South Africa's grim unemployment rate weighs down economy

20% jobless rate.

As South Africans and the world wait and worry about the medical condition of Nelson Mandela, few will argue with the social and political transformation Mandela led as president and symbol of post-apartheid reconciliation.

But a more intractable problem is that of a growing economy that continues to mostly benefit whites and keeps the black majority in poverty, an economy that does little to alleviate endemic joblessness.

It’s an issue that Mzukisi Qobo has witnessed personally as a resident of Cape Town.

“You see unemployment almost everywhere in South Africa,” said Qobo, an independent political risk analyst and guest lecturer on political economy at the University of Pretoria.

Depending on whose statistics you use, the unemployment rate in South Africa is somewhere between 20 and 40 per cent, according to Mount Allison University international relations professor Dave Thomas, who specializes in South African politics.

“What they’ve done with the economy in the post-apartheid era has generated some modest economic growth most years, but a lot of people refer to this as jobless growth,” added Thomas.

South Africa’s GDP has historically grown by about 3.1 per cent since the end of apartheid in 1994. It has enjoyed robust growth when its mining resources are in demand by the world but has little to fall back on when demand is low. The economy shrank as much as 6.3 per cent in 2009 as demand for its minerals dried up.

According to the African Economic Outlook—a report published yearly by the UN in collaboration with the OECD and other organizations—unemployment among South Africa’s youth has been particularly high in recent years. The 2011 report found that 42 per cent of South Africans under the age of 30 were without a job, compared to 17 per cent for those 30 and older. Almost 86 per cent of the country’s youth have no “formal further or tertiary education,” and two-thirds have never had a job.

The numbers do not bode well for South Africa’s future.

“If you set a young person for life with absolutely no prospect of getting out of poverty, you are setting yourself a time bomb—that’s what the country’s elites are concerned about,” said Jean-Philippe Stijns, an economist with the OECD Development Centre.

The disparities aren’t just divided along age lines either. Racial inequality is still a factor in South Africa’s economy based on the fact that the country’s white citizens typically have greater access to a better education, said John Campbell, the Ralph Bunche senior fellow for Africa policy studies with the Council on Foreign Relations.

“The gulf between white incomes and black incomes is greater now than it was in 1994,” Campbell said, adding that an important place to start in addressing this problem, and lifting the majority of South Africa’s population from poverty, is in overhauling the education system.

“It’s paradoxical, but there is in fact a labour shortage in South Africa at the same time you have unemployment rates that are sky high,” Campbell noted. According to the OECD, as of 2007 the country’s mining sector only accounted for 8.8 per cent of GDP. Services, however, make up nearly 30 per cent of GDP, while transportation and communications account for 22.6 per cent.

Compounding the education challenges is the country’s cultural legacy.  There are 11 legal languages in South Africa, and children are often taught in their native tongue. The problem is that South Africa conducts its higher-level business transactions in English, a language that is not usually a priority in rural township schools that are often underfunded, with undertrained staff. In addition, there has not been enough training for the skilled trades, an area lacking in South Africa’s labour landscape, added Campbell.

In sum, “you need to have more primary schools with a curriculum taught in the students’ native tongues, and then a transition into English at some subsequent point… [and] more and much better vocational training,” he said.

With the education system in need of major changes, overhauling South Africa’s labour composition won’t be an overnight process, added Stijns. In the meantime, what the country can do is refocus its energy on cultivating new trading relationships, and work towards encouraging more foreign investment.

“There has been a decline over the years of our ability to export to major markets,” said Qobo. Europe is still South Africa’s largest trading partner, and the country has in many ways experienced the European financial crisis by association. Looking for new partnerships in Asia could be a solution, said Stijns, but this will take time as well.

The government also needs to build confidence in the “investment climate of the country,” said Stijns.

In December, the ANC was still debating over whether to nationalize the country’s mining operations— an industry mired in labour strikes, sometimes bloody, for the past several months.

The idea was vetoed, but South Africa needs “to ensure investors that the path [the] country is following is not one that’s turning it into another Venezuela,” said Stijns.

Still, South Africa’s economic performance hasn’t been entirely bleak since the end of apartheid, noted Thomas.

“The economy didn’t collapse like some people thought it might. That is deemed as a success in some way,” he said.

But in the fight against income inequality, South Africa is “still really struggling on that point, in terms of transforming the economy into something that people imagined in the mid-1990s, when apartheid was ending.”