South Africa is being overwhelmed by an unemployment and inequality crisis of astonishing proportions and overwhelming consequences, yet the elites are in denial.

Three decades after the end of apartheid, South Africa is experiencing a sort of structural decomposition. The economy is in steady decline, state institutions are eroding, and visions of national renewal are hard to find. Unemployment is both a manifestation of this decomposition and its cause. South Africa is being overwhelmed by an unemployment and inequality crisis of astonishing proportions and overwhelming consequences, yet the elites are in denial.  

There can be no avoiding personal accountability for the terrible levels of violence, especially against women. But the elites run away from seeing that this violence is related to the mass unemployment of the more than six million men, who are robbed of their ‘breadwinning role’. So long as their ‘solutions’ to endemic crime and violence are disconnected from fighting mass unemployment, the majority of our townships will remain terrifying no-go areas, overrun by crime and gangsterism.

The biggest cause of poverty and income inequality is unemployment. Numerous studies show that earnings from work are the most important source of household income, and in the absence of a comprehensive welfare programme, unemployment has a dramatic impact on household poverty.

The scale

While official figures record South Africa’s rate of unemployment at about 32%, the truth of the matter is that the official statistics grossly underestimate the number. They do this by excluding the 3.2 million unemployed people who have given up looking for work because there is none to be found. When they are included, the rate of unemployment is 42%—what is referred to as the expanded rate. We call it the more real rate. However, there are another 2.3 million people (mainly women) who are also excluded from the figures because they are designated as ‘homemakers’. In reality, most of them are unemployed and would welcome a job. And by mistakenly including anyone who has earned any income of any sort, including begging, the ‘active unemployed’ are treated as employed in Stats SA’s misguided rates of unemployment.

This suggests that the true number of unemployed is much closer to 50% than 32%. Nevertheless, whether 32% or 42% or 50%, such levels of unemployment represent a massive social disaster. It is worth recalling that when unemployment reached 25% in the USA, it was the period they called the ‘great depression’. It caused the government to introduce the New Deal, an extraordinary set of measures to give relief to the unemployed, stimulate the recovery of the economy and reform the financial system to prevent it from happening again.

Recognising the scale of unemployment is one thing. There is much less agreement about its causes and solutions.

The structure of the economy is the problem

The post-apartheid mass unemployment crisis is rooted in the structure of the South African economy. It is a semi-industrialised economy, dependent mainly on the export of raw materials and the import of high value goods. It is based on intensifying the extraction of minerals, and fully integrating South Africa into the global economy, together with  black economic empowerment. And it is underpinned by a neoliberal macro-economic policy. It is crystal clear that this strategy has run its course. It has failed in its own terms. 

South Africa’s economy labours under stagnant growth. It remains untransformed, dominated by global and domestic monopolies. The rapid removal of protective trade tariffs made much of South African industry uncompetitive. Not only have cheap imports wiped out several labour-intensive industries, like textiles, but South African corporations have globalised and disinvested from South Africa. In addition, to compensate for the removal of apartheid laws, which guaranteed cheap labour, capital switched to more capital-intensive forms of production (mainly through mechanisation). This has led to many workers being thrown out of production. 

This can be seen from the following table which shows that economic growth did not bring job creation in the years immediately after 1994 .

South African industry has always had a strong tendency toward capital-intensive, rather than  job-creating, labour-intensive, production. Government’s export-led growth strategy made this worse, not only through its trade policies but as a result of its export incentive schemes. It also created demand for highly skilled workers rather than semi-skilled and low-skilled workers, who make up the vast majority of the unemployed.

Shifting to an export-oriented economy exposed South African goods to intense competition on the global market. This forced capital to introduce a number of cost-saving mechanisms, which focused on ways of cheapening the costs of labour. The entire labour market was restructured and various forms of labour-saving mechanisms became generalised. These included outsourcing and the use of labour brokers, and informal and part-time contracts. Privatisation, austerity and high interest rate policies further contributed to mass retrenchments and a situation of job-less growth. 

And it is not as if the government has served as an employer of last resort (guaranteeing work for those who can’t get private sector jobs). Between 2000 and 2022, just 2.5% of the population over 15 years old were employed in the education sector. The proportion of the population employed in education is now lower than in 2010 despite overcrowded classrooms. This is set to get worse as the implementation of even harsher austerity policies leads to retrenchments of public sector workers and the further freezing of posts in the public sector.

The vulnerability of the South African economy to shocks from the global economy was harshly exposed during the 2007/8 global financial crisis and again during the Covid-19 pandemic. Between October 2008 and March 2010 more than 1.2 million workers lost their jobs, as the crisis took its toll. And the toll was worse in the mining and manufacturing sections of the economy. During the COVID-19 pandemic, the economy collapsed, and almost three million jobs were lost. Not all of them have since been recovered.

Once again, the winds of the global economy are pushing the South African economy to the point of recession. This time, it is the slowdown in growth in China and the decline in demand for mineral commodities. Rising debt and a new wave of retrenchments are destroying thousands of livelihoods. We have an economic growth strategy based on intensified exploitation of the country’s natural resource wealth, combined with debt-driven consumption. This offers virtually no hope of dealing with South Africa’s unemployment crisis. A new sustainable development path and industrial strategy is needed. 

There is another way

Shifting to an export-oriented economy exposed South African-produced goods to intense competition on the global market. This forced capital to introduce a number of cost-saving mechanisms, which focused on ways of cheapening the costs of labour.

Thirty years of neoliberalism has given us liberalisation, privatisation, austerity, and high interest rates. The government has bent over backwards to attract foreign investment. All of this has caused South Africa’s unemployment rate to double until it is one of the highest in the world. 

Another way requires a break with neoliberal policies. It requires a public pathway which drives a reindustrialisation programme based on meeting the needs of the millions of impoverished people in this country. Such a programme needs to be based on employment multipliers (creating indirect jobs as well as direct ones) such as in driving a mass housing programme, expansion of public transport, agrarian reform and rural industrialisation. These interventions will stimulate downstream industries and create millions of decent jobs when they are underpinned by the mobilisation of domestic public finances. 

However, the unemployment rate of 50% gives us the opportunity to think beyond the issue of wage labour and job creation. We have an important opportunity; in fact, it is imperative to rethink work beyond the formal labour market. We must go beyond thinking just of job creation. We must focus on socially useful labour. This was the conception behind the notion of climate jobs—work directed to combating climate change. It is also embedded in growing the care economy (health, social welfare and education), expanding public investment in education and health and expanding public infrastructure to enhance the quality of life.  

A follow-up article for the next issue of Amandla will expand on this alternative public pathway.

Brian Ashley is a member of the Amandla Collective.