The formal non-agricultural sectors of South Africa’s economy contracted significantly in the third quarter of 2024, with around 130,000 jobs lost, marking a 1.2% decrease compared to the previous quarter. The latest Quarterly Employment Survey (QES) highlights a troubling trend of job losses across multiple industries, raising concerns about the country’s broader economic stability and resilience.

Sector-Specific Job Losses and Gains

The contraction in employment was primarily driven by the community services sector, which recorded a staggering loss of 131,000 jobs, representing a 4.3% decline quarter-on-quarter (q/q). Many of these job losses were in part-time positions, reflecting heightened vulnerability in temporary employment.

Other key sectors that reported job declines include:

• Business Services: 15,000 jobs lost (-0.6% q/q).
• Manufacturing: 4,000 jobs lost (-0.3% q/q).
• Transport: 3,000 jobs lost (-0.6% q/q).
• Mining: 2,000 jobs lost (-0.4% q/q).
• Electricity: 1,000 jobs lost (-1.6% q/q).

On the positive side, job gains were observed in:

• Trade: 19,000 jobs added (+0.8% q/q).
• Construction: 4,000 jobs added (+0.7% q/q).

These gains, though notable, were not enough to offset the broader losses.

Full-Time and Part-Time Employment Trends

The data shows a stark difference in the trends for full-time and part-time employment:

• Full-Time Employment: Decreased by 14,000 jobs q/q and by 44,000 jobs year-on-year (y/y), reflecting a 0.5% annual decline.
• Part-Time Employment: Suffered significantly, with nearly 120,000 jobs lost q/q (-9.4%) and 250,000 jobs shed compared to Q3 2023 (-17.8%).

By Q3 2024, South Africa’s formal economy employed fewer than 1.2 million part-time workers and under 9.5 million full-time workers.

Earnings Growth Amid Job Losses

Interestingly, total gross earnings in the formal economy rose by 1.3% q/q and were 2.6% higher than in Q3 2023. Basic salary and wage payments increased by 0.8% compared to the previous quarter and by 3.4% y/y. Average monthly earnings, including overtime and bonuses, rose by 6.6% y/y.

Earnings in Q3 2024 were 32.5% higher than Q3 2019 levels, surpassing inflation, which grew by 27.4% during the same period. These increases in wages, while beneficial for employed workers, highlight the growing divide between those who retain employment and those who are unable to find work in South Africa’s challenging economic environment.

Comparisons to Pre-COVID-19 Employment Levels

The survey data reveals that South Africa has yet to fully recover its pre-COVID-19 employment levels, even though there has been some progress. While 380,000 jobs have been added since Q3 2019, the nation remains vulnerable to external economic shocks and domestic challenges such as crime, corruption, and energy crises.

Challenges in South Africa’s Economy

Several structural and systemic issues have exacerbated job losses and constrained economic growth:

1. Energy Crisis: Persistent power outages and instability at Eskom, the state-owned electricity provider, have disrupted manufacturing, mining, and other industrial activities, further hampering job creation.
2. Crime and Corruption: High levels of crime and corruption continue to deter foreign investment and hinder local business operations.
3. Inflationary Pressures: Rising costs of living have eroded disposable income, reducing consumer spending and impacting sectors reliant on domestic demand.
4. Skills Mismatch: A significant gap exists between the skills demanded by the labor market and those possessed by the workforce, particularly in high-growth sectors like technology and renewable energy.

Future Outlook and Opportunities

Despite the current challenges, there are glimmers of hope for South Africa’s economy:

• Economic Growth: GDP growth is expected to approach 2% in 2025, supported by structural reforms and infrastructure investments.
• Infrastructure Development: Maintenance and development of infrastructure are expected to benefit sectors such as construction, trade, and finance, provided crime-related disruptions are managed effectively.
• Export Opportunities: South Africa’s mineral resources and agricultural exports remain significant drivers of foreign exchange earnings. Expanding trade agreements with emerging markets could boost these sectors further.
• Green Economy: Investments in renewable energy and environmentally sustainable projects could create new jobs and reduce reliance on fossil fuels.

Policy Recommendations

To reverse the trend of job losses and achieve sustainable growth, the government and private sector must work collaboratively on several fronts:

1. Addressing the Energy Crisis: Stabilizing Eskom and expanding renewable energy projects are critical to reducing power disruptions and ensuring stable industrial operations.
2. Enhancing Skills Training: Expanding vocational training programs and aligning them with market demands can help bridge the skills gap, especially for young and unemployed South Africans.
3. Promoting Small Businesses: Providing financial and technical support to small and medium enterprises (SMEs) can stimulate job creation and drive economic diversification.
4. Tackling Corruption: Strengthening anti-corruption measures and ensuring accountability at all levels of government will improve investor confidence and boost economic activity.

Conclusion

South Africa’s Q3 2024 employment data underscores the fragile state of its formal economy, with job losses concentrated in sectors critical to the country’s socio-economic stability. While challenges such as the energy crisis and inflation persist, targeted reforms and investments offer a pathway to recovery. By addressing systemic issues and leveraging opportunities in trade, infrastructure, and renewable energy, South Africa can lay the foundation for a more inclusive and resilient economy.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

16th December, 2024