SA seemed to have forgotten that many things can hold true at once in the wake of comments in this newspaper by Capitec CEO Gerrie Fourie (“Capitec CEO argues SA’s jobless rate as low as 10%”, June 10).
There can be an employment crisis, an income crisis and a poverty crisis all at the same time as the data not telling us the full reality — people getting monetary support from abroad and a complex range of sources, and seemingly tenuous and difficult-to-explain social stability in the face of such crises.
I remember sitting in the SA Reserve Bank auditorium many moons ago for an afternoon conference on unemployment, and hearing endless debates about statistics and measurements and trying to align the statistics with what we know are the realities on the ground.
The most important part of Fourie’s intervention was the statement that such a high unemployment statistic is at odds with SA’s social stability — even if, as seen in high crime rates and the unrest and riots of 2021, it can be threadbare at times.
The population of working age adults is 41.7-million, of whom only 16.8-million are employed (including in the informal sector, Stats SA tells us for the first quarter of this year). Excluding people who are not economically active — about 13.2-million — leaves us with some 11.7-million people doing what exactly?
We should remember there is no working age jobless grant (the social relief of distress grant is as close as you come, but is not designed as a policy instrument to cover unemployment). Measures such as Unemployment Insurance Fund payouts are temporary, so how is this huge number of people surviving?
The simple answer is that despite such a persistent crisis in SA this is actually not as well understood as the clarion call of Fourie’s critics last week would have us believe. The Stats SA household survey for income and expenditure tells us part of the story: household and extended family units at the lowest income deciles have different people with different roles, including several different grants coming from different people (including, importantly, the child support grant).
There might be one adult employed formally and perhaps more informally or occasionally. Something the Stats SA data does not tell us very clearly is the churn that likely happens in employment in the informal sector, of someone with income one month and not the next.
Too much was brushed away last week about the clarity of Stats SA’s output. That its statistics are assembled in accordance with international standards doesn’t detract from the fact that the unemployment rate actually fell during Covid-19, even as people temporarily left the labour market. Nor does the fact that Stats SA recently (and correctly) undertook a major revision to is labour market data, as it does to all data periodically.
Even Stats SA’s own two different data sources on formal ex-agriculture employment — the quarterly labour force survey and the quarterly employment statistics — showed vastly different outcomes through the post-Covid recovery, as the agency itself laid out at the back of its recent releases. Part of the reason this is methodology, but that doesn’t seem to be able to explain the entire story.
There are huge disparities in how state entities view informality in SA, and in particular the number of SMEs with order of magnitude differences between the SA Revenue Service, Stats SA and FinMark Trust, or between International Labour Organisation estimates and Stats SA estimates of informality. Government entities and the SA Reserve Bank all have to “glue” various different indicators on households and the labour market together to get a sense of what is going on with labour and income. That doesn’t mean the data is “wrong” compared to international standards; just that a wide range of inputs is required to build a true picture.
One of those inputs is banking and financial data, which Capitec has built a business on understanding and being able to manage. It digs deeper into this space than its competitors, who have been scrambling to catch up in recent years. People need to be banked to partake in the modern economy, especially now as financial services firms offer more in the way of products, services and support through the formal/informal sector boundary, so there is value in this insight.
None of this detracts from the precarity and poverty that exist. Nor does it detract from the necessary policy prescriptions required to solve the crisis, including broad social security reform and a richer social wage and safety net as reform-induced growth allows more tax revenues to be spent sustainably, and spatial, planning, transport reforms break barriers to enter the formal economy.
For too long the informal sector itself, and how firms behave at the informal/formal sector boundary, has received too little attention, with policy debates dominated by the formal sector and especially big formal sector enterprises and their concerns. In some cases, such as network industry reforms, these can support the informal sector. However, in others such as lobbying around master plans, they lock out SMEs in the formal sector, let alone the informal sector.
High compliance frictional costs remain a major barrier to formalisation, which the recent push to register informal businesses in some areas (surely an oxymoron) seems to fail to grasp. Siyabonga Hadebe outlined many of these issues last week already (“Why Capitec’s CEO is forcing SA to rethink its unemployment narrative”, June 14).
The forthcoming national dialogue risks being a monumental waste of time and money, with different stakeholders only hearing what they want to hear.
• Peter Attard Montalto leads on political economy, markets and the just energy transition at Krutham, a SA research-led consulting company.
This article first appeared in Business Day.
