South Africans could be forgiven for thinking that the global financial crisis of a decade ago was back. In the first quarter, the economy shrank 3.2%, its biggest contraction since the days when subprime home loans in the United States pulled the rest of the world down with them. Then in the second quarter, the unemployment rate rose to 29%, its highest level since “The Great Recession”. And business confidence levels are also close to where they were a decade ago.
At least 10 years ago, South African policymakers could take some solace in the fact that the domestic economy was far from alone. Everyone was screwed, and at least some of the blame could be placed on Wall Street bankers and the predatory loan/ponzi schemes they dangled in front of working-class Americans whose wages had been stagnating for decades.
But in 2019, they don’t have this comfort. This is largely a mess that has been made during the past decade, as the lost Zuma years continue to extract their toll, with the poorest among us bearing the brunt. And the latest jobless data comes ahead of a widely expected downgrade by Moody’s, the last of the ratings agencies to maintain the fiction that South Africa’s debt is investment grade.
The expanded definition of unemployment, which includes those who have given up looking for a job, rose to 35.8% from 35%. Most economists reckon that figure may even be higher.
“The number of unemployed persons increased by 455,000 in Q2,” Stats SA noted, the highest increase in the number of unemployed persons in the second quarter since 2013. So the economy shed close to 500,000 jobs in that period, with the number of unemployed swelling to 6.7 million from close to 6.2 million.
And one of the more alarming things about this data – as if it is not shocking enough – is that most economists believe that the economy picked up at least a bit of steam after a dreadful first quarter, when load shedding shredded any hopes that 2019 might be a year of significant recovery.
But there was actually an increase of 62,000 jobs in that quarter. One way to look at this is that the hardship of Q1 lead to job losses in Q2 – South Africa’s labour legislation makes it difficult for employers to quickly cut staff, which is widely cited as one of the reasons for a reluctance to add to payrolls even when the economy is expanding decently.
Even sectors that have turned a corner are trimming jobs. Profits in the mining industry are surging thanks to a combination of rising commodity prices, past restructuring, and general rand weakness. But 36,000 jobs were lost in the mining sector in Q2. That trend will continue as there is little investment going into new projects, and as the sector slowly pivots to mechanisation where it is possible in South Africa’s challenging geology.
Above ground, this is an economy that is embracing automation at a snail’s pace, but if and when it does, expect the ranks of the jobless to swell even higher.
For example, petrol pump attendants have gone the way of typists and dodos in much of the developed world. And don’t be in a hurry if you want to buy a few groceries. You’re not going to have the army of cashiers, with others bagging your groceries, that you typically find here. And yet even with jobs that no longer exist elsewhere, or have been greatly reduced, South Africa still has an unemployment rate just shy of 30%. The situation is simply catastrophic.
Economists must be getting tired of pointing out what needs to be done: that the cost of doing business must be reduced to attract capital that could potentially grow the economy and create jobs, not to mention the vast reforms needed in a system of public education that is churning out legions of unemployable youth.
“It’s pretty tragic that this government remains so opposed to capital. It blows my mind that they think they can grow an economy without it. President Cyril Ramaphosa acts and talks like he wants it and then the government goes out of its way to implement policies that run completely against the capitalist grain,” George Glynos, Head of Research and Analytics at ETM Analytics, told Business Maverick.
Who needs a global financial crisis when you have one manufactured at home? At least we can say this is made in SA.
"There isn't a Monday that would not cede its place to Tuesday." ~ Anton Chekhov