Both Stats SA reports wrong – SA’s “true” unemployment rate is around 16% – analyst
In this interview,Coface lead analyst Saijil Singh argues that South Africa's two unemployment statistical publications, one of which measures employment by surveying companies, the other by surveying households, are both wrong. According to Singh, these surveys overlook a lot of the informal and marginal jobs that people hold, or their micro businesses, and so overestimate unemployment. The real number, he says, is 16%. This may be true, but to my mind, it's not all that helpful. 'Working' people who are not being caught by the Stats SA jobs are probably 1) earning well-below-poverty-level wages and 2) are not engaged in the formal economy (i.e. paying taxes, saving for retirement etc). So, while it's good to think that there are more South Africans eking out a living than the official number shows, I think the goal of policy should be to get more people into the formal sector, into jobs that pay decent wages, and into the income tax net. And that, I think, is why the official statistics matter, and why they are a reasonable guide for policymakers. – FD
ALEC HOGG: South Africa has the largest economy in Africa and accounts for about a quarter of the continent's GDP. Joining us to give us some outlook on where we're heading as a country and the Monetary Policy Committee's deliberations, which are going on right now, is Saijil Singh. He is the Lead Analyst at Coface. I liked your reports Saijil, for a couple of reasons and we're going to get into the big one on unemployment in just a little while. Your thoughts about this 24 percent that South Africa is now of the African economy: it almost reminds me a little bit about the gold price. At some point in time, South Africa produced 60 percent of the world's gold and we're now below…we're not even in double figures anymore. Where has the country come from and what was the peak?
SAIIJIL SINGH: I think in terms of 'what was the peak', we need to go way back…say, to around 200/2002, and that's where you're seeing the peak of our economy but in saying that, not the peak in terms of our potential, our output, or our contribution to global GDP.
ALEC HOGG: But we were around 50 percent of Africa or more.
SAIIJIL SINGH: No, when you talk about peak in terms of contribution, we were around the 40 percent mark – so, quite significant. However, the dominant economies were Egypt and South Africa, at the time. What we've seen since then is an emergence of East Africa and West Africa, and they then take up that portion of GDP. While our GPD hasn't shrunk to any effect – it has actually grown – it just hasn't grown as fast as the other emerging economies in Africa. That's why our percentage share at the moment is around 24 percent. That however, is under significant threat. All our projections say that it will go down by the year 2020, to around 15 to 16 percent.
ALEC HOGG: It sounds like the gold story.
SAIIJIL SINGH: It's much the same.
ALEC HOGG: The reversal of that trend… We had Russell Loubser in here yesterday talking about Drift and this Drift into mediocrity in so many areas in our economy. When you have a look at that as a percentage of the African GDP, we should be aiming, surely, to get back to 40 percent and not accepting that we'll go down to 15.
SAIIJIL SINGH: Yes, it's very difficult and one of the main pressures is that we're not truly an emerging economy in the global sense. Our growth percentages are not in line with other emerging economies. We're very much caught between what is technically classified as an emerging economy, and the first world, or the western world and that's where we are having a hard time finding our place. Until we find a true classification for ourselves, it's not going to get better. We need to decide whether our policies place us more in line with an emerging economy. We then become more output-focused, we concentrate on exports, look at sectors such as agriculture and mining, and put effort into that. Alternatively, look at developing more on a first world standard and look at being more industrialised, looking at then providing services into Africa and our neighbouring states that can benefit us.
ALEC HOGG: It's a challenge.
SAIIJIL SINGH: It's a huge challenge. It's not something that's very simple.
ALEC HOGG: It's an interesting point you're making now, because it's almost like America to the world. America has five percent of the world's population and it produces round about a quarter of the world's GDP, and they're struggling to keep it at a quarter.
SAIIJIL SINGH: Yes.
ALEC HOGG: South African has five percent of Africa's population and produces about a quarter of its GDP, so our natural share I guess, would be less.
SAIIJIL SINGH: Yes, the natural share is less, but it's not only about 'what is our percentage'. What we need to focus on is how do we sustain that percentage? How do we maintain our position in the global sphere of things? Do we remain as the 20th largest contributor to GDP or are we consistently dropping down that scale, going down towards the 80's and 90's, and that's where the trouble as such, would come in. That's where you're going to get things such as social unrest and economic problems. Some people would say there's an economic bubble, and that's where the bubble would burst.
ALEC HOGG: You're still five times better off than you are on average, on this continent, but that's a very interesting debate. Just to come back to the employment question. I spoke with Azar Jammine this week and he said there's now a new report out from Stats SA, which shows we created thirty-nine-thousand jobs last year, and that these thirty-nine-thousand jobs come from a research amongst VAT-paying companies. On the other hand, the one the politicians love talking to is five-hundred-and-seven-thousand jobs created last year from a household survey. Which one is accurate?
SAIIJIL SINGH: Both of them are extremely inaccurate. The problem we have if we're looking at just Africa, is that we're very stats-focused. South Africa as a country, as an economy, and as a people are very concerned with certain numbers for example, we're over 25/26 percent unemployment. That's not true. That is based on true statistical data from the Revenue Services with minor adjustments for estimations, but it's talking about tax-paying people. What about the very small entrepreneur in rural areas starting up a little business of his own: is he technically unemployed? The stats would say he is. From our point of view, we look to factor in all these adjustments and we look at it as being more around the 16 percent mark of people who are truly unemployed whether they're living below what we've termed 'the breadline' if you want – although poverty levels are a different story. However, if you're looking at just employment it's very difficult to just look at stats. The politicians would always favour the lower number and say 'estimates say that this is the case. It's better than what it was five years ago', but the way we calculate these stats is not the same as it was five years ago.
ALEC HOGG: Okay, I think that's great. Anyone who is rational would buy that. Has employment been growing or declining in the last year, given your 16 percent number?
SAIIJIL SINGH: If you're looking at just the last year…definitely, unemployment is increasing, so employment itself is reducing. Companies in general, are looking at a strategy of consolidation. While it might be the government's strategy to increase employment in South Africa, many companies are looking at maintaining their bottom line.
ALEC HOGG: Hence, you say both of those surveys are wrong. It's not five-hundred-and-seven-thousand new jobs, and not thirty-nine-thousand new jobs. In fact, it's a contraction.
SAIIJIL SINGH: Yes.
ALEC HOGG: And if you take our 16 percent – because Coface is all over the world – how do we rank? Where do we come? Which other companies are similar?
SAIIJIL SINGH: Similar to the situations in Spain I'd say, and in Ireland. Those are not very good economies at the moment. They are improving, but from a purely economic point of view, they are struggling economies. However, they operate under a different sphere of rules – different circumstances. People are used to a different level of living and a different quality of life, whereas in South Africa, we work off a very low base. There's therefore less tension and less chance of social uprising. Although it's very publicised, it's not as bad as in these European economies, but we're definitely not in the same position as our peers, and that should be countries such as Brazil and Russia – Russia is contracting significantly – but definitely Brazil and Indian. That's where we want to be, competing with that sort of economy. Those are major economies of scale, so I don't suggest we compete in terms of output etcetera and contribution to GDP, but definitely from a developmental point of view and from an infrastructure point of view. What is our rate of our increase in education levels. What is theirs? What is our infrastructure development? How quickly is it improving? What is theirs? That's where we should be and we're definitely not. We're falling off the pace and you're getting countries such as Angola, Zambia, and Kenya – to a small extent – that' s improving at a faster pace than what we are doing.