South Africa would likely continue to see elevated levels of unemployment as more graduates look for jobs this year when companies were cautious of entering into long-term employment contracts with employees, First National Bank (FNB) economist Thanda Sithole said yesterday.

Sithole told FNB’s 2021 Franchise and Economic Outlook webinar yesterday that South Africa’s unemployment rate could remain elevated for some time.

Sithole said it was important that South Africa attempted to reduce the structurally high level of unemployment through creating robust economic growth for a sustained period, as opposed to the merely cyclical recovery that FNB were predicting for this year.
“So we need to see a sustained longterm higher and quality economic growth.

We need to see implementation of economic reforms to try to improve the ease of doing business and attract long-term investment into the economy so that we will see more job creation. Without that, we will continue to sit with elevated levels of unemployment,” said Sithole.

It was worrying that employment was down 8.5 percent in the first quarter, compared to the same period last year, reflecting the continued slack in the labour market, he said.

FNB predicted economic growth of 4.1 percent this year and 2.2 percent next year, before recovering to pre-pandemic levels by 2023.
Sithole said they were seeing a strong cyclical growth rebound at this stage, but were doubtful that this was the beginning of a strong long-term trend in economic growth.

“If you look at our forecast beyond 2021, growth should average around 1.8 percent, which is still very weak and does not create hope that at this level we will see significant employment creation opportunities,” said Sithole.

Sithole added that most of the rebound would be driven by the mining sector, which was supported by elevated commodity prices and rising demand, particularly from China and South Africa’s other major trading partners. The manufacturing sector, which was also exposed to the global environment, could also do very well this year.

“We think that mining gross domestic product will grow by about 12 percent and manufacturing by about 10 percent. These two sectors will significantly contribute to the economic growth rebound, followed by agriculture, which did well last year, as it was not severely impacted by the lockdown last year, with most of its components allowed to operate even during the hard lockdown,” he said.

Morné Cronje, FNB’s head of franchising, said the franchise sector was particularly hard hit by Covid-19 because of its exposure to the food and beverage sector.

“In 2019, the food and beverages industry posted an estimated R734 billion in revenue, while revenue in 2020 was R14bn less compared with the previous year. At the peak of lockdown in April 2020, 94 percent of the franchise industry halted trading,” Cronje said.

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