SA needs to expand 5% consistently to cut unemployment

South Africa’s economy needs to expand consistently at 5% for years to create jobs and lower an unemployment rate that’s among the world’s highest, according to central bank Deputy Governor Rashad Cassim.

For an economy that expanded at an average rate of 1% in the past decade and is being buffeted by rolling electricity outages, labour unrest and transport bottlenecks, accelerating growth to 5% may be a challenge.

“Going from a 1% economy to 3% isn’t rocket science” for South Africa, Cassim told reporters in Johannesburg on Tuesday. “Unfortunately, 3% gets the economy going, but it will not bring the unemployment down. To get unemployment down, we really need systematic 5% growth every year and that’s a different debate.”

Power outages — known locally as loadshedding — reached a record this year and are deterring companies from expanding and adding jobs. Rising labour and utility costs spurred Sibanye Stillwater, South Africa’s second-largest precious-metal miner by sales, to consider cutting about 2 000 jobs at some of its gold mining operations.

The unemployment rate in the continent’s most-industrialised nation is currently 33.9% — the highest on a list of 82 countries and the euro zone monitored by Bloomberg.

The International Monetary Fund projects the nation’s jobless rate will reach 35.2% this year, the highest in the world, though data for some countries is unavailable. A Bloomberg survey of economists forecasts the jobless rate will be 34% this year, before declining to 32.7% next year and 31.8% in 2024.

© 2022 Bloomberg