In mapping the various data points that provide a profile of the South African economy, troubling trends emerge…
This month, South African’s were once again reminded about the dire state of our socioeconomic indicators when Statistics South Africa published the latest unemployment numbers.
The latest unemployment rate of 33,6% represents an increase from the previously published rate of 32,7%. Such an increase is reflective of the fragile state of the global economic landscape due to persistent conflicts that create economic casualties across the globe; and the longstanding local structural and policy challenges that had left us in the unemployment crisis long before recent geopolitical shifts.
Whilst the unemployment data is sobering even at the universal level of 33,6%; it is in the granular analysis where more disturbing patterns emerge. A key point to note is that the way unemployment data is computed incorporates important caveats and statistical adjustments.
For example, since no one expects infants and schoolchildren to be working, they are not part of the calculation. Similarly, elderly individuals who are beyond working age; are not reflected in the calculation whose primary focus is the employment absorption of those with an ability to work. However, even these groups require ongoing financial support that those who are employed can sometimes provide.
In the Stats SA data, the national population of over 63 million is ultimately stratified into the working age population of 15 to 64 years; and everyone else. It is from this working age population where the employment and unemployment indicators are derived.
In the latest figures, 42,3 million citizens fall within this range but just 16,7 million are actually employed translating to just 40% of the working age population. The remainder are then classified as officially unemployed (8,5 million) or outside the labour force.
Contextually, the reality of just 16,7 million citizens being gainfully employed from a population of 63 million, requires strong incomes for those who directly support their family members who are outside the working age population; and also support those family members within the working age population who are unemployed.
These individuals are referred to as the ‘sandwich generation’ since they support not only their children but also their parents and other dependents.
For those who suffer from the dual dilemma of being unemployed and also not being supported by those who are employed or have some access to means; the reliance on state assistance is elevated. This means that our socio-economic problems require higher employment to spread the net of direct and indirect support; and also, to boost the taxes required to support those that ultimately rely on state services.
Unfortunately, even within the spectrum of the working age population where much of the burden lies, troubling patterns emerge when one analyses the data.
A good reference point for understanding the scale of the problem is the annual Old Mutual Savings and Investment Monitor (OMSIM). The Monitor – which is published annually – measures the financial pulse of working South Africans with a view of understanding the key challenges and trends affecting this population.
The review focuses on working South Africans that earn at least R8 000 per month. The importance of that reference point is found in its convergence with a key threshold used by the South African Revenue Service.
According to SARS, the tax register of individuals has over 27 million taxpayers but very few (7 million) are estimated to generate taxable income above the tax threshold of R96 000 (R8 000 per month) and end up paying income tax. As a progressive tax (unlike VAT); increasing the contribution of personal income taxes to the national revenues is ideal; but it is dependent on many factors like employment and good incomes. The reflections of those who fall within the working age group and earn over R8 000 is that it tells a lot about how everyone is juggling their finances to meet personal needs and also respond to exogenous factors.
The sandwich generation remain a critical part of the national profile and due to the competing demands on their incomes, such individuals are likely to experience levels of financial stress associated with the ability to manage their debts. OMSIM tracks this trend at an average of 40% experiencing significant levels of financial stress. These trends are perhaps not surprising when one considers the overlaps and concomitant responses amongst vulnerable groups.
Lower income earners (closer to R8 000) who suffer from multiple expectations have a greater need to juggle (64% of them always or often worry about debt); and also have the lowest ability to access formal credit cheaply due to lack of collateral. As a result, the incidences of moving money around just to escape debit orders (53%) and reliance on personal loans are on the rise.
The unfortunate consequence of this shift is that escaping the low income-loan-debt management trap is not an easy exercise. In the past 3 years, the inability to keep up with debt repayments has worsened for both low income and younger earners.
The sobering reality reflected collectively across the unemployment statistics, the tax statistics and the savings and investments monitor, is that the financial challenges persist and are escalating for vulnerable groups. Addressing the various issues comprehensively provides the best change of altering the fragile socio-economic profile of many citizens. Until we find a solution to that, many disaffected citizens will simply fall into socioeconomic limbo.
Written by Khaya Sithole, an accountant, activist, and academic