South Africa’s economy is facing a number of problems that requires the government to actively pursue a different trajectory, the Department of Labor said on Thursday.


In its annual Labor Market Bulletin (ALMB) 2012/13, the department said the South African economy has been growing slowly with a relatively small employment growth during the period under review.


The report said that with regard to the performance of the South African economy, it appears that the economy is relatively stable but at a lower growth rate from the recession of 2008.


However, the GDP growth recorded in the 2012/13 financial year does not bring much hope of tackling the high unemployment rate of 25.2 percent in March 2013. The report identifies the following problems faced by the South African economy: — Labor market was disrupted by labor unrest in the last quarter of 2012 which originated from the platinum mining sector before spreading to other mining sectors and subsequently to other sectors of the economy, such as the road freight transportation and agricultural sectors in the Western Cape; — Inflation stayed within the inflation target range of 3-6 percent with consumer price rising by 5.7 percent in 2012 and projected to increase by an average of 5.5 percent a year, over the period ahead; and — The deepening crisis in the eurozone, slow growth in other advanced economies such as United States and Japan, could increase the risk of a slow economic growth in South Africa in future, thus affecting the projected economic growth of 2.7 percent in 2013 and employment growth. According to the report, there is a sign that South African labor market situation may not improve soon to the level of before the economic crises of 2008. “The quality of jobs had deteriorated and the type of jobs created by the economy is temporal and not sustainable,” the report notes.


It said prolonged labor market under-performance leads to long term unemployment and many workers could become excluded from the labor market This will result in young people being at risk to remain unemployed or inactive for the rest of their lives. Well-designed active labor market programs that are aimed at making sure that young people are not trapped in precarious jobs could play an instrumental role in promoting job recovery, said the report.


“South Africa’s economic outlook is improving, but requires that we actively pursue a different trajectory if we are to address the challenges ahead,” said the report. “If Government does not effectively implement and monitor some of the policies that are aimed at reducing youth unemployment rate, it will increase social unrest and erode citizens’ confidence in the National Government and the financial system,” the report warned.