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VIDEO: Covid-19 is worsening SA’s job crisis. Here’s how:

Thanks to Covid-19, there is no straightforward answer to “are you working?”🙄. You, or someone you know probably falls into some vague category: maybe you’re not working but still getting paid, or maybe you can’t work but your earnings are not impacted. 

And as recent research shows, women, black people and young people are being affected the most. 

In this series, explain unpacks what Covid-19 has meant for our unemployment situation, what our numbers say now, and in the second part of this series we look at what we can do about it. 

Check it out here

VIDEO: Watch our explainer on unemployment:

Government is expected to release its unemployment numbers soon, and we’ll know just how many more people lost their jobs between April and June 2020. 

It will most likely increase from the current unemployment rate of 30.1% (equating to 7.1 million people) because this period saw a number of businesses closing temporarily, or forever, due to the (hard) lockdown.an analysis of National Income Dynamics Study (NIDS) – Coronavirus Rapid Mobile Survey (CRAM) research shows just how dire the situation is.

The NIDS-CRAM is a huge national household survey undertaken by researchers at the University of Cape Town. The research covers a variety of topics related to unemployment in SA and the findings estimate that there is a 40% decline in “active employment”. About half of this is due to people being fired, as opposed to people being on paid leave or being temporarily laid off. The results of the survey were released in July this year.

A quick reminder that when we say that 30.1% of people are without a job, we don’t mean that as a percentage of South Africa’s total population of about 60 million people. Rather it is nearly 30% of the labour force who are unemployed.

First…who makes up the labour force?

If you’re between the ages of 15 and 65, you are considered to be part of the labour force — UNLESS you are in secondary or tertiary education, receiving on the job training, unable to work due to medical reasons, or a homemaker. This means you are not in employment.

The community and social services sector in SA is the biggest employer in the country, far more than mining and agriculture.

Click on the individual industries to see their size as employers Credit: Code for Africa

If you are a discouraged jobseeker, you are also not considered to be part of the labour force. According to Statistics South Africa, there are 38.9 million people aged between 15 and 65. From there, 23.4 million are part of the labour force or expected to be earning a living, 12.5 million are not in employment and 2.9 million people are “discouraged jobseekers”.

“Discouraged job seekers” means people who are otherwise able to work but have given up trying to find a job. Estimates vary but if you were to include these South Africans in the labour force, our unemployment rate would be far scarier — as high as 40% to 50%.

But today we’re focusing on those who are looking for a job but can’t seem to find one. This the approximately 7 million South Africans who are unemployed.

Who is being affected the most? 

While people across the spectrum and across sectors of society have been impacted by job losses since the start of the pandemic, unfortunately, the most vulnerable in society have been hit the hardest. Let’s look at the five main groups who have suffered the most: 

Women

Women suffered job losses more severely than men between February and April 2020. More specifically, African women and those in lower earning brackets.

According to the NIDS-CRAM report, there was a 22% decline in the share of women employed, while the share of men employed only declined by 10%. 

That’s right: nearly one in five women who had jobs before the crisis are no longer employed, compared to one in ten men. This decline widens the gap for gender inequality (as if women don’t have enough going against them already 🙄). 

With women typically taking on the burden of caregiving responsibilities in the home, the impact of the pandemic has been even more severe for them. The report found that in April, nearly 80% of women who were spending more time than usual on childcare spent more than 4 hours a day on it. 

In other words, the vast majority of women who now have to work from home because of the pandemic are spending about four more hours a day on childcare. Obviously, this means that women have less time to work than men do, affecting their performance. 

From February to April, the number of hours women worked declined to 23 hours a week in April from 35 hours in February. While men worked 38 hours a week in February and 29 hours in April. This obviously impacts earning. Smell more inequality? You’re right! 

Youth 

The NIDS-CRAM has classified “youth” as people between 18 and 29. They are also considered to be a vulnerable group, like women, blacks/Africans and people with low levels of education. 

