Executive Chairman of Impact Investment Africa, Chris Hart, says South Africa’s rising unemployment reflects years of weak economic growth, declining investment and inadequate job creation, warning that the economy is not generating enough activity to accommodate its growing workforce.
Speaking during an interview with ARISE NEWS on Thursday, Hart said the underlying health of the South African economy remained poor from a social and employment perspective, attributing the situation to stagnant growth, corruption, weak investor confidence and a breakdown in law and order.
On the country’s rising unemployment, Hart said South Africa was not generating enough economic activity to absorb its growing workforce.
“The economy is not big enough to accommodate everybody. It needs to be much bigger than it is.”
Hart said South Africa had experienced stagnant economic growth for almost 15 years, arguing that the situation had been compounded by corruption, declining investor confidence and a breakdown in law and order.
“That’s where we’ve suffered from stagnant growth virtually for the last 15 years, since 2008.”
He said the combination of stagnant growth and rising unemployment pointed to serious structural weaknesses within the economy.
“In 2006, it was 22%, so it’s risen by more than 50% over that particular time with stagnant growth. That’s the classic definition of a depression.”
Hart said South Africa’s unemployment rate was unusually high by international standards, arguing that the problem was largely driven by domestic policies rather than global economic conditions.
“It’s really because of internal policies and the breakdown of law and order.”
He also identified the adoption of the expropriation without compensation law as another factor affecting investor confidence, warning that unemployment could rise further.
“The adoption of the expropriation without compensation law is another factor affecting investor confidence, and we could see unemployment rise further.”
According to Hart, weak job creation was also being compounded by overtaxation and overregulation, which he said were discouraging investment and limiting economic expansion.
“There’s not going to be the generation of jobs because of these things, and then you add overtaxation, overregulation. The economy doesn’t really stand a chance to really attracting investment into the economy on any significant scale.”
Hart expressed particular concern over employment losses in agriculture and mining, describing both sectors as critical components of South Africa’s economic value chain.
“My concern was the actual loss of employment in both agriculture and mining.”
He said employment growth was increasingly concentrated in government-related sectors rather than productive areas capable of generating broader economic activity.
“We see that over the longer term, it’s really things like community and social services, et cetera, which is more like government jobs. That is where jobs have been created.”
Hart argued that such employment was insufficient to generate the wider economic growth and multiplier effects needed to address South Africa’s unemployment crisis.
“It’s not employment in what we say productive areas, which will create significant multipliers across the economy.”
On the country’s high youth unemployment rate, Hart linked the problem partly to declining educational standards and a growing mismatch between available skills and those required in a modern economy.
“The decline in standards in the education sector does not help the broader economic activity where you try to look for skills, especially in a world where technology is rising.”
He said South Africa was falling behind other countries in skills development, particularly because of weaknesses within the government education system.
“We’re not keeping track with the rest of the world in terms of standards.”
Hart also attributed some of the challenges in the education sector to mismanagement and ideological problems.
“In the government sector, it’s actually very, very poor because of a variety of problems, including mismanagement and ideology problems.”
Looking ahead, Hart said he saw little evidence of economic reforms capable of reversing the unemployment trend, particularly in the areas of investment, taxation and regulation.
“There is absolutely no sign of any reform in the right direction that would actually help to say, right, we’re going to actually see a change, a turnaround.”
He said South Africa needed significant increases in investment and policy changes that would reduce the burden on businesses and encourage employment creation.
“We need to see changes in regulation, changes in taxes so that these burdens are lowered and are enablers for employment.”
Hart warned that without significant policy changes, unemployment was likely to remain elevated over the coming years.
“I don’t see any significant changes. Big three, the 30-something percent unemployment is going to be in place for the next year, two years, et cetera, until we see a significant change in government policy.”
He described South Africa’s unemployment crisis as largely policy-driven, arguing that adverse government policies had undermined investment and productive economic activity.
“This is a government-created problem in South Africa because of adverse policies that we’ve outlined earlier in this discussion.”
Hart said improving employment would require a shift in government policy, increased investment and reforms capable of restoring investor confidence.
“More significantly, we need to see an increase in investment, and there’s no sign of any changes on the policy, even with a government of national unity.”
Hart ultimately warned that without meaningful economic reforms, South Africa’s unemployment crisis could worsen, projecting that the unemployment rate could rise to about 35% within a year.
“We probably will see the unemployment rate rise to about 35% in a year’s
Goodness Anunobi
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