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South African Unemployment Above 27 Percent, Hits 13-Year High

South African Unemployment Above 27 Percent, Hits 13-Year High

South Africa this week put on hold proposals to stabilize the labor market by introducing a national minimum wage.

Labor upheaval is a potential risk factor to the country’s credit rating, which faces a possible downgrade to junk status in the next two weeks by ratings agencies.

The economy has grown slowly in the last six years, but not enough to recoup the 1 million jobs lost during the 2008-2009 recession.

From Independent Online. Story by Wiseman Khuzwayo.

Unemployment in South Africa rose to a record 27.1 percent in the third quarter – the highest in 13 years – despite a rise in the number of employed.

Statistics SA said that the joblessness rate rose from the 26.6 percent in the second quarter.

The agency said both total employment and the number of unemployed rose, helped by a decline in the number of discouraged work seekers.

It said the economy had grown slowly over the past six years, making it hard to recoup the 1 million jobs lost during the 2008-2009 recession.

“This marks the highest unemployment rate since the survey was introduced in 2008 and exceeds the average unemployment rate of 25 percent in the aftermath of the 2008-2009 recession,” said Kamilla Kaplan, an economist at Investec.

South Africa has the highest jobless rate of more than 60 emerging and developed countries.

Yet despite the gloomy figures, the rand held its ground, propped mainly up by firmer metal prices, which boosted commodity currencies.

South Africa this week also tabled proposals to stabilize the labor market by introducing a national minimum wage of
3,500 rand ($247 US per month) and curtailing strike action.

The move has, however, received mixed reviews from key stakeholders in the economy.

Ratings agencies are scheduled to decide whether to downgrade the nation’s credit rating in the next two weeks.

Moody’s Investors Service and S&P Global Ratings have cited labor upheaval, strikes and laws that discourage companies from hiring as potential risk factors to the country’s rating.

South Africa is ranked at the lowest investment grade level by S&P, while Moody’s rates its debt one level higher.

The industry breakdown shows the largest annual gains in employment levels in the third quarter were in finance, construction and transport.

Mnufacturing and the government sector registered large job losses.

Employment levels also decreased in agriculture, utilities, mining and trade.

The expanded definition of unemployment, which includes people who have stopped looking for work, was slightly lower at 36.3 percent in the third quarter, from 36.4 percent in the second quarter.

In February, the World Bank said the South African economy needed to expand at 7.2 percent a year from 2018 to achieve the government’s goal of reducing the joblessness rate to 6 percent by 2030.

“We are not surprised by this report because we have long argued that the unemployment problem in South Africa will not be addressed if the flawed structure of the South African economy is left intact,” Trade union federation Cosatu said.

Cosatu said jobs would be created in the small business sector in South Africa. “However, due to the legacy of concentration and domination of the South African economy by a few monopolies, there is little space for South African small firms to succeed and create jobs for the 9 million unemployed workers in a short space of time,” the federation said.

Read more at Independent Online.