Overview of Youth Unemployment in South Africa

Overview of Youth Unemployment in South Africa

Abstract

 This paper explores cause, effect, and future of unemployment in South Africa among adolescents and youth and how it relates to the overall “health” of the South African economy and how it is viewed in the global marketplace. As of July 2019, the overall unemployment rate in South Africa is at 29%, jumping from 27% in the first quarter. The current youth unemployment rate is 56% slightly increasing from 55% in the previous quarter. Compared to the rest of the developed world, these rates are unbearably high and frankly detrimental to the potential of what could have possibly been a booming economy. There are many theories as to why and how the unemployment crisis started and progressed in South Africa, but it is nowhere near black and white. There have been many contributors in the country’s past such as the long-lasting effects of apartheid, lack of sufficient education, and the financial complications of being both developed and underdeveloped in many ways. Most importantly, I would like to explore possible remedies to improving unemployment among the youth or at least, controlling the issue. From increased government involvement to completely reconstructing the education system from early childhood onward, the labor market in South Africa requires serious observation and reconstruction in order to remedy the effects of youth unemployment to guarantee a more efficient and stable labor market.

A Review of Youth Unemployment

One of the most compelling socio-economic problems of the South African Economy is unusually high rate of youth unemployment. Only recently have studies examined how the youth has managed since the Labor Force Survey in 1995. Young adults do not have a sufficient network to obtain job opportunity information or access to financial resources or the mobility to seek work or relocate closer to the places where those career opportunities exist. Majority of the youths also lack “soft-skills” such as communication, personal presentation, and basic education skills. A high percentage of young work seekers are not sufficiently educated and dropped out of school early for reasons beyond their control. Poverty, the inability to cope with studies and familial hardships have had a great effect on these individuals. With an economy that favors and demands highly-skilled labor, due to technological advancements and increasing capital investments, an incomplete secondary degree will does not suffice to guarantee employment. When the youth do pursue post-secondary education, graduates from well-paying fields, such as engineering and medical sciences, are much less common. The lack of graduates from those fields is mainly due to a declining number of students passing the necessary sciences and mathematics in matriculation along with the institutions’ struggle to retain “high-quality” teaching and research staff. An elevated number of black matriculation graduates completed their qualifications at institutions not recognized by employers, which significantly decreases their demand from employers.

Structure of Labor Market in South Africa

Traditionally, South Africa’s economy has been rooted in agricultural and mining sectors due to favorable agricultural conditions. In recent decades, however, there has been a structural shift in output. Starting in the early 1990’s, economic growth was driven by wholesale, retail trade and tourism, now South Africa is leaning towards becoming dominant in e-commerce, technology, and financial services. South Africa is known for its world-renowned mining sector. It has an abundance of mineral resources, accounting for a significant proportion of world production. It is estimated that mineral reserves are worth up to R20.3 trillion ($2.5 trillion USD). Their mining industry is critical to South Africa’s socio-economic development as it contributes considerable to economic development, foreign exchange earnings, and job creation.

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The financial sector is home to dozens of domestic and foreign institutions providing a wide range of services from commercial and merchant banking to mortgage lending and insurance. The South African banking system is extremely efficient and well regulated, although very competitive. Over the past decade, many foreign banks have set up home bases in South Africa. Farming remains vitally important to the South African economy.

Tourism has always been a part of the South African economy, but it has recently grown tremendously. The World Travel and Tourism Council (WTTC) indicated that travel and tourism in South Africa directly employs more people than the mining, communication, automotive manufacturing and chemical manufacturing sectors. The country’s advanced infrastructure combined with scenic beauty, biodiversity, neutral climate and cultural diversity have made it one of the world’s fastest growing tourist destinations. South Africa continues to focus on tourism as it adds an increasing amount of potential. 

The nominal GDP for Q1 2019 was estimated at 87.4 billion USD in March 2019 compared with 87.6 billion USD in the previous quarter. In the chart below, the finance sector focuses heavily on finance, real estate and business services. The economy in South Africa relies heavily on the manufacturing sector which not only forms about 13% of its GDP but is also the largest provider of employment across all sectors.

 Unemployment in South Africa is defined a bit differently that it is in the United States. There are two major components to the concept, Narrow and Expanded unemployment. Narrow is someone who is unemployed and has been looking for work within the past two years. Expanded is someone who in unemployed, not actively looking but would take a position if offered. In their quarterly surveys, South Africa also accounts for discouraged job-seekers (including those who want to find work but there is none in their area, jobs available don’t match their skills or have lost hope about finding work) and those who are non-economically active (including university students and those who care for the home and children).

