INSIGHT 1

Demand exists, but it looks different

South Africa’s acute COVID employment collapse, on a background of chronic jobless growth, looks like a story of blanket labour market contraction. A deeper dive into the data shows that we are, in fact, seeing the acceleration of a reshaping of demand that has been underway for decades. 

Heavy industry is declining: the GDP contributions of mining, agriculture and manufacturing—industries that had traditionally absorbed large numbers of low-skilled workers—have all shrunk by double-digit percentages since 1994. Against the decline of these ‘big industrial’ sectors we see two trends, both of which contain the potential for new job creation: the contraction of the formal labour market as we know it, resulting in increased informalisation of economic activity; and the emergence of what we call ‘sunrise sectors’, that have the potential to grow and absorb young people.

The most obvious sunrise sectors are the so-called ‘industries without smokestacks’, including financial, business and community services. These industries have a number of characteristics that make them a valuable focus for employment intervention. Firstly, like manufacturing, these are productive sectors, generating high value per worker relative to average economy-wide productivity. Secondly, they can employ large numbers of low- and moderately-skilled labour, giving them the potential to generate the number and type of jobs required to absorb young people at scale. Thirdly, these sectors are undergoing rapid digital transformation at the global level, creating high potential for sector-wide productivity growth which in turn drives up investment and employment growth, and enables the creation of viable pathways to higher earning. A great example here is the Digital, ICT and Global Business Services sector. Our research identified 60 000 high-skill digital job vacancies in the local economy, with the potential for 500 000 more by 2030. Though agriculture’s share of GDP is on the wane, agro-processing and horticulture contribute a growing 15% towards formal employment. High-value growth pockets within the sector offer the opportunity to unlock 300 000 potential jobs across agriculture, horticulture, agro-processing, and associated value chains. 

Another, quite different, sector with high potential for job creation is the growing care and social economy, which includes Early Childhood Development, Health, and Community, Social and Personal services. Community, Social and Personal services is the second-largest absorber of young people in the labour market, comprising over 20% of all youth jobs. Investing in this sector can also unlock opportunities for young women, who were significantly impacted by the COVID-19 pandemic, and remain the most vulnerable to unemployment, with black African women experiencing the highest level of unemployment. Current projections suggest that 104,000 assistant and auxiliary roles can be created in ECD centres, and if we were to target full national ECD coverage, up to 400,000 new opportunities could be created. The success of innovative enterprise development programs in this sector suggests that partnership between private sector and ECD microenterprises can increase the pathways to sustainable income generation in places where formal economy jobs will be slower to arrive. The health care sector could unlock thousands of opportunities for young people over the next five years–including over 25,000 opportunities for counsellors and community mobilisers in public health facilities, and entry level positions in pharmacies across the country.  

These growth sectors form the core of economic activity that will now be prioritised for investment in job creation. The next question is ‘how?’

INSIGHT 3

Our most powerful employment levers aren’t fit for an informalising economy

Our state employment incentive infrastructure — tax incentives, credits and training programs — was built for a different era of heavy industry, corporate stability and less complex value chains. Redesigning these incentives for a future of work that supports small, medium and micro-enterprise (SMME) will be vital, both to help these businesses bounce back from deep pandemic-related job losses and to harness their potential for growth. The last QLFS data shows that most job losses occurred in the SME sector, with about 70% occurring in age groups 15-to-44 years. 

Our employment incentives also need to be recalibrated for greater administrative ease if SMMEs are to take advantage of them. For instance, allowing small businesses to participate in the Youth Employment Service (YES) programme with recognition via affidavit—sidestepping the costly QSE verification process—could not only help unlock 200,000 jobs per annum but also mobilise value chains critical to economic revitalisation.   

Across the economy at large, skills development levies provide many opportunities to facilitate inclusive hiring. But these can be administratively intensive to claim, and often incentivise skilling over job placements. As well, current skills incentives do not sharply target the most vulnerable youth (those youth at or below matric and who are not in education, employment and training). Instead, they bias towards tertiary and graduate youth. By recalibrating our system of skilling incentives to bias instead towards job placement and inclusion, we can encourage more corporates and industry associations to hire the most excluded youth.