UIF and Sassa grant recipients wait in long queues to receive their payouts outside the Sharpeville Post Office. (Photo: Gallo Images / Fani Mahuntsi) 
South Africa has the deepest and most persistent unemployment crisis in the world. More than 12 million South Africans want to work but cannot find a job. That is a catastrophe shaping the daily reality of individuals, families and entire communities. And it calls for urgent action.
In a new report, the Centre for Development and Enterprise sets out four key priorities to tackle the unemployment crisis: making the labour market more employment-friendly, fixing the skills system, unleashing small business growth, and removing obstacles to the informal economy.
These are the reforms that can start turning the tide on joblessness. They will require the government to refocus its energies away from piecemeal public employment initiatives that are never going to shift the needle on unemployment.
Unemployment has tripled since 1994, rising from 3.7 million people to 12.6 million today. On average, 1,000 people have joined the unemployment queue every day for the past 17 years. Less than four in 10 adults work, a shocking 20 percentage points below the average for countries at our income level. In 2008, 46% of adults had jobs; today it is below 40%.
Youth unemployment is staggeringly high: over 55% of young people aged between 15 and 34 don’t have a job. In all of this, education is a clear dividing line: two-thirds of graduates find work, but three-quarters of people without matric are unemployed.
Our unemployment crisis is rooted in two major failures: an economy that barely grows, and an economy that is not sufficiently labour-intensive. Between 2008 and 2025, the labour force expanded by 42% while employment grew by just 15%.
The collapse of Eskom and Transnet has crippled energy supply and logistics. Reckless fiscal policy driven by unaffordable public sector wages has increased risk and reduced investment. Corruption has drained billions from growth-enhancing projects, while dysfunctional municipalities fail to deliver basic services and misguided industrial and transformation policies have often deterred investment.
Each alone would slow growth; together, they have brought it close to zero.
Meanwhile, our labour laws, broken skills system, and hostile environment for small firms make hiring workers risky and expensive. Instead of tackling these barriers, the government has turned to small-scale fixes.
Public employment programmes such as the Expanded Public Works Programme and the Presidential Employment Stimulus provide temporary relief, but not market-related jobs at scale. An Expanded Public Works Programme “work opportunity” lasts, on average, four months, and many of these posts pay below the minimum wage. The government boasts of creating 924,000 “work opportunities” in a year, but in reality it takes nearly three such placements to equal one full-time job. These programmes provide some income and may help in rural areas, but they are not, and cannot be, the core of a national employment strategy. To focus on them is to ignore the urgent reforms we need to make our economy grow and absorb more labour.
If the country is to take unemployment seriously we have to couple a more comprehensive package of growth reforms with the changes required to build a more labour-absorbing economy.
Four areas of urgent reform are required
The first is to make the labour market more employment friendly. This means extending probation periods for new hires, halting the automatic extension of bargaining council agreements to non-signatories, and removing restrictions on labour brokers who once provided vital pathways into work (especially for those far removed from networks or economic activity). The impact of this should be tested in a special economic zone designed to attract labour-intensive manufacturing, where firms could negotiate wages and conditions directly with employees while still adhering to basic protections.
The second is to fix the skills system. Half of unemployed South Africans lack matric, while employers complain of persistent skills shortages. Technical and Vocational Education and Training curricula must be aligned with the needs of business, with colleges incentivised to improve outcomes through performance-based funding. Apprenticeships and learnerships, which deliver far higher employment rates, must be expanded. Sector Education and Training Authorities should be scrapped.
The third set of reforms would unleash the dynamism of small businesses. Small firms are more labour intensive, but are suffocated by red tape. OECD and World Bank comparisons rank South Africa as one of the most restrictive economies in the world. Red tape consumes 11%of small business managers’ time, far above peer countries.
South Africa needs a formal “SME test” to ensure regulatory compliance does not strangle smaller firms. Identifying which regulations to amend or scrap should be managed through a bottom-up process of consultation with business rather than through top-down bureaucratic committees. Access to finance must be expanded by leveraging private sector funders and investors. The government’s billions of rand for small business funding should be channelled through existing private investment companies through competitive tenders that reward institutions capable of delivering impact, rather than being wasted on state-driven programmes.
The fourth reform involves national and city governments enabling the informal sector to thrive by eliminating costly licensing fees, reducing police harassment, and investing in urban planning that makes it easier for traders to access markets. Densifying cities through streamlined building approvals and small-scale housing development would create vibrant local economies where informal enterprises could flourish. Experiments are needed. Why not try transport subsidies for traders? These might lower barriers to accessing customers.
None of these reforms will create millions of jobs overnight, but avoiding them and continuing to focus on public employment will not deal with the scale and intensity of our employment challenge, with more than 12 million people wanting work but unable to find a job.
What stands in the way is the lack of leadership and political will. In the past 15 years, the government and organised business have focused far more energy on special projects and youth initiatives that create a limited number of jobs than they have on the hard work needed to achieve policy reform to create millions of market-based jobs. They have diverted attention from where it belongs: fundamental structural reform, and building a coalition to achieve that.
The country needs bold and resolute leadership willing to confront vested interests and embrace change.
The unemployment crisis is our greatest challenge. Every year of drift condemns hundreds of thousands more people to the margins. Every delay weakens our social fabric and erodes hope. Unless bold reforms are implemented, South Africa will deepen the marginalisation of a vast underclass of permanently unemployed citizens.
What is needed is a new social contract that recognises growth and employment as the twin pillars of national prosperity and stability. If the country can raise its growth rate to just 4% a year, it would create 400,000 jobs annually. Coupled with reforms that make growth more labour intensive, millions of jobs could be created within a decade. But this would require leadership willing to confront entrenched interests, dismantle ineffective institutions, and unlock the potential of markets and businesses.
The choice before us is stark: we can act with urgency, embrace reform, and create a pathway to inclusive prosperity with millions more jobs — or we can condemn another generation to the despair and anger of joblessness. The time for compromise and prevarication has long gone. The time for reform is now. DM
Ann Bernstein is executive director of the Centre for Development and Enterprise (CDE). This article is based on a new CDE report, South Africa’s Unemployment Catastrophe: A call for urgent action.