Explanations of Youth Unemployment

 Labor supply is affected by an increase in the amount of job seekers. The rate of women, especially African women, coming into the labor market has sharply risen. Additionally, the South African population is quite young compared to other countries, so there are more people entering the working age as opposed to the number of jobs becoming available.

 Research has shown that the deliberate exclusion of black people from the educational system and skilled occupations, has greatly contributed to the high rates of unemployment. “Unemployment increases progressively with decreased education levels; and the education system is not producing the skills for the labor market.”  Until 1994, numerous market distortions were caused by the industry policies of the Apartheid government, with these effects still remaining today. Majority of South Africans were excluded due to “racial spatial policy” and other measures. The lasting effects of the Apartheid economy upon democratization are an uncompetitive primary and secondary industries which have been shedding jobs since 1994 and an unskilled, misaligned labor force with a great number of South Africans having been denied a quality education.

 One of the most relevant causes of the high unemployment rate amongst the youth is due to the downfalls in the South African education system. There are fundamental resources missing from their structure such as qualified teachers, decent facilities, and the quality of material taught. The chart included below shows the main problems experienced by learners in public school, by province, in the 2018 school year. The most prominent reason given by employers for the low youth employment rate is that with schooling not accurately indicating skill levels, unskilled inexperienced workers are seen as risky to employ, therefore increasing their real cost. Similar to the United States, South Africa is receiving a big push for college education. High school aged individuals feel that the only way to be “successful” in life is through attending university and that discourages any other pathways. There is a large need for a vocational stream of education in the country. Non-degree necessary career paths such as plumbing, electrical, and labor are in high demand in South Africa. Offering shorter, vocational based programs would provide skills to those who may not be able to afford a full degree program while making them more marketable in the labor force. Ultimately, the causes of youth unemployment in South Africa then, are a combination of a low demand for labor, in part due to the increasingly skills heavy orientation of the economy and by the high number of low-skilled, risky youth.

 South Africa’s government is not innocent in this epidemic. Policy reform and the support of more small businesses would aid in the rehabilitation of the unemployment market. The current government has attempted to remedy bits and pieces of what the apartheid government implemented but building necessary housing closer to the cities for those who were unfairly displaced to rural areas. This is slowly aiding the issue, but it is not nearly enough. For every 10,000 homes built there are thousands more in need and counting. This issue is not simple, especially in regard to land reform and the complications that go with the property rights and distributing land to its rightful owners.

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In addition, the government supporting small business would help many communities, even from a smaller scale. In South Africa, small businesses are burdened with taxes, fees and no opportunities for the same amount of growth a larger company would have. Many of these entrepreneurs put everything they have into their business in order to have the opportunity for a better life and career but unfortunately many also fail due to lack of funding and other complications.  The businesses that are able to stay afloat often desire to hire younger people around them and school students but there is usually no extra money in the business to pay new employees. “Policy that ensures their survival and expansion, as well as the creation of many more new firms, would have the most impact on unemployment.” (CDE)

Ways to Remedy Youth Unemployment

 The obvious solution to reducing youth unemployment in South Africa would be to invest in the youth. South Africa is the worst underperformer for education in the world compared to the amount of money they spend. The quality for the bottom 80% of schools is terrible and over 60% of children cannot read after 4 years of education. Investing in a more quality education system, supporting small business and overhauling current policy would be enough to jump start a beneficial initiative. Continuing to improve the education system would help to control the problem from the ground up. Having teachers with adequate education themselves and more structured classroom facilities will improve the education levels from adolescents. This should mainly be aimed at those is rural areas where schools are over filled and underfunded because in reality those are the children that will grow up to be skill-less and eventually contributing to the unemployment.

Governmental activity in housing policy would also combat the issue. It is extremely difficult for people to look for work and finding ways to get there. Moving people closer to the cities or expanding job opportunities out of the city would marginally reduce the amount of unemployment in those areas. An anecdotal, but large, solution is believing in the youth of South Africa. Employers should be more willing to train and give more entry-lever workers a chance. Although, there is higher risk when hiring these individuals, there could also be a higher reward.

Completely eradicating South Africa’s youth unemployment problem is not going to be an easy feat but what does seem to be clear is that major intervention is necessary. The current status is not creating jobs nor changing the countries situation. Unemployment is detrimental to peoples livelihood and self-worth and it should be top priority of not only the South African government but of employers, business owners and communities as well.

To conclude, the current youth unemployment issue in South Africa is among the worst in the world and has been caused by a combination of factors but there are many possible remedies and there is still hope to reverse this issue in the upcoming years.

Bibliography

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