By any measure, South Africa has extraordinarily high rates of unemployment. Just 41 percent of adults work, including in informal economic activity. In other developing countries generally, about 60 percent of adults work, and the ratio is higher in developed countries. The labour-force participation rate stands at 56.5 percent – well below the average of 65 percent in comparable countries.
Gender differences in the domestic labour market are still pronounced, with unemployment rates lower among men, and absorption rates and labour-force participation rates higher for men than for women. As of September 2010 unemployment was 30 percent for African men, 38.7 percent for African women, 4.0 percent for white men and 6.2 percent for white women.
Why are South Africa’s rates of labour participation low?
From 1970 to 2000, the economy simply grew too slowly to keep up with growth in the labour force. At the same time, South Africa’s export performance was poor, so falling domestic demand could not be offset by greater external demand.
In this period, the country also experienced what is called skills-biased technological change, with firms requiring workers with ever-higher skill levels as productivity rose, technology developed and global competition became more pronounced. The proportion of workers with a university degree increased from just 1 percent in 1970 to about 18 percent in 1995. At the same time, the proportion of people working with less than a matric qualification declined from 7 million to 5 million. Apartheid education stunted the educational development of at least two generations of black people, making it much harder for them to get jobs, further contributing to low growth and low productivity.
This problem was compounded by the fact that the two sectors that are most intensive in low-skilled employment, agriculture and mining, steadily shed jobs. Between 1970 and 1995, these sectors shed 1.4 million workers, or 46 percent of their worker force. This was not matched by a significant opening of opportunities for low- and semi-skilled workers in new industries. This trend continued after 1995, when these two sectors shed a further 30 percent of their workers. Even within these sectors, the composition of skills changed dramatically. The number of people with at least a matric qualification in mining increased from just 15 000 in 1970 to 129 000 in 1995.
South Africa has lost out on the recent commodity boom, which was the largest such development in half a century. Mining exports have not grown as fast as in countries such as Australia, Brazil or Chile, even though South Africa has greater mineral resources than most of them. Part of the reason has to do with the uncertainty that was caused by the mineral rights conversion process and poor government capacity to service the industry. Infrastructure constraints and mining companies’ own lack of foresight in predicting the boom also contributed to poor performance. At present, concerns about the mining licensing process and threats of nationalisation are obstructing higher investment and output.
Several factors have undermined the growth of agriculture and agricultural jobs. These include higher levels of mechanisation, driven partly by a desire to compete internationally. The nature of policy for this sector and the response to it have also played a critical role. The necessary introduction of rights for resident farm workers, including security of tenure, has resulted in one of the most intense migration patterns in South Africa’s history. Close to a million people were uprooted from commercial farms between 1994 and 2003, destroying jobs and undermining household food security. The dissolution of agricultural (control) boards, withdrawal of subsidies and rapid change in the tariff regime resulted in the kind of shock that the sector could not adapt to quickly enough. The impact of uncertainties deriving from the land restitution process, and the poor regulation of land use management, are still being felt. This has been compounded by low levels of production on most of the resettled and distributed land. All this raises critical questions about effectiveness of the state, including the phasing in and sequencing of policy.