According to Helenya Fourie, senior economist at the Bureau for Economic Research (BER), South Africa's worsening employment crisis should serve as a fresh warning that the country needs to accelerate domestic reforms, reduce the cost of doing business and make it easier for companies to start up, operate and expand.
Speaking to CNBC Africa, Fourie said the combination of weak economic growth, cumbersome regulation and deteriorating infrastructure is making it difficult for the economy to absorb labor, at a time when millions of South Africans are unemployed or have stopped looking for work altogether.
His comments come as policymakers face increasing pressure to address the employment shortage, which includes about 8.1 million people actively looking for work and more than 3 million discouraged job seekers. Fourie said that while global factors such as oil prices and geopolitical tensions could weigh on growth, South Africa should immediately focus on fixing the constraints that are within its control.
“The geopolitical situation right now is really a wake-up call for us to get our house in order,” Fourie said. “We need to think about what is within the control of South Africans.”
He argued that each new release of quarterly labor force data should focus the country's attention on faster economic growth and policy changes that can improve employment outcomes despite the difficult international backdrop.
A central theme of Fourie's assessment is that policy debates in South Africa often focus too much on people already working, while paying too little attention to firms that may have created jobs but decided not to enter the market because the business environment was too costly, uncertain or restrictive.
“Too often there is a lot of talk about the large numbers of unemployed people in South Africa and too much policy attention goes to those who need jobs and those who have them,” he said. “But we often forget about the companies that considered entering the market and decided not to do so because of the high cost of doing business or the too-restrictive regulatory environment.”
In BER research cited during the interview, Fourie pointed to a troubling pattern of structural change in the economy. Sectors that have traditionally been labor-absorbing – construction, manufacturing and mining – have not only lost formal sector jobs, but their contribution to output and GDP has also declined.
This trend is particularly worrisome, he said, because it is common for manufacturing to become a smaller share of GDP over time, but it is much less common for the sector to shrink outright.
According to Fourie, sector-specific barriers help explain the decline. In construction, inadequate public investment in infrastructure has weakened activity, while bureaucratic delays at the municipal level have also slowed private projects. He cited examples such as lengthy approval processes that could discourage homebuilding and other developments.
Fury said the failure of networked industries has become a major hurdle for manufacturing. Poor logistics, rail bottlenecks and road network weaknesses have increased costs for producers, reducing competitiveness and limiting the sector's ability to create jobs.
Meanwhile, mining has faced a mix of regulatory hurdles and uncertainty, he said, even during a period when stronger commodity prices should have led to a more meaningful boost in production and employment. Rail performance also remains an important issue for the region.
The pressure is particularly acute for small businesses and firms in the informal sector, which Fourie said bears the greatest burden of unreliable infrastructure. Large companies can often protect themselves from some of these problems by investing in backup power or other private solutions. Small operators usually cannot do this.
“A large retail chain can install solar panels on its roof, but a small spaza or shop in an informal settlement does not have the financial capacity to do so,” she said.
This leaves small enterprises more vulnerable to power disruptions, transportation disruptions and service delivery failures. Fourie said the impact goes beyond individual firms as strong formal sector job creation will also boost household incomes and support demand in townships and informal markets, creating a wider positive chain reaction across the economy.
He also suggested that many of the reforms needed are not particularly new. Rather than reinventing policy, South Africa could make substantial gains by improving the accessibility, clarity and predictability of the rules governing business activity.
Fourie cited OECD product market regulation data showing South Africa is the most restrictive of the countries measured, underscoring how tough the country's operating environment has become. One of the most obvious problem areas, he said, is the administrative and regulatory burden faced by companies.
This burden can be as basic as businesses being able to find relevant regulations online, identifying which authority to contact, or determining where and how to submit plans and applications. In practice, poor digital access to information increases uncertainty, delays decision making, and increases costs that many companies cannot afford.
“Uncertainty equates to costs for companies,” Fourie said, adding that there is little room for avoidable costs in an already restrictive and uncompetitive environment.
His comments link to broader reform efforts under Operation Vulindlela, which focus on measures to improve digital public infrastructure and state capacity. For Fori, simpler and more transparent administrative systems would be a meaningful step towards reducing barriers to entry and encouraging investment.
Asked whether this year's national budget sent strong enough reform signals to the small business sector, Fourie struck a cautious tone. While acknowledging some efforts to ease the burden on small companies, he said a key issue remains the extension of bargaining council agreements to small businesses, which could increase labor costs and compliance pressures.
He argued that policymakers needed to strike a more careful balance between protecting existing workers and creating conditions that would allow more unemployed South Africans to enter the labor market.
“I think we need to start thinking carefully not only about our workers but also about the people who want to work,” Faury said. “In any budget and any policy, it's really important to balance both of those objectives, especially in a country where there is a job shortage on our scale.”
The message from the BER economist is that South Africa's unemployment problem cannot be solved through labor market policy alone. Without faster growth, better infrastructure, less regulatory friction and a more welcoming environment for business creation and expansion, the economy is unlikely to create jobs on the required scale.
At a time of global uncertainty, Fourie's warning is that the most effective response may be domestic: fix what South Africa can control, and do it with far greater urgency.