SA's unemployment is not a statistical construct; it's a real and painful hardship

Mail & Guardian

17-07-2025

South Africa's unemployment rate currently sits at 32.9% (Delwyn Verasamy/M&G)
For the many jobless people in South Africa, the debate over whether the unemployment rate is 10% or 32.9% is futile. It makes little difference to an unemployed young graduate sitting at home whether Statistics South Africa counts them in the Quarterly Labour Force Survey or not. What may give them some solace is the acknowledgement that a problem exists. Seemingly, those with the power to act, including government ministers, are fixated on errors of inclusion and exclusion.
The primary purpose of releasing the unemployment rate regularly is to provide a sense of economic health and urgency. The grim picture of unemployment in communities is glaring for all to see. Annual research from the Gauteng City Region Observatory demonstrates that people's perceived quality of life — socio-economic status, health, safety, public services — is diminishing. Government social spending is at an all-time high because of pressing social needs.
Clearly, the economy's health is not in good shape, and this should be reflected in and affect various socio-economic matrices, including unemployment itself. So, why is South Africa debating the unemployment figures instead of its substance?
Well, the saying, in every crisis lies the seed of opportunity, could not be more relevant than in this debate.
After observing money movements in the millions of Capitec bank accounts, the outgoing chief executive could not reconcile the amounts of deposits flowing into the bank accounts with the official unemployment rate of 32.95% or 8.5 million people. As a bank serving low-income segments, the chief executive argues that millions of his depositors, who are likely to generate income in the informal economy, are not included in unemployment surveys. If accounted for, unemployment could be as low as 10%, he argues.
The country's relatively small informal employment (19% or just over three million people) in comparison to peer African and emerging market economies reinforces his argument, with Brazil and India sitting at 39% and 90% respectively.
The criterion for inclusion in the counting is not a bank deposit or income earnings (this debate has been exhausted). The opportunity that Capitec may have exploited through the provocative discussion is not so much about who is included, but what a different interpretation of those deemed informal implies for extending cash flow-based business credit lines and other banking services, such as PoS systems and related wallet value-added services.
A recent International Monetary Fund and World Bank report suggests that only 4% of informal businesses in South Africa have access to credit lines compared to other African and income peers of 20% to 40%.
Capitec has made no secret of its wish to replicate its success in the low-segment personal banking market by penetrating informal businesses, arguably estimated to be R450 billion to R750 billion a year.
Tinkering with unemployment statistics won't change the fortunes of Capitec or any bank, for that matter. Neither would this affect the performance of the economy, because the size of the national income, including bank deposits from informal businesses, is given at any period.
It is therefore not possible to achieve a sudden downward adjustment to the unemployment rate from 32.9% to 10% without a corresponding increase in economic output. One of the established doctrines in economics, dubbed Okun's law, suggests that the country's GDP must grow at about 3% to 4% a year to achieve a 1% reduction in unemployment.
The prospects of achieving such robust output growth have eluded the country's economy for many years. Even if circumstances change dramatically, it will still take no less than 20 years to reach this elusive 10% unemployment rate.
Unemployment and economic activity are inextricably intertwined, but their relationship in South Africa has been spurious, leading to mischaracterisation of whatever sluggish economic growth there is as jobless.
Corporate executives can shape the public discourse on unemployment by steering debates toward addressing the structural determinants of unemployment or strategies to achieve 3-4% GDP growth. Unsubstantiated unemployment estimates may raise unwarranted and damaging questions about the country's national statistics. To some people, unaccounted unemployment may be equated with unaccounted income, leading to questions about the accuracy of GDP size. Closer to Capitec's home, some people may rightly question how corporate giants continually achieve double-digit earnings growth in an economy growing at1% a year.
Of course, the answer is business prowess, just as Stats SA aptly boasts statistical mastery. But the question remains: is it conceivable that GDP may also be understated, based on observations of super corporate profit performance? Banks will be among the first to complain if anyone suggests a drastic revaluation of GDP, because it would lead to the misallocation of resources, production planning nightmares and flawed economic policy.
Many economic policy decisions, including borrowing rates from which banks generate profits, hinge on the accurate measurement of GDP. Those familiar with the political economy of South Africa know too well that certain policy areas are sacred. Bank executives rarely comment on the percentage spread between the repo and prime rates or the perceived conservatism of the South Africa Reserve Bank in lowering lending rates, even when inflation is at the lower bound of the target band. Unemployment figures deserve the same level of sensitivity, for many reasons that bank executives must familiarise themselves with. This is not 'whataboutism', but a matter of principle when dealing with national statistics: accuracy, consistency, credibility and sensitivity.
Unemployment is a painful reality for many South Africans. The South African Police Service received almost 148,000 applications within 48 hours of opening online applications for 5500 police trainees. This level of desperation is not consistent with a 10% unemployment rate.
No amount of disagreement with Stats SA's counting methods should trivialise the sheer size of unemployment and the psychological effect of economic inactivity. Reports of government ministers lining up to talk to the Capitec chief executive are encouraging. Perhaps something will come out of the discussion. There is no shortage of solutions for jobs, only the will from the government and the private sector to work together in the best interest of every South African.
The official unemployment rate remains at 32.9%. Period.
Eddie Machete Rakabe oversees the political economy faculty at the Mapungubwe Institute for Strategic Relations. viewsHe writes in his personal capacity.