South African Unemployment Rate Skyrockets in Third Quarter

Power outages and low commodity prices burden South Africa’s economy, which suffers from a 25.5 percent unemployment rate, according to Bloomberg Business. Overall employment increased in multiple sectors as more people join the workforce, but unemployment rose due to the commodities slide and low business morale. Slower demand from Asia is another cause for concern, most notably from China, which is one of South Africa’s largest export markets.

Power outages and low commodity prices burden South Africa’s economy, which suffers from a 25.5 percent unemployment rate, according to Bloomberg Business. Overall employment increased in multiple sectors as more people join the workforce, but unemployment rose due to the commodities slide and low business morale. Slower demand from Asia is another cause for concern, most notably from China, which is one of South Africa’s largest export markets.

South Africa’s economy added 18,000 jobs to the manufacturing sector, but electric outages continue to be an issue, despite assurances from authorities to address the problem. Unstable power created massive problems in the form of productivity disruptions, layoffs and mine closings.

To make matters worse, South Africa’s crop sector went through a devastating drought that affected output, and farmers could face a tougher road ahead in the wake of trade complications.

Trade Barriers

Differing standards in meat processing and the continued policy of barring American agricultural goods may work to suspend an important trade agreement between South Africa and the United States. A suspension would prevent farmers and other exporters from taking advantage of the African Growth and Opportunity Act, which is an agreement that gives African economies access to U.S. markets and grants incentives to American companies investing in Africa.

South Africa ships the most goods to the U.S. out of all African nations under the agreement. Regardless of the pact, it will not be enough to boost the South African economy substantially, and authorities downgraded a 2015 growth forecast from 2.0 percent to 1.5 percent. Moreover, the government cut its 2016 tax projections by 0.7 percent in recognition of slower growth.

Societal Anger

The economic downturn takes its toll on more people, as numerous protests have erupted across the country. For example, university students have gathered and expressed anger over high tuition costs, and young people vent further disapproval over wider economic inequality throughout the southern African nation.

Protesters argue that rising costs hamper student achievement and graduation rates, further perpetuating the country’s staggering inequality rate. In addition, the Economic Freedom Fighters (EFF) rode on the coattails of student protests by highlighting a need for redistribution of wealth to benefit more people.

The protests could influence local elections next year, and the EFF pledged such measures as nationalizing land and natural resources. Such policies harken back to Zimbabwe President Robert Mugabe’s policy of confiscating land from the white minority, which devastated economy.

With that, the ruling party of South Africa, the African National Congress, does not have much to worry about from the EFF in the short-term because the Democratic Alliance is the primary opposition. However, the establishment party should be worried over the long-term as anger and economic instability worsens. So far, Zuma failed to live up to many of his promises, giving the opposition plenty of ammunition going forward.