Economic modelling by financial consultancy PwC shows that South Africa could add R137 billion in extra household income by resolving its biggest labour crisis: youth unemployment.<\/p>\n\n\n\n
In its latest economic outlook report for September 2023, PwC noted that youth unemployment in South Africa is at shocking levels – despite small gains made in the overall job market and economy in Q2.<\/p>\n\n\n\n
Making matters worse, in all scenarios laid out in the consultancy’s economic modelling, the situation is only expected to deteriorate.<\/p>\n\n\n\n
According to PwC, youth unemployment levels in South Africa (people aged 15 to 24) sit at 70% when looking at the extended definition (people who are unemployed and have given up working).<\/p>\n\n\n\n
Youth in this bracket make up approximately 13% of the labour force, accounting for 2.3 million individuals. Of these, approximately 1 million have simply given up looking for work.<\/p>\n\n\n\n
“When looking at the future of youth employment in South Africa, we first need to have a perspective on what the different potential economic growth scenarios could look like for the country towards 2030. <\/p>\n\n\n\n
“We currently expect the South African economy to grow by an average of 1.2% per annum during 2024-2030. This is based on some improvement (reduction, not elimination) of load shedding and progress made to address logistics challenges, especially export-oriented rail,” the group said.<\/p>\n\n\n\n
“Our model suggests that this will result in youth employment increasing by an average of 1.0% p.a. towards 2030.”<\/p>\n\n\n\n
The upside and downside scenarios include faster and slower progress, respectively, in improving energy and logistics security. This would see youth employment grow by 1.3% and 0.4%, respectively,” PwC said.<\/p>\n\n\n\n
“Our baseline forecast is for 169,000 youth (ages 15-34) jobs to be created this year. This will be more than the 151,000 young people expected to enter the labour force. This, in turn, will result in the youth unemployment rate declining from 46.3% in 2022 to 45.4% by the close of this year.<\/p>\n\n\n\n
“However, over the medium-to long-term, our modelling for youth employment and the labour force indicates that the number of jobs created for young people will fall short of the rate at which new youths enter the labour market. As a result, the youth unemployment rate will increase towards 2030 under all our scenarios.”<\/p>\n\n\n\n
PwC said that the South African economy would need to grow by an average of more than 2.0% per annum before the country is able to turn the tide on youth unemployment \u2014 and given the current structural challenges, “that would only occur late in the current decade”.<\/p>\n\n\n\n
The lost billions<\/strong><\/p>\n\n\n\n PwC said that having so many unemployed youth has a massively negative impact on the economy, effectively robbing it of billions of rands worth of economic activity and tax collection while also stifling innovation, entrepreneurship and opportunities for further job creation and growth.<\/p>\n\n\n\n Looking specifically at the age group of 25-34, PwC said that if unemployment levels in this cohort could return to 2008 levels, household income would be increased by R75 billion.<\/strong><\/p>\n\n\n\n To achieve this, South Africa would need to create 1.4 million jobs.<\/p>\n\n\n\n On the higher end, if the unemployment levels for graduates could be reduced to 2008 levels – requiring 420,000 skilled positions – another R62 billion in household income (after tax) would be added.<\/strong><\/p>\n\n\n\n Having these billions of rands injected into the economy would not only spur further activity and growth, but would also contribute to tax collections.<\/p>\n\n\n\n PwC noted that the tax collections from this cohort alone would be able to cover the R350 SRD grant needs in the country.<\/p>\n\n\n\n “The extra R137 billion in spending from 1.8 million extra jobs would directly boost total household expenditure by about 3.1%. This spending, in turn, could potentially add another R175 billion to GDP “Overall, these extra jobs and household spending could add a potential R36 billion to total government revenue, through the collection of direct and indirect taxes.”<\/p>\n\n\n\n PwC said that the solution to the unemployment problem lies in fixing South Africa’s education system – however, this will take too long to accomplish anything before the situation gets worse.<\/p>\n\n\n\n The group said that the shorter solution lies in building an “entrepreneurship ecosystem” where various stakeholders – including financiers, businesses, experts and communities – come together to cultivate, upskill, train and educate the youth in the ways of business and entrepreneurship.<\/p>\n\n\n\n “To make the entrepreneurial ecosystem truly work in favour of the youth requires leaders with a set of foundational and emerging leadership skills to make a radical difference to entrepreneurialism in the country,” it said.<\/p>\n\n\n\n “Without these, the entrepreneurship ecosystem cannot thrive, and it will be unable to create the millions of jobs needed in South Africa to reduce the youth unemployment rate.”<\/p>\n\n\n\n
per annum, and support (create or sustain) another 300,000 direct, indirect and induced jobs.<\/p>\n\n\n\n
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