International Monetary Fund outcome and the challenges of unemployment in SA

Friday, 31 January, 2020 - 12:18

The International Monetary Fund (IMF) has published the outcome of its consultations with government and other authorities in South Africa, warning that the country’s GDP per capita will continue to decline if it does not act now. GDP per capita is a measure of a country’s economic output that accounts for its number of people. It is often used a more accurate representation of real economic growth in a country, as a higher population should yield a greater GDP output. So while South Africa has avoided overall GDP decline over the years of economic hardship on a per capita basis, we’re getting poorer, as the growing population becomes less productive.

The IMF acknowledged South Africa’s economic potential which is largely untapped. However, the following are the downside economic risks identified:

  • Weak economic growth;
  • Deteriorating fiscal and debt positions;
  • Difficulties in the operations of state-owned enterprises (SOEs).

It is assumed that partial reform implementation and continued governance improvement will lift business confidence and gradually allow a limited recovery of investment and consumption. “With structural constraints largely unaddressed, economic growth remains on a trend decline. Unlike other major emerging markets, growth failed to benefit from the global recovery in the last decade following governance weaknesses and persistent structural rigidities,” the IMF said.
 
The IMF further recommended that South Africa create a conducive environment for private sector investment and take a decisive approach to implement structural reforms to boost economic growth.  These include reducing the cost of doing business, streamlining operations of SOEs, releasing the spectrum, improving governance, promoting competition in product markets and addressing labour market issues.
 
The National Treasury agreed that South Africa is facing difficult economic times, what it  termed ‘difficult juncture’. “The economic outlook is subject to risks, both domestic and external. Domestically, failure to address governance and operational issues, specifically at SOEs, would continue to weigh negatively on the outlook,” it said.
“National Treasury is mindful of the fiscal risks that SOEs, particularly electricity utility Eskom, present to the fiscal framework. Furthermore, there is commitment to resolve the challenges facing South African Airways (SAA).”

The Challenges of Unemployment in South Africa.

We begin the year 2020 with grim sentiments that South Africa has the deepest crisis of unemployment in the world. There is no other country where as large a proportion of the population has been without work for as long. The level of joblessness is so deep that it poses social and political consequences such that it is has been a crisis to which every politician and policy document refers.  Unemployment levels have been increasing each year for more than ten (10) past years.  40 years of slow economic growth and a range of factors (including policy choices) that have produced an economy that needs less and less unskilled labour - the one resource with which the country is amply endowed.
 
South Africa has the deepest and most persistent crisis of unemployment in the world: only 42 per cent of adults work, a figure that compares poorly against norms of around 60 per cent in the rest of the world and higher in some parts of the developing world. Of the adults who are economically active, 38.5 per cent are unemployed, a figure that is among the highest in the world.  The numbers for young people (aged 15 to 34) are even worse. Between 2008 and 2019, the population of young people increased by 2.2 million, but the number of young people who were employed actually fell by 500 000. Thus, while the population of young people increased by about 560 per day, the number of young people in work fell by more than 100 per day.

This crisis is rapidly deepening year by year.  And, unless it is resolved quickly, there are no chances of the economic growth suitable for the socio-economic development envisaged for our country.  This growth can only be realized by increased employment in South Africa.  Employment is the most important driver of development, human and national. No human society has found a way of providing its members with decent standards of living except by having them engage in productive activities. Employment in these activities simultaneously makes possible the production of valuable goods and services and allows people to participate in the consumption of them.

What Should Be done?

Change in education system:

Educational pattern should be drastically changed. Students who have liking for higher studies should be admitted in colleges and universities. Emphasis should be given on job-related education, with the 4th IR slowly creeping in on us our education system should not ignore this and let it be a benefit to those schools and cities who can afford to invest in such but rather be a right that every leaner should have from an early age. The sad reality of our country is that in this day and age, a large percentage of our youth start to get familiar with the basic professional functions of a computer in tertiary. And one of the most important requirements in almost all job descriptions is basic knowledge of computer.
 
Change in industrial technique:

Production technique should suit the needs and means of the country. It is essential that labour intensive technology should be encouraged in place of capital intensive technology.

Boost economic growth:

According to Cape Business News, Investec Chief Economist Annabel Bishop believes if weak economic growth persists (below 3%) then it will be difficult to reduce unemployment, inequality and poverty. South Africa’s economy contracted by -0.6% during the third quarter of 2019 due to load shedding which carried on to 2020. With a full understanding of the above what our country should focus on is investing in measures that will help us overcome this formidable problem like more solar systems, battery pack and any other measures to keep organizations functioning as usual during this crisis. This is most definitely one other way of creating jobs for people. This does not by any chance suggests that finding ways to survive load shedding will be the end of our country’s economic problems.
 
Mentioned above are a few possible solutions to unemployment, we are however aware that there are countless contributing factors that cannot be covered in one article. We believe that the one most important solutions to this problem is by working together as the government, NGO’s, the private sector and the youth with the right resources or back-up made available.

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