The bad news keeps coming for South Africa’s economy, as News24 reports that unemployment has hit 27.5%.
Youth unemployment is particularly bad – 15 to 24 year-olds have a 52.8% unemployment rate.
If you’re looking for a job in South Africa you should probably go to Limpopo – it has the lowest unemployment rate at 18.9%.
The Free State is the worst province when it comes to employment in South Africa, with an unemployment rate of 36.3%.
A lot of people are going to say that this is because our wages are too high.
Okay here is the thing, according to BusinessTech‘s analysis, in terms of the OECD South Africa is in the middle of the pack for wages.
Sure the countries they list as paying more than we do are first world – but this shouldn’t really make much of a difference if all that matters to an employer is wages.
We’ve got a very competitive currency – in terms of buying power we should be at around R6 to the dollar, and as of writing this we’re at R14.66.
We also have fairly easy access to the rest of Africa, which is expected to show 3.1% in growth this year according to the World Bank.
In terms of the cost of doing business, our indicators are on the surface pretty good. What is holding us back?
A lot of people will say that it is due to the unions, we have had increasing strikes and it seems to make sense right? Except here is the thing, you can more or less plan around the unions, you generally know well in advance when a strike is going to happen.
And a lot of those strikes are perfectly reasonable. A few months back I went on holiday to Mpumalanga, and I ended up going through Dullstroom. On the way back, we were told that there was a strike and we should try to avoid the main road because they’d be marching through town.
What was this strike about? Apparently several of the businesses there were tardy when it came to paying their workers. That’s wage theft, and what are the workers supposed to do, simply accept not being paid?
That’s not employment, that’s slavery.
The bigger problem isn’t our unions, or our workers getting overpaid – it is Eskom. You can plan for a strike, but it is much harder to plan around an unsteady power supply.
Not only that, but part of how we have coped with avoiding drops in our power supply has involved things like paying our smelters not to operate – which has a knock on effect for their suppliers.
This was part of Highveld Steel’s woes, which has in turn impacted companies downstream as its closure left the industry dealing with a monopoly.
According to Imeisa earlier this month, Warne Rippon, Executive Director of steel major, Allied Steelrode, said “The local downstream steel sector has been placed in an untenable position with an outdated mill producing expensive steel – the quality of which leaves much to be desired – in a total monopoly with no competitor since the closure of Highveld Steel.”
And that is just the steel sector.
Another issue is the whole expropriation without compensation debate – which has left investors with the impression that they could invest here only to have the EFF rise to power and nationalise whatever they built, leaving them with nothing.
You need to have a pretty good potential return on investment to take that risk – and right now we have unemployment of 27.5%, meaning that we don’t have a strong internal market.
Finally, our current budgetary focus has been to reduce government debt in order to increase investor confidence, which is insane when you actually look at the macro economics of it.
I’ve said this before, I’ll say it again – we have consumers cutting their spending, we have business not investing, we have trade wars threatening our exports to America, and we have government talking about austerity – debits and credits have to balance.
Someone has to be buying in order for us to sell, and if nobody is doing that, we cannot expect a stronger economy in the short term, which means investors aren’t reassured by government trying to get control of its debt because the short term becomes the long term.
Europe’s long battle with recovering from the financial crash of 2007 shows that Austerity fundamentally doesn’t work, and yet it is always treated as the sage advice that we should follow.
How we should fix things is by increasing taxes on the top bracket, increasing spending, raising debt, fixing up our power supply and bringing in a welfare state. Can we do it though?
Well consider, our government right now is so inept, so corrupt that in the last medium term budget, Tito Mboweni talked about SARS actually paying the VAT refunds it owes as a form of economic stimulus.
To put it simply our government’s idea of stimulus is to stop committing VAT fraud.