And even though the youth SHOULD be occupying most of the labour force, the NIDS-CRAM report on Labour Market Dynamics in South Africa in the time of Covid-19 found that at least 43% of youth lost their job between February and April, while only 6.1% were able to find a job during this period. 

Compared to people in their prime (30-49), this is troubling. Nearly 10% of people in their prime were able to find a job in this period and 38% lost a job. According to Statistics SA, in the first quarter of 2020, there were 20.4 million young people aged 15–34 years and of the 20.4 million, about 8.5 million or 41.7% were not in employment, education or training – meaning they were expected to have a job. This figure includes discouraged job-seekers. (More on this below.)

Informal economy

South Africa’s informal economy probably just got bigger. With all the formal job losses, more people have started looking for alternative forms of income – this may be through home baking businesses to selling services and getting paid on an hourly basis. The informal economy (we’ll explain below) is hard to capture, but it takes up a big chunk of South Africa’s economy – not the labour force. Statistics SA reported that there are 2.9 million people in the informal sector. 

According to the NIDS-CRAM report on The Covid-19 Crisis and the South African Informal Economy, about 31% of informal workers were ‘locked out’ of employment when the hard lockdown was in place – meaning that they lost work opportunities because restrictions were in place. And the average hours worked per week decreased by 50%, meaning they suffered a loss of income and, as we highlighted above, women were once again more severely impacted. Nearly a third of women in the informal economy were ‘locked out’ of employment in April. This is compared to 29% of men, while the hours worked by women decreased by 49%, and 25% for men. 

Small to medium and micro sized enterprises (SMME)

Covid-19 has shown us that some jobs and industries are more equal than others: some small to medium and micro sized enterprises (SMME) survived, some didn’t. (We, at explain are part of the lucky few to continue growing our business in these tough times – we have you, our readers and subscribers to thank 😉). Without enough money or some sort of financial support, small businesses could easily crumble under a crisis. The government has therefore set up a number of schemes and grants to help small businesses during this time. From UIF payments to debt relief measures and Spaza Support Schemes – which was established to provide financial support in the form of loans and capital so the business can continue to provide essential services. To date, The Department of Small Business Development claims that 1497 SMMEs received approval for Covid-19 relief funding and through this 21 421 jobs were saved. See here if your business qualifies for small business support measures: https://www.gov.za/Coronavirus/support-business.

Statistics SA conducted two surveys covering the business impact of Covid-19 in South Africa. The second survey conducted in April, with over 2 100 businesses responding, found that nine in ten responding businesses’ turnover had DECREASED from their normal expected turnover. From these businesses at least 36% reported having to lay off staff in the short-term, 48% of businesses reported a pause in trading for the period between 14 and 30 April and 9% had to permanently stop working. The effects of this will most likely be reflected in the upcoming unemployment statistics. 

Vulnerable and grant recipients 

There are millions of people struggling to make ends meet in South Africa – no jobs mean no income and poverty just increases. With Covid-19 in the picture, the hustle gets even harder. To cushion the blow on South Africa’s most vulnerable, the government increased grants to care-givers, unemployed persons and to those without any sort of income. About 5 million South Africans have so far received the R350 monthly grant according to Social Development Minister Lindiwe Zulu. (Read more on that here).

The special Covid-19 grant relief scheme was implemented in May and will continue until October, but the NIDS-CRAM report on the Labour Market and the Poverty Impact of Covid-19 on South Africa, published on 15 July, claims that if the scheme had been implemented in April rather than May, then the increase in poverty associated with job losses in April could have been reduced by about 20 – 40%. Aside from that, the grant system did not run smoothly, so not everyone received the money they needed. 

So, we know we should expect to see a high unemployment rate, but before we get too depressed, let’s jump into what led us here in the first place. 

So why can’t people find jobs? 

Joblessness is not something new in South Africa. It goes far back, well before the transition to democracy in 1994.

Apartheid laws favoured white people, providing them with automatic access to better education, better living conditions and job opportunities that make the good life look easy. But this unjust and racist system came at a great cost to everyone else. 

