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Cape Town - As unemployment figures reach a 13-year high, an economist is raising the alarm over what he termed interventionist policies.
Gerhard van Onselen, an economics researcher at trade union Solidarity, commented that employment statistics figures paint a gloomy picture. “If last year’s figures for the third quarter are compared to the current third quarter figures, we see that the estimated number of working people have increased by a mere 5 000, from 15.828 million in Q3 2015 to 15.833 million in Q3 2016.
"In contrast, the number of unemployed in terms of the expanded definition have increased by 712 000, from 8.3 million to 9.02 million,” Van Onselen explained.
Latest official figures show unemployment in South Africa went up to 27.1% in the third quarter of 2016. This means 5.9 million South Africans are currently without work — the highest number since 2003.
READ: Unemployment hits 13-year high
Van Onselen said damaging policies are depriving the local economy of its vitality and adaptability, and that the proposed national minimum wage "is an example of the increase in interventionist policies that are on the cards".
"Urgent consideration should be given to drastically reduce interventionist policies, if not the economy would continue to perform much worse than its true potential,” Van Onselen said.
Further bad news is that the inflation rate accelerated to 6.4% in October 2016, with the consumer price index increasing by 0.5% month-on-month.
READ: October inflation accelerates to 6.4%
Thanks to a sluggish economy, South Africa’s economic growth forecast for 2016 has been revised downwards from 0.9% to 0.5%. National Treasury doesn't foresee any substantial recovery in the next three years either, and expects gross domestic product growth to reach 2.2% in 2019.
Lesiba Mothata, head of market and economic research at Investment Solutions in Johannesburg, has pointed out the importance of accelerated GDP growth for the labour market.
“We need faster GDP growth, because once we do that we will find that a lot more people are absorbed in the labour force,” Bloomberg quoted Mothata as saying. “Unemployment is a big challenge and it’s an economy that is screaming for reforms.”
READ: SA's unemployment crisis: Economy screaming for reforms
This comes amid Deputy President Cyril Ramaphosa recent announcement of a proposal of a National Minimum Wage of R3 500, or R20 per hour.
Economists are divided on the merits of this, with some saying a fixed minimum wage could in actual fact end up harming the very people it is intended to help.
READ: Proposed R3 500 minimum wage sparks heated debate
Analysts from the South African Institute of Race Relations said a minimum wage would make it more difficult for those who are currently unemployed to find work.
The Free Market Foundation said introducing a minimum wage would drive down the demand for labour, and that it would contribute to unemployment levels and perpetuate inequality and poverty.
However, Professor Haroon Bhorat, from the School of Economics at the University of Cape Town, said the proposed R3 500 is at a “well-balanced” level.
Trade union federation Cosatu said concerns about unemployment are simply “fear-mongering by big business”.
Spokesperson Sizwe Pamla said: “We do not want to be bogged down by that. This fear-mongering has been disproven.”
Dennis George, general secretary of the Federation of Unions of South Africa, said the proposed minimum wage is a good starting point, even though this is not a “living wage”.
