Formal sector creating 1,000 jobs a day, says study

Contrary to fears of deepening unemployment, South Africa's formal sector is creating 30,000 jobs a month, according to a new study commissioned by the United Association of South Africa (UASA) labour union.

"The findings show that jobs are being created - more than what was previously thought," said economist Mike Schussler, author of 'The South African Employment Report'. The study was based on Unemployment Insurance Fund (UIF) records and tax collection figures, which are not usually used by official statistical surveys.

According to the study, South Africa's economy has been growing at six percent - much faster than the 4.4 percent in the first half of this year stated in the government's medium-term budget plan released last week.

UIF records show 871,011 new commercial employees registered between January 2004 and August 2005, or about 46,000 new registrations per month. Adjusting the figures for late registrations reduced the monthly figure to 30,000 - enough to absorb the annual influx of 360,000 new entrants to the job market.

Taking into account employees not covered by the fund, such as domestic workers and the self-employed, Schussler's study suggested that nine million people in South Africa had jobs rather than the 8.3 million mentioned by Stats SA's Labour Force Survey (LFS).

"The South African economy is certainly much bigger than previously thought. More people are employed in some form, as UIF numbers indicate a massive 'catch-up' since SARS [South African Revenue Services] took over collections in April 2002," said the report.

Some economists, however, have questioned the study's accuracy, as it relied on UIF figures.

"There are questions around the methodology," commented economist Iraj Abedian of Pan African Investment and Research Services, because every new UIF entry does not necessarily indicate a new employee - "it could just be the UIF updating their database".

Neva Makgetla, chief economist of the Congress of South African Trade Unions, a labour federation was also dismissive of the "hunky-dory" picture of the economy painted by the study.

"The latest LFS shows that the labour participation rate in the economy has dropped from 56.3 percent in 2001 to 54.8 percent this year, which means almost two percent of the labour force has dropped out of the market," she noted.

However, Abedian said it was possible that the country's economy was growing at six percent. "There are a number of indicators - SARS tax collection figures are up, car sales have increased - which indicate that people have more income to spend."

He added that it was "very difficult to measure progress" in an economy undergoing "so many structural changes".

"At one end of the market you will notice so many people earning a living from the cellphone industry by selling cellphone accessories, airtime, etc, on the street; on the other hand more and more companies are outsourcing services such as IT. It is very difficult to take these people into account while measuring the strength of our labour force," Abedian pointed out.

"Broad-based unemployment, of course, is still high - to cover half of that figure we would need to create 60,000 jobs every month," Schussler remarked.

According to the LFS for March 2005, the unemployment rate has declined from 29.4 percent since 2001, but is still at a high 26.5 percent this year.

Stringent labour legislation makes hiring labour an expensive proposition for small-scale companies, and Schussler suggested that government relax legislation for small firms to enable them to employ more people.

Abedian suggested another problem was the limited skills of the workforce. "our major problem is our education system - it is too inadequate to generate or enhance skills to cope with the demands of a growing modern economy". He suggested involving the business sector formally in skills-enhancement opportunities.