Black, coloured and Indian men and women were deliberately excluded from these opportunities. Education was poor, living conditions were shocking and job opportunities were all too scarce. The majority of jobs available for non-whites were cheap and unskilled labour, either on farms or in the mines.

This led to a massive skills shortage that saw skilled white workers from Europe and North America being imported by the Apartheid government, INSTEAD of empowering people of colour to gain an education and take up opportunities in the economy.

In a nutshell: When the doors of democracy finally opened, most South Africans did not have the skills to take up the opportunities in the new, theoretically “free” economy.

So, unemployment really is a legacy of apartheid playing out today. 

But there’s also more to it than that. 

A great many South Africans lack access to education and resources to this day, which means that they aren’t able to take up the opportunities that do exist.. 

This is further aggravated by the fact that the labour force is always growing: South Africa produces more school leavers, graduates and trained artisans annually than the economy produces jobs for them. And yet there are significant skills shortage elsewhere – which means the training and education sectors are not in sync with the economy. 

Structurally speaking, inflation is also tied to unemployment, but we’ll save that for another day. It’s between the systems of our country and the people they are meant to serve that we find the real unemployment gap. 

What are the biggest sectors driving employment now? 

During Apartheid, South Africa’s economy was driven by industries like mining, engineering and manufacturing – powered by an endless (they thought) stream of cheap black labour.

But since the transition to democracy in 1994 the game has changed completely, with a mixed economy that relies less on industrialisation and more on services like finance and tourism.

Mining may have been the major contributor to GDP growth for decades, with manufacturing and agriculture playing a similarly huge role, but these industries have slowly but surely lost their lustre as resource deposits dried up and the sectors became less labour-intensive and more mechanised.

In many ways the financial sector has become the economy’s powerhouse. It comprises of retail, commercial and the real estate sectors. It’s big, stable and inviting — if you have the cash to play in it. 

South Africa may be a middle income country – but it has the financial plumbing of a rich country. Our financial markets are deep and liquid, meaning that large swathes of capital can flow across our borders with ease.

In 1994 the financial sector contributed 15.27% to the country’s GDP. By 2014, that number had increased to 21.65%.

In addition to being one of the major contributors to South Africa’s GDP, the sector also managed to come out of the 2008 global financial crisis relatively unscathed, its success owed to a strong regulatory framework backed up with orthodox economics.

Local and foreign capital like South Africa’s finance sector because it is watched over by strong institutions like the South African Reserve Bank.

Click play to see SA’s GDP by sector over time. Credit: Code for Africa

What is the informal sector? 

South Africa was known for having a flourishing informal sector — often referred to as the shadow economy. It’s made up of those people you see on the side of the road, making small sales from selling anything from vegetables and fruits to paintings or cooldrinks. They do not form part of the “official” labour force, but they are still in some way employed, either in their own right as entrepreneurs or by someone else.

It’s hard to determine its actual size, but it’s generally accepted that without the country’s informal sector, the jobs situation would be catastrophic. But like we said above, it’s likely to have increased with all the job losses. 

Although people in the informal economy do not pay direct taxes, they do have a critical role in the economy. In fact, we all do, because we all make purchases — whether it’s bread, milk or chocolates, so through value-added tax (VAT), a percentage of that payment will somehow trickle into the broader economy. We are all part of a bigger system. 

Recent statistics show that the informal economy has as many as 2.9 million people, depending on the sector’s definition. That’s a huge number considering there are just over 11 million people working in the South African formal economy, according to the latest statistics. Remember there are about 23 million people in the entire labour force. While the informal sector may not pay direct taxes it forms a critical component of the South African economy. Consider supporting small-scale informal traders, entrepreneurs and artisans to bolster this vital sector.

The informal sector may breathe air into the suffocating economy. It maintains a large proportion – this and many other policy changes and interventions can be considered to help South Africa’s economic and unemployment issue. This is a topic we’ll be tackling in the next part of this series: unemployment solutions. You are going to want to read it. 😉

This story was supported by the Pulitzer Center and Code for Africa.