South Africa

South Africa

SA’s big January unemployment hit

SA’s big January unemployment hit

Thousands were added to the latest unemployment figures in January, according to the Adcorp Employment Index. Unsurprisingly, some of the heaviest losses were sustained in the mining sector, where the news stubbornly refuses to get better. By SIPHO HLONGWANE.

Employment numbers fell sharply in January 2013, falling at an annualised rate of 3.2%. During the month, the economy lost 51,495 jobs. Permanent jobs declined 5.3% (40,232 jobs) representing nearly 80% of job losses in January alone. While no sector of the economy was spared, wholesale and retail trade (-8.8% or 13,000 jobs) and mining (-17.4% or 4,000 jobs) were the worst hit. This is according to the Adcorp Employment Index, which was released on Monday.

This may be putting South Africa’s fourth-quarter employment figures in a different light. According to Statistics South Africa (Stats SA) 68,000 jobs were lost in the last three months of 2012 but, surprisingly, the overall number of jobs lost in the mining sector was next to none.

Despite the strikes observed in the mining industry in the recent past, no job losses were observed in this industry in the fourth quarter of 2012, however, there was a sharp increase in temporary absence from work. The number of people who reported that they were absent from work in the week before the interview increased from 5,358 to 23,787 between third and fourth quarters of 2012,” Stats SA said.

After numerous warnings that the labour crisis in the mining sector would surely result in job losses, that process seems to have kicked into place now after the initial lag. So far, none of the major strike flashpoints in the mines (Lonmin and Anglo American’s Marikana operations, Harmony Gold in Carletonville or Gold One’s Modder East mine in Springs) have seen widespread job losses within the same operation or company, though many have threatened to do exactly that since August 2012 when things became very tense.

The losses were never unexpected given that mining output had dropped 11% in November 2012, compared to the previous three months. With South Africa producing most of the world’s platinum and chrome, and also being the world’s fifth largest gold producer in terms of kilograms produced per year – let’s not forget that the industry employs about 500,000 people – the crisis is no laughing matter in terms of its impact on the economy and the companies operating within the troubled industry. (Also, it is interesting to note that hedge fund managers flocked to platinum after August, anticipating that the ongoing strikes and tumbling output would make platinum very expensive, and them very rich indeed.)

In January, Anglo Platinum announced that it would have to undergo a restructure that could see the company shedding four shafts, one mine and 14,000 jobs in total. The unions and government reacted furiously to the announcement, prompting a promise of “talks” from the company, but not a guarantee that the unrest would not result in lost jobs.

It isn’t just the mining sector that has been under the threat of sweeping jobs losses of late. Several farm unions said that the unrest that has swept over the Western Cape agricultural economy could mean thousands of jobs lost. So far, disaster has been averted there through hastily-signed deals but, just like the platinum mines 1,000km to the north, nobody is certain that the new wage agreements won’t force employers to cull jobs in the near future.

The ruling ANC has promised to introduce a new raft of legislative changes to help alleviate the burden of the bad economy as well as the mining unrest. They, like proposed amendments to the Mineral and Petroleum Resources Development Act, mostly intervene by giving the government wider discretion to intervene in the economy, while proposing new tax regimes like a new mining capital windfall tax. At its recent national congress in December, the party resolved to capture an even-bigger share of minerals windfall, indicating that more regulations and tax schemes are likely in the near future.

Some of the people disappearing from the Adcorp Employment Index are not actually out of jobs, but may have slipped beneath the “formal economy” radar, according to Adcorp market analyst Loan Sharpe. His analysis of the most recent Stats SA employment figures, compared to data from the South African Revenue Services, shows that the percentage of unreported taxable income is anything between 25% and 33%. And even more interestingly, the number of businesses (almost exclusively sole proprietorships) dropping out of the formal economy and pitching up in the non-taxed, informal economy is almost the same. The conclusion that Sharpe draws is that small businesses are simply dropping under the radar and shirking their tax duties in order to survive.

As indicated in the Adcorp Employment Index for February 2012, 440,000 small business ‘closures’ occurred between 2006 and 2011, and the number of new business start-ups fell to an all-time low in 2012, based on data obtained from Stats SA’s Quarterly Labour Force Survey. It is likely that these businesses continued to exist and operate but stopped reporting themselves to the authorities. That is, these enterprises re-emerged in the informal sector where compliance with income tax laws is patchy and incomplete,” Sharpe said.

So when we’re quoting figures for the jobs lost and businesses closed, some of them may have simply chosen to disappear, while continuing to operate within the informal market. The expectation is that tax for high-income earners will go up as well. And as go those, so go the tax-pinched small businesses, according to Sharpe.

South Africa’s informal sector is growing, largely due to circumvention of labour laws and evasion of income taxes. In order to stem the growth of informal economic activity, there is no real alternative but to relax labour laws and reduce income taxes.” DM

Photo: Thousands of hopeful job applicants queue for 200 positions advertised by the Metro Police Department in Durban September 9, 2009. REUTERS/Rogan Ward


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