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Eskom kept the lights on from April to June, but that was not enough of an economic jolt to arrest the swelling ranks of the unemployed.
Statistics South Africa (Stats SA) said on Tuesday that the unemployment rate climbed to 33.5% during the period from 32.9% in Q1, when the economy shrank 0.1%. This brings the rate to within two percentage points of the record high of 35.3% recorded in the last quarter of 2021.
Under the expanded definition, which includes discouraged job seekers, the rate increased 0.7 of a percentage point to 42.6%.
During the period, 111,000 jobs were shed in the trade sector and 45,000 in agriculture. Measured by provinces, the Western Cape still has the lowest unemployment rate at 22.2%, while North West topped the charts at 41.3%.
Based on the expanded definition, the unemployment rate in North West is a staggering 54.2%.
The latest read once again underscores the depressing scale of South Africa’s unemployment problem, which exacerbates the challenges of poverty and inequality.
A major concern is that the unemployment rate maintained its rise while other data suggests the economy barely grew in Q2 despite the fact that there were no nationwide rotating blackouts during the period, which admittedly was also marred by local power cuts.
Eskom’s woes have long been sighted as the biggest constraint to economic growth and job creation in South Africa, but clearly it needs to keep the lights on over a much longer timeframe to spark meaningful investment and activity.
Political uncertainty around the election and its outcome no doubt detracted from Eskom’s performance, and most of the other economic data from the period suggests the economy avoided a recession but only grew by the slimmest of margins. It also means that South Africans cast their ballots in May against this lacklustre economic backdrop.
Another data set published on Tuesday showed that mining production fell 3.5% year-on-year in June and on a seasonally adjusted basis by 0.9% in Q2 compared to Q1. This means the sector will be a drag on the gross domestic product (GDP) number for Q2.
Technical recession
“The latest (mining) data suggests that the sector will dampen real GDP growth in Q2 2024, but probably not enough to drag the economy into a technical recession,” Gerrit van Rooyen, an economist at Oxford Economics Africa, said in a note on the data.
“… we forecast that the slight improvement in manufacturing output steered the South African economy to a small expansion of 0.3% quarter-on-quarter in Q2, following the 0.1% quarter-on-quarter contraction in Q1. However, if tomorrow’s retail sales report (for June) disappoints, it could tip the scales toward a recession.”
The sluggish economy and the contraction in the power-intensive mining sector probably helped to keep the lights on.
“While load shedding was suspended in Q2, the contraction in mining production aided this outcome,” said Investec Chief Economist Annabel Bishop.
Economists are generally more positive about the second half of 2024 with the Government of National Unity in place, Eskom still performing well, and hopes for an interest cut as early as September.
There is some data already out that suggests the economy may have started turning the corner in July.
Read more: Absa PMI bounces back to positive levels in July, signalling solid manufacturing start to Q3
But whether or not this will put the brakes on the rising unemployment rate remains to be seen. The record high is not that steep a climb. DM
