Insight: South Africa – No country for young people

The youth unemployment rate in South Africa is one of the highest in the world. The underlying causes of this crisis includes a dysfunctional education system, a distorted labour market, the legacy of Apartheid and unhelpful policy choices. Ann Bernstein, executive director of the Centre for Development and Enterprise, suggests how this vicious cycle can be broken.

In South Africa, the burden of unemployment is concentrated among young people (aged 15–34 years) as they account for two thirds of all unemployed South Africans. The latest national statistics show that more than half of 15–34 year olds who would like to work in South Africa, cannot find a job. An even more extreme situation exists in the cohort aged 15-24 ­– of those who would like to work, 68% cannot find a job. This makes South Africa’s youth unemployment rate one of the highest in the world.

Youth unemployment is therefore South Africa’s most pressing socio-economic crisis. This devastating reality for millions and millions of young people is the result of the malign legacies of Apartheid and the failure of democratic governments to adopt policies that respond to the scale and severity of the crisis.

South Africa’s economic strategy has not produced the growth or employment that we desperately need. There have been numerous targeted initiatives to address the challenge, but they have failed to address the underlying causes and have failed to reduce the vast numbers of young people without work in any significant way.

The organisation I lead, South Africa’s Centre for Development and Enterprise (CDE), has more than two decades’ worth of research and policy analysis on youth unemployment, education reform and other key national issues.

The CDE has consistently urged government and civil society to think more deeply about the scale of the youth unemployment challenge in South Africa, and to prioritise faster growth and a more labour-intensive economy as the only viable response.

 

A crisis of scale

According to the latest population estimates, over 70% of South Africa’s population is under the age of 35 (more than half are under the age of 29). These young people should be shaping and driving the South African economy forward. Instead, what the official statistics make clear, is that South Africa is no country for young people.

The levels of youth unemployment in South Africa are staggering, and the situation keeps getting worse. There were nearly 200,000 fewer young people in employment at the end of 2016 than there were at the start of 2008. On average, South Africa has lost nearly 60 jobs for young people daily for nearly a decade. For the age category 15-24, The Economist lists South Africa’s youth unemployment as the worst in the world.

The long-term, scarring effects of unemployment are extensively recorded: young people who experience a period of involuntary unemployment have been shown to have a greater propensity to unemployment in the long run, poorer earning expectations and mental health problems.

Yet, instead of being gripped by a sense of national crisis, political, civic and business leadership tend mostly to propose projects and interventions that, however successful in their own terms, have little chance of moving the dial on the scale of youth unemployment.

To understand the depth of the crisis, one must also take into account that almost half of all South Africans aged 15-34 find themselves not in any form of education, employment or training (NEETS). That adds up to 8.3m out of a total of 20.5m young South Africans. What this extraordinarily high number of young people essentially outside of the system highlights, is that this national crisis is not simply about jobs but also about a failed approach to basic education and a skills crisis among young people.

 

Structural barriers

South Africa’s labour market fails to match the supply of jobseekers with sufficient demand. Part of the problem relates to government policy decisions, which have led to increased costs and risks for firms and investors. This has led to slower economic growth and a reluctance to hire young jobseekers at the prevailing wage rates.

Access to economic and education opportunities is a critical factor in whether or not young people find themselves as NEETs; rural areas have the highest provincial rates of young NEETs while the provinces which are home to South Africa’s largest cities have the lowest young NEET rates.

 

Dysfunctional education system

South Africa’s education system is clearly part of the problem. Those who enter the South African job market without a matric certificate are jobless at a rate of 60%. In addition, these young people cannot access training opportunities that could compensate for their educational disadvantages and add to their employability.

Despite a large increase in the number of secondary and tertiary school graduates in the workforce over the past two decades, the education system is failing too many young people. 78% of Grade 4 learners cannot read for meaning in any language, while 61% of Grade 5 learners cannot perform simple mathematical functions.

South African learners also fare poorly compared with their peers in other countries – South Africa placed last in the Progress in International Reading Literacy Study (PIRLS 2016) reading assessment and second-last in the Trends in International Mathematics and Science Study (TIMSS) 2015 mathematics assessment, achieving 55-60% of the leading countries’ scores in both.

Moreover, up to 80% of teachers lack the subject content knowledge and pedagogical skills to teach the subjects they are meant to teach. This suggests that the term ‘learner’ is a misnomer – very little learning appears to take place in the typical South African classroom.

Getting a poor educational start has an enormous impact on a person’s future prospects. In South Africa, of 100 learners that begin school, approximately 50-60 will make it to the final year. Forty to fifty of these will matriculate (i.e., get a school leaving certificate), but only 14 will qualify to go to university.

Only six individuals of the original 100 (6%) will receive an undergraduate degree within six years of finishing school. This is the lowest share across all OECD and partner countries – South Korea’s figure is as high as 70%, while the OECD average is around 45%. 

 

Labour market distortions

South Africa’s economy has become increasingly capital-intensive over the past decade. Part of this is inevitable – as technology advances and productivity rises, fewer workers are needed to produce the same amount of goods.

But the process has been accelerated by the low skills of the workforce, the relatively high cost of unskilled labour, and the incentives offered by government to firms seeking to modernise their production processes.

Due to the failings of the education system, South African youth remain largely unskilled. This reduces the number of opportunities available to them in the labour market considerably, especially when economic growth is slow.

Beyond the lack of skills, labour regulation and policy have created a labour market designed to protect the employed to the point where it penalises the unemployed.

The principal goal of this is to address perceived injustices and exploitation associated with the old Apartheid workplace, but these policies raise the costs of employment at a time when unemployment is a national crisis.

The position of young, inexperienced workers is made especially precarious by the fact that minimum wages are not much lower than the wages paid to the typical worker in an industry. This means that firms have no incentive to risk employing someone who has no experience.

South Africans must ask themselves if higher levels of unemployment are a price worth paying in a country where the majority of young people cannot find work, at current wages.

 

Lifetime of exclusion

Many of the young people who fail to find work will be condemned to a lifetime of exclusion from the main currents of economic life, especially formal sector employment, for most if not all of their lives. Given the role a youth bulge can play in accelerating an economy’s growth, the failures of the labour market constitute a vast waste of South Africa’s resources. It is also a terrible human tragedy that crushes the hopes of millions of citizens, poisoning our communities and our politics.

There can be no more damning indictment of existing policies which serve to push the economy towards high wage and higher skill jobs. This strategy has failed dismally. South Africa needs millions of new jobs for the workforce we actually have, not the highly trained workforce we wish we had.

Achieving faster, more labour-intensive growth would transform South African society and its prospects: it would increase employment (the key to social and economic inclusion), reduce poverty, expand tax revenue and make possible the fulfilment of the promises that are enshrined in the South African Constitution.

The hardening of the boundaries between those who are included and those who are excluded from the economy represents the greatest threat to the viability of democracy in South Africa. Unless those who are currently excluded feel their lives getting better and develop credible hope of further improvement, there is every prospect of South African politics becoming more violent and less capable of delivering reasonable solutions to the country’s challenges. 

 

*The Centre for Development and Enterprise, an independent policy analysis and advocacy organisation, is South Africa’s leading development think-tank. Since its establishment in 1995, CDE has been gathering evidence, consulting widely, and generating innovative policy recommendations on issues critical to economic growth and democratic consolidation.