In June 1976, South Africa’s students ignited a fire that would burn down the apartheid system and change the country forever. The uprising was not because they believed change was imminent, but because they had decided that the world they had inherited was unacceptable and had to change.
The struggle today is fundamentally economic rather than political. But the stakes are just as real. Stats SA data for March shows the overall unemployment rate has risen to 32.7%, with youth unemployment even higher at 46% (that is 4.7 million people under the age of 35). Youth unemployment tends to be higher because young people without work experience are less able to compete for the jobs available.
Rising unemployment is the result of decades of economic failure. South Africa’s GDP growth rate from 2009 to 2026 was a miserable annual average of 1.1%. This is below the 1.3% annual population growth, meaning our GDP per capita has been declining by 0.2% per year for the past two decades.
Compare this with the sluggish Organisation for Economic Cooperation and Development (OECD) countries that grew annually by 1.5% per capita over the same period. Comparing South Africa with China, which grew more than 5.5% a year, gets depressing.
The employment intensity of growth also matters. Most countries depend on their small business and the informal sector to absorb the unemployed. In South Africa, however, we find 16 entrepreneurs per 100 people compared with 45 internationally.
The reason we have so few entrepreneurs is that South Africa is a country dominated by large businesses. Small businesses must navigate regulatory red tape and high taxes as if they are large businesses.
Additionally, apartheid excluded the vast majority from formal business experience for generations. Therefore, even though the National Development Plan in 2012 famously projected that 90% of the country’s new jobs by 2030 must come from small business, our regulatory environment keeps that door shut.
The rising unemployment also signals the failure of the taxpayer-funded education and skills development system. Internationally, according to OECD and World Economic Forum comparisons, South Africa is consistently both the highest spender and worst performer regarding educational outcomes.
And while we delay economic growth and skills reforms, the tsunami of AI is fast approaching our shores. AI is not a distant threat; it is already affecting entry-level work in auditing, financial services, logistics and administration. We can expect at least 40% of skills requirements to change by 2030.
Although many argue that AI will both destroy and create jobs, we must not be fooled. Those young South Africans who lose their admin and cashier jobs are not going to become AI engineers or AI ethics officers. Rather, we face an AI jobs bloodbath along the lines of the Covid job losses.
Even before AI, technology advances posed an external threat to a complacent South Africa. The automotive sector – one of South Africa’s most important manufacturing employers – faces structural disruption as Chinese vehicle brands are selling their offshore-produced, high-quality cars faster than those produced locally. This has implications for every plant, supplier and logistics operator in the Eastern Cape.
The calamitous unemployment data must not cause us to panic, however. Instead, the crisis must spur us to respond decisively.
What must a response look like?
First, as AI undermines youth employment, we must correspondingly introduce new rules that make it easier for companies to hire young people. As a country, we cannot win if half the team is not even on the field.
Therefore, our top priority is to ensure young people get their first work experience. The practical action is to amend labour regulations to make it much easier for employers to take a chance and hire someone without a track record. There needs to be a special employment dispensation for all work-seekers under the age of 25.
These new rules must extend to a revised dispensation to support the creation of small businesses, which will ultimately be the biggest employer of young people. Small businesses (meaning those generating less than R50-million a year in revenue) need to be given a reduced administrative burden and lower tax rate.
Second, youth job initiatives that have a proven track record and existing capacity must be scaled up immediately. In the Presidential Youth Employment Initiative, which includes Setas, technical and vocational education and training (TVET) colleges and other programmes, the Youth Employment Service (YES) accounts for 68% of all the demand-led youth jobs.
One way to scale up YES as the largest youth job creator is to cut red tape. For example, 40% of companies are blocked from participating in the YES programme because of a requirement that they first satisfy other B-BBEE criteria, like equity ownership, before they are allowed to sponsor youth jobs through YES.
Why stop thousands of…
Read the full article at Daily Maverick →
ZA