SA facing unemployment crisis
Analyst George Glynos described the unemployment rate as a “crisis”.
JOHANNESBURG - South African Reserve Bank (Sarb) Governor Gill Marcus on Thursday revealed the country's youth unemployment rate reached 52.8 percent.
She made the comments during her repo rate announcement in Pretoria.
Marcus said she was deeply worried about the state of the economy and slow economic growth.
Importantly, the governor revealed that the economic growth outlook for 2013 was revised down from 2.4 to 2 percent.
Chief Economist at Stanlib Kevin Lings and Managing Director at ETM Analytics George Glynos were not surprised by the revision.
Lings said economic growth could come in even lower than revised expectations because Sarb tends to be a bit optimistic.
Lings also said low growth was not nearly enough for the country as it faced severe unemployment.
"We're not creating anywhere near the number [of jobs] to just deal with those people entering the job market, let alone the unemployment rate."
Glynos said while the 2 percent growth revision was "scary", it was not unexpected.
He described the unemployment rate as a "crisis".
"I don't see it getting any better," he said, adding that creating jobs was what could "pull us out" of the economic slump.
Asked whether anything could be done to influence growth, Lings said both the Monetary Policy Committee (MPC) and Sarb have maximised their potential influence over growth.
"Monetary policy, especially in South Africa, can only do so much in order to grow the economy [and] we've reached that point where interest rates are doing the most they can."
He said the focus had to shift to policy, which is the responsibility of government.
"What stops us growing is all the other polices that we're not really dealing with effectively.
"There's a whole range of policy initiatives that could be more effective."
GLOBAL ECONOMY NOT TO BLAME
Lings went on to argue that blaming the global economy was not an adequate excuse for poor growth, saying South Africa couldn't "rely on the world to uplift growth."
Glynos agreed with his argument, saying government needed to be more introspective to deal with the problems in the economy.
"I'm hearing a lot of blame on the weakness of the global economy [but] I also think we're scoring a few own goals with regards to our industrial policies and certain aspects that we are in control of."
He too agreed that interest rates were not enough to save the economy, saying they "certainly aren't the sustainable way to generate growth in the South African economy."
Lings explained that the current economic climate meant that now was the best time to invest in infrastructure.
"Given that interest rates are at their lowest levels since 1972, it tells us that the cost of developing infrastructure is as favourable as its going to be. So we really need to use this opportunity and get the infrastructure in place.
For further commentary on the severe youth unemployment, listen to this interview with Dr Catherine Burns, researcher at the Wits Institute for Social and Economic Research.