S. Africa Joblessness Rises to 13-Year High in Third Quarter

  • Unemployment rate rose to 27.1% from 26.6% in second quarter
  • Labor unions rejected proposal for national minimum wage

South Africa’s jobless rate rose to the highest in over a decade in the third quarter as more people started looking for employment.

The jobless rate rose to 27.1 percent in the quarter through September, from 26.6 percent in the previous three months, Statistics South Africa said in a report released Tuesday in the capital, Pretoria. That is the highest unemployment rate since 2003, according to data from the International Monetary Fund. The median of six economist estimates compiled by Bloomberg was for unemployment to stay unchanged from the second quarter. The number of people without jobs rose by 239,000 to 5.9 million while those employed increased by 288,000 to 15.8 million.

South Africa has struggled to rein in unemployment after the 2009 recession as gross domestic product growth stayed below 3.5 percent annually and is projected by the government to slow to 0.5 percent this year. The sluggish economy, policy uncertainty and rigidities and instability in the labor market are some of the factors that rating companies like Moody’s Investors Services and S&P Global Ratings Ltd., which will publish their assessment of the nation’s creditworthiness in the next two weeks, have highlighted as risks.

“We need faster GDP growth, because once we do that we will find that a lot more people are absorbed in the labor force,” Lesiba Mothata, head of market and economic research at Investment Solutions in Johannesburg, said by phone on Tuesday. “Unemployment is a big challenge and it’s an economy that is screaming for reforms.”

The number of discouraged work-seekers fell by 235,000 to 2.3 million as more people started looking for employment in the third quarter, the statistics office said. Manufacturing shed 28,000 jobs and employment in community and social services, which includes the government, fell by 45,000. Construction added 104,000 jobs and agriculture employed 56,000 more people in the third quarter than in the previous three months.

A panel of experts commissioned by the National Economic Development and Labor Council, known as Nedlac, which promotes negotiations among labor unions, government and business, recommended on the weekend that a minimum wage of 3,500 rand ($246) a month to be phased in over two years. This is part of a plan to stabilize the labor market and retain an investment-grade credit rating. The nation’s biggest union has rejected the proposal.

“The default reaction is if you put in a minimum wage it’s going to cost some jobs,” Christie Viljoen, an economist at KPMG LLP in Cape Town, said by phone. “I can only see one direction for the unemployment rate and that is higher” as more people enter the labor market.

South Africa has the highest jobless rate of more than 60 emerging and developed countries tracked by Bloomberg. The economy needs to expand at 7.2 percent a year from 2018 to achieve the government’s goal of reducing the jobless rate to 6 percent by 2030, the World Bank said in February. Finance Minister Pravin Gordhan projected output growth of 2 percent and 2.2 percent for 2018 and 2019 in his October mid-term budget.

The rand gained 1.4 percent to 14.0665 per dollar by 1:42 p.m. in Johannesburg on Tuesday. Yields on rand-denominated government bonds due December 2026 fell four basis points to 8.93 percent.

— With assistance by Simbarashe Gumbo

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