Manufacturing Jobs Bloodbath Due To Covid-19 Pandemic Underlines Mammoth Task Facing Policy Makers – SEIFSA

JOHANNESBURG, 29 SEPTEMBER 2020 – The disappointing employment data released by Statistics South Africa (Stats SA) today highlights the mammoth task facing stakeholders and policy makers in their efforts to seek sustainable solutions to the growing crisis, Steel and Engineering Industries Federation of Southern Africa (SEIFSA) Chief Economist Michael Ade said.

Dr Ade said the results of the quarterly labour force survey (QLFS) – which is a household-based sample survey that captures labour market activities of persons aged 15-64 – highlights the urgency that is needed to address the fundamental factors inhibiting job creation in the country.

The employment data showed that the manufacturing sector, of which the metals and engineering (M&E) sector is a part, lost 14% of total employment – or an alarming 250,000 jobs – between Q1 2020 and Q2 2020, with employment decreasing from 1,706,000 during the period spanning January to March 2020 to 1,456,000 during the period spanning April to May 2020.

The quarterly labour force statistics showed that 334,000 jobs in total were lost year on year between April and June 2019 and during the same period in 2020, amounting to an 18,6% year-on-year decrease.

Dr Ade said the general South African working-age population had decreased by 13,6%, and the number of employed persons correspondingly had declined by 2,164 year on year, and by 2,234 quarter on quarter.

He said this was cause for concern because although the data officially placed the domestic unemployment rate at a lower 23,3%, this still ran counter to the objectives of the National Development Plan to reduce the unemployment rate to 15% by 2030.

“Considering the official unemployment rate for Q2 2020, which is a lag indicator, it is difficult to predict a huge turnaround in the numbers in the near future, especially with the on-going COVID-19 pandemic and fear of contagion, which warrants the need for businesses to still maintain social distancing and encourage the wearing of masks,” Ade said.

He said although the decrease in employment was mainly underpinned by the COVID-19 economic lockdown spanning alert levels five, four and three, which also distorted production levels, other key contributing factors were trade and consumption patterns, persistent insufficient domestic demand conditions, structural challenges and uncertain global trade dynamics faced by most industrial sectors.

He said the situation was not helped by the fact that local companies had been operating below production capacity and at sub-optimum production levels as they tried to minimise input costs, including uncontrollable fuel and energy costs, despite not trading and selling during the lockdown. These alarming dynamics had negatively impacted on both formal and informal employment numbers in the manufacturing industry and the M&E sector in particular.

“The numbers further highlight the existing corollary between two key macro-economic variables, employment and economic growth, given the very alarming performances of both jobs and GDP numbers,” he said.

Dr Ade said employment levels are generally supposed to increase or decrease on the back of higher or lower economic activity, but this has not been the case for a long time, with the economy sinking deeper into recession.

He said SEIFSA was also concerned about the socio-economic impact of high levels of unemployment compounded by decreasing GDP-per-capita since 2016.

He said a collegial approach was needed to ensure that delineated interventions aimed at reducing the persistent unemployment situation in the country were successful. He called for all hands on deck to stop the predicament, saying that the responsibility fell on all South Africans and not just on the Government, the labour unions or captains of industry.

“The high unemployment rate provides food for thought for all South Africans, who have to collectively seek sustainable solutions to the unemployment problem. Policy makers should also continue to provide support specifically for small business and start-ups, and also boost economic activities in all 513 townships in South Africa. Accordingly, specific focus should be channelled at encouraging opportunity-driven entrepreneurship, rather than necessity-driven entrepreneurship, since the former will lead to sustainable informal employment,” Dr Ade said

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