Poverty, inequality and unemployment represent a trifecta of woes that are fanning the flames of social unrest and undermining the economy’s capacity to grow.  

In some ways, this is a vicious cycle. Economic growth is not always a panacea, but most economists agree that much higher rates are needed to create jobs and pull the unemployed from the pit of poverty. 

Yet the terrible trifecta itself is a constraint on growth. The unemployed and poor are hardly in a position to stimulate significant demand and consumption, for example, and a frayed social fabric is a deterrent to investment.  

What is especially worrying is South Africa’s high rate of youth unemployment, a squandering of the country’s potential “demographic dividend”. 

Accounting firm PwC has crunched the data and made some forecasts in its latest monthly SA Economic Outlook. These are simply terrifying. 

But PwC also has some helpful suggestions, which one suspects will largely be ignored by South Africa’s “policymakers”.

To wit, South Africa’s economy in Q2 grew by a faster-than-expected 0.6% on a quarterly basis and 1.6% year on year. 

“Alongside this better-than-expected economic growth performance, total employment increased by 5.0% y-o-y during Q2 2023,” the report says, noting that this was an addition of 784,000 jobs. 

But here’s the kicker.

“… of the 784,000 jobs created over the past year, only 45,000 went to youths aged 15-24 years,” the report says. 

“From a proportional perspective, 5.7% of the jobs went to this group of young people who comprise 13.0% of the labour force. As a result, the expanded unemployment rate (including discouraged workers) among this cohort was struck near the 70% mark. There were 2.6 million unemployed people in this age bracket during the second quarter, including nearly a million discouraged workers.”

No end in sight

It’s common knowledge that this moribund economy is not absorbing new entrants into the labour market, but the breakdown is still stark. And things look set to worsen.

“Under the status quo, all three of our scenarios point to a continued rise in the youth unemployment rate,” PwC says.

“We currently expect the South African economy to grow by an average of 1.2% p.a. [per annum] during 2024-2030. This is based on some improvement (reduction, not elimination) of load shedding and progress made to address logistics challenges, especially export-oriented rail. Our model suggests that this will result in youth employment increasing by an average of 1.0% p.a. towards 2030.”

The upside and downside scenarios see youth unemployment growing each year by 1.3% and 0.4%, respectively, until 2030.

In short, the fuse on this social bomb is shortening, and there is no sign of it getting defused. 

Depressingly, the report writes off the education system as a solution. Of all the elements of state failure under the ANC, this may well be the most egregious. Literally tens of millions of children have had their prospects for a better future squandered. 

“The solution to the unemployment problem is in the education system — but this will take too long to fix,” the report says. 

If you can’t even replace pit latrines at schools, then you’re hardly in a position to make a difference in the classroom. 

Still, it’s not all doom and gloom.

“We need to quickly bridge the skills gap to either get young people into formal employment or to create their own employment through entrepreneurship,” the report says. 

In short, young South Africans need to be provided with incentives to employ themselves, which in turn will provide some of the sparks for job creation and economic growth. 

Among developing economies at comparable income levels, South Africa stands out for its relative lack of self-employment. 

“In South Africa, self-employment represents only 10% of all jobs, compared to 30% in most upper middle-income countries such as Turkey, Mexico and Brazil,” the report says.

“South Africa has the highest youth unemployment rate in the world due in part to its failures to boost self-employment. 

“The scale of youth job creation needed to turn this around and reap the demographic dividend requires two key components: 1) a different mindset about entrepreneurialism from the status quo, and 2) leaders who can adopt this mindset to address the country’s employment challenges through entrepreneurship. In the first instance, changing the mindset of ordinary South Africans towards entrepreneurship will require instilling confidence and pride in local circumstances and how these can be improved.” 

This is sensible and in another report — Catalysing Township Revival Through Entrepreneurship Development — PwC notes low-hanging fruit such as township tourism (foreign tourists don’t just come for the wine and wildlife), construction and agriculture. 

PwC, in collaboration with the global NGO Unicef and the University of Pretoria, has established the Mamelodi Business Hub, an entrepreneurship community hub. More such initiatives would be welcomed. 

It must be said that many in the ANC do not have an entrepreneurial mindset, to say the least, even while they are focused on consumption.  

But like the school system, encouraging self-reliance and entrepreneurship among young people cannot wait for any government-run initiatives. It’s an area where business and wider civil society need to step into the breach. Just as they have on many other fronts.

The stakes are simply too high, and the potential consequences too terrifying, to allow the scourge of youth unemployment to maintain its current trajectory. DM