to social grants to rise to 16.8m by 2013

5.9m registered taxpayers

5.7% of taxpayers account for 39% of personal tax

14.3% of taxpayers account for 33% of personal tax

i.e. 20% of taxpayers or 1.2m account for 72% of personal tax in population of

over 50m

Increasing Dependency Syndrome

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Inability of Govt to Implement Infrastructural Investment

-20

-10

0

10

20

30

40

50

60

06 07 08 09 10 11

Gro

wth

%

Gross Domestic Fixed Investment by Type of Organisation

Public corporations General government Private business enterprisesSource: SARB

Shares (%) of Provincial Budgeted Expenditures Actually Spent 2010/11

Total

Personnel Capital

Total 101.1 84.0

% Growth (y-o-y) 12.5 -3.3

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Social compact vital to make progress

• Private sector has the skills, but government the power

• Lack of trust between government, business & unions needs to be overcome

• Business needs to overcome stigma of excessive remuneration

• Labour needs to overcome obsession with opposition to ‘dual labour market’

• Examples should be drawn from Singapore & Germany

• Alternative is more political tension

Innovation for Development

• Initiatives to find employment for unskilled people

• Innovation in developmental projects in communities

• Will provide employment & motivation for those previously never employed

• Will provide dignity

Other Solutions to Job Creation

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Educational Achievement in Maths & Science

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Poor education & Skills

Literacy & numeracy amongst the world’s worst

o Result is one of lowest labour absorption ratios in the world (40.8% cf 64%

in US)

o Marked increase in proportion of discouraged workers

Most unemployed are unemployable

o Leads to one of lowest productivity growth rates in world

Impediments to Job Creation

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Skills needed are in short supply

Average age of artisans is 55

Poor throughput from schools

Matric results artificially enhanced by Umalusi

Incompatibility between NGP skills requirements & Matric

throughput (e.g. 30,000 engineers by 2014)

Impediments to Job Creation

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Perceptions amongst employers that job creation generates

hassles

Labour legislation creates impression of difficulties in firing

Requirement to create ‘decent’ (permanent, not temporary) jobs too onerous

Challenge of dealing with militant unions

Minimum wage legislation makes offering menial jobs unattractive (e.g.

agriculture has lost more than 1m jobs since minimum wages were

introduced)

Difficulties in accessing training funds

Bureaucracy of SETA’s & inefficiencies of many

Learnerships drawing to a close

Union opposition to wage subsidies

Cosatu slates R5bn for 1st time job creation

Minister of Finance has since suggested only 4m jobs to be

created by 2025 if no labour market adjustments made

Impediments to Job Creation

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Lip-service to encouraging small business activity &

entrepreneurship

According to Minister of Finance 69% of all jobs created by businesses with less

than 50 employees

SMME’s create proportionately far more employment than big business

Regulatory environment unattractive for small business

Difficulty in accessing finance

Government favours ‘Golden Triangle’ (government, trade unions, big business)

eg access to R20bn investment subsidy only with investment exceeding R200m

Impediments to Job Creation