According to Statistics South Africa’s Quarterly Employment Statistics, an extra 86,000 jobs were lost in the formal non-agricultural sector in the second quarter of 2021. Economists fear that these job losses may have far-reaching ramifications.
As Dawie Roodt, chief economist of the Efficient Group, says the employment losses aren’t surprising since the nation is still recuperating from the long-term effects of the Covid-19 epidemic and related lockdowns.
There are numerous technological causes for the economy’s rapid expansion. Because 2020 was an awful year, and because the mining industry, in particular, is growing rapidly. He said, though, that “the remainder of the economy is in the doldrums and will stay that way for some time”.
As unemployment rises, the government may see a decline in tax income, while reduced household expenditure results in lower VAT revenues.
Consumer borrowing is likely to rise, but Roodt expects financial institutions to be more cautious about lending money to individuals in the future. “South Africa’s economy may expand this year, but I expect growth to be far below 2 percent starting in the next year. To put it another way, this implies that unemployment will stay high until certain macroeconomic policies are altered.”
Further Job Losses
Debt Rescue CEO Neil Roets believes that additional job losses will have an effect on family budgets.
“As anticipated, families will make financial sacrifices to meet the necessities, such as skipping life and auto insurance or canceling retirement annuities. The emphasis rapidly narrows down to prevent defaulting on a house loan or to just have enough money to pay the rent that vehicle loan installments also suffer.”
When people max out their credit cards or utilize store credit to the absolute maximum, Roets says they become trapped in a debt cycle.
When personal loans from banks aren’t an option, they turn to less reputable sources like mashonisa loans, which charge exorbitant interest rates. He said that for some people, the financial and emotional consequences of mounting family debt are just too much to bear.
Roets cautioned that the economic outlook was equally bleak and that South Africans would have to tighten their belts even more.
In the next quarter, the overall employment rate will be impacted by the catastrophic effects of the July riots, according to Stats SA. Because so many businesses were damaged or looted, more people will lose their jobs as a result of company closures and layoffs. As a result, more people will get indebted. As the job crisis increases in the country and many people stay without income, they are seeking additional resources to make money. One of the ways for these people, according to the South African Forex brokers, is to start trading in the FX market, which is the world’s largest financial market. However, given the country’s many issues, particularly political ones, FX cannot be expected to fully address the employment situation. As Forbes predicted the July rioting and business damage will lead to additional employment losses in Q3 2021. This means that further job losses are likely in the medium future before things begin to stabilize. In both 2021 and 2022, South Africa anticipates the jobless rate to be on average 33.2%. As a result of the stronger than anticipated economic recovery, the labor market is unlikely to respond quickly, which will put further pressure on domestic demand and the expansion of employment.”
According to the organization, a more robust and long-term recovery in these sectors would only begin in 2022 when vaccines are extensively implemented and foreign travel is resumed. As the economy improves, so should property management and commercial services.
What To Do?
When it comes to joblessness in South Africa, official figures show a nearly 50% increase, but frankly speaking, most economists believe the real number is closer to 70%, with young unemployment particularly high. Protectionist labor laws are often blamed by economists and other critics, both in the United States and overseas. It’s recommended that the procedure of hiring or dismissing an employee shouldn’t be expensive in South Africa or anywhere else. There are costs involved with both starting and ending a job relationship because of the time, effort, and money that goes into it – including the need to hire labor law experts to assist companies with legally compliant procurement and termination of employment processes.
Many people (and, crucially, their families) who otherwise would not have been employed would have the opportunity to get work experience as well as money.
The case for loosening up on labor regulations is all the more compelling when you consider the important role that small and medium-sized businesses (SMEs) play in creating jobs and cutting unemployment. A less restricted labor market would promote the expansion of small and medium-sized businesses (SMEs), the emergence of new ventures, and the creation of jobs as a result. SMEs currently in existence would be assisted and encouraged to invest more resources in growth, which would lead to more job opportunities for the general public.
Unemployment in South Africa must be addressed, and the only way to do so is by encouraging new companies to be established, developed, and invest in human resources.