Labour Force Trends

The 2016 municipal elections have come and gone and South Africans have made their voices heard. The voices have indicated that although the ANC is still the dominant force in South African politics, the other parties, most notably the DA and EFF have made in-roads into the ANC’s firm grip on South Africa.

The most notable changes which came from the elections were the hotly contested the Metropolitan areas – Johannesburg, Tshwane and Nelson Mandela Bay. Some of the reasons for this change which were punted in the media revolved around, economic growth, complacency, employment and general leadership. The evidence supporting this is unfortunately readily available, for example – the GDP growth currently is at -1.2% for the first quarter of 2016. The GDP growth outlook for 2016 is also somewhat dismal with expectations of 0% to 0.2% being cited by the notable economists (the International Monetary Fund predicts 0.1%). Similarly, unemployment is sitting at dangerously high levels and currently stands at 26.6% in the second quarter of 2016.

The general trends in the labour market are that employment figures have slowed, unemployment figures have accelerated and the labour force is growing too quickly in relation to the number of jobs being created. Table 1 indicates how the general labour trends have changed in South Africa between the first quarter of 2008 and first quarter of 2016.

As Table 1 indicates, the percentage increase in the number of employed people (8.5% between 2008 and 2016) is approximately four times lower than the increase in the number of unemployed people over the same period. Similarly, the labour force has grown at double the rate of the number of employed people which once again is a worrying sign. If new jobs are not created at a fast enough rate – to absorb new entrants into the labour force – the result is increased unemployment. This paints a bleak picture of the current trends in the labour market as South Africa is simply not creating jobs at a fast enough rate to absorb new entrants into the labour force. This is one of the most likely reasons that the municipal elections which took place on 3 August 2016 yielded the results which they did. It would seem that many South Africans are unhappy with the current economic climate and outlook and want a brighter future.

The question is, how should this ‘brighter future’ be achieved? This is a difficult question to answer as it relies on a number of factors.  Firstly, from a supply side, the labour market needs to possess the necessary skills to facilitate economic growth. This is fundamental to productivity and hence increased production. Government is already doing a lot of work in this field with the SETA’s as an example but there is always room for improvement. Secondly, government should do more to facilitate an environment which improves the ease of starting and doing business. Unnecessarily stringent legislation should be relaxed to promote the creation and growth of small and medium enterprises. These organisations have the potential to grow (and create jobs) more rapidly than the large incumbents within the market. The demand side is a bit of a double edged sword in that increased employment will lead to increased demand for goods and services but requires increased employment in the first place.

Creating an environment conducive to stimulating and doing business is the most logical first step towards solving this problem. It is also a starting point which is directly in the control of the government. In time South African’s will see whether their voice has been heard and suitable changes are on the horizon, or if the status quo will continue going forward.

 Conclusion

The municipal elections are different from the national elections but it definitely serves as a barometer of the general feeling of the public. The general view formed from these elections is that the public are tired of the status quo and are looking for change.

The people of South Africa have voted – they are looking for more economic opportunity …. with or without the incumbent party in power.

Written by:

Bryden Morton
Data Manager
B.Com (Hons) Economics
[email protected]

Chris Blair
CEO
B.Sc Chem. Eng., MBA – Leadership & Sustainability
[email protected]