Economic crisis eroding SA's employment growth, report

Friday, September 25, 2009

Cape Town - The Development Indicators 2009 indicate that the deterioration in global economic conditions is adversely affecting South Africa and eroding the positive gains made in creating employment.

Despite the increase in employment from 11.3 million in March 2003 to 13.6 million in March 2009 and the attendant decline in unemployment rate from 31.2 percent to 23.5 percent over the same period, the country has witnessed massive job losses in the recent months, says the report, released on Friday.

According to the Development Indicators, 267 000 jobs were lost in the second quarter of 2009.

Real Gross Domestic Product (GDP) growth has also slowed to 3.1 percent compared to an average of over 5 percent in the previous three years. This is the first time in more than 15 years that South Africa has experienced three consecutive quarters of negative growth.

The negative impact of the global slowdown is already being felt on the government budget as well as government debt as a percentage of GDP. The medium term budget balance as a percentage of GDP is projected to be a deficit of over 6 percent in 2009/10.

The reported noted: "Generally, the country is doing well in global economic rankings, although it is clear that in some sub-indices, especially labour force skills, other countries are advancing faster than South Africa."

Analyst, Professor Haroon Bhorat, said looking at annualised quarterly data, 362 000 jobs were lost in the second quarter of 2008. Of these jobs, 258 000 of the 362 000 job losses were in the informal sector, not top companies and retrenchments.

"In terms of individual characteristics, these are individuals who are African, men, young people between the ages of 15 and 24 and employed in wholesale and retail trade and incomplete primary and secondary education.

"Effectively the losers have been the disenfranchised with very little bargaining power."

Ronette Engela, from the Presidency's National Planning Commission explained that the economic indicators showed that South Africa's massive public sector-led construction package and expansion of public works projects was assisting in what would have been an even greater unemployment challenge.

"We do, however, have the Expanded Public Works Programme (EPWP) as well as some massive construction going on at the moment that provides some sort of buffer."

Engela said that EPWP had exceeded its target in the first phase of creating a cumulative 1.65 million work opportunities and had now been extended to the second phase with new modalities to reach an even wider range of job opportunities for the people.

The second phase of the EPWP is planned to create four million work opportunities.

She said despite the negative effects of the economic climate, the living standards measure showed a significant decrease in people in the lower quintiles of income and an increase in the number of people in the middle-class quintiles of four, five and six.

"This means there is a shift of people in extreme poverty, although there are still many there," said Engela.

She added that there were more than 13 million people receiving social grants.

Minister in the Presidency: National Planning Commission, Trevor Manuel, said the report made interesting observations about poverty and showed that the current recession had cast a very long shadow over government progress in this regard.

He said the Development Indicators was a "warts and all" report of government's progress in 76 different indicators.

"The third edition of the Development Indicator a very interesting document for government to release because it's a report that covers 76 different indicators, and it is presented warts and all. Its also a report hat draws from a diverse range of sources."

He said the report was released to help in government's decision-making processes and create debate around the efficiency of government.