OPINION | Labour market reforms needed to address deepening economic challenges and job losses

SA’s latest employment statistics, showing a 1.2% drop in jobs in the third quarter of 2024, highlight the concerning state of the nation’s economy.

The contraction of the non-agricultural formal sector, which saw employed individuals fall from 10,738 in June to 10,605 in September 2024, paints a grim picture for millions of households already struggling with economic uncertainty.

This significant job loss, compounded by ongoing challenges in sectors such as manufacturing and mining, signals deep systemic flaws in our economy. The impact is already evident; the ripple effect on household incomes and demand for goods and services will be felt across the board, especially for households that rely on a single source of income and have now lost their jobs.

Those depending on social grants face even deeper challenges as the economic strain begins to take hold, leaving many in precarious situations.

The loss of jobs not only weakens household income but also significantly dampens the buying power of South African citizens, pushing many into financial distress. Those who have lost their jobs will find it difficult to meet their debt obligations, adding to the pressure on a population already burdened by rising costs.

The job losses and resulting strain on the economy will likely lead to a rise in household debt, pushing many to default on their credit commitments. As debt repayments become unmanageable for a large population segment, consumer confidence will continue to decline, amplifying economic stagnation.

This spells a grim start to 2025 as the country enters a period where rising inequality, widespread financial strain and reduced consumer spending will likely define the socio-economic landscape.

Retailers, the broader tourism sector and hospitality industries are expected to bear the brunt of this contraction. These sectors, traditionally dependent on strong holiday sales, are likely to see declines in revenue, further affecting businesses that are already operating under tight margins.

As sectors such as tourism and hospitality struggle with these losses, they are unlikely to recover without government intervention to stimulate demand and support the businesses hardest hit. This directly affects domestic tourism’s economic output.

This stark reality highlights the need for urgent and bold government intervention, but the responsibility doesn’t rest solely with the state. Citizens must also adapt to the prevailing economic conditions and make informed financial decisions to navigate the storm. One immediate step the government can take to relieve some of the financial strain on households is to remove VAT on essential goods and services.

A policy intervention that removes VAT from critical items such as maize meal, cooking oil, bread, and crucial sanitary products will go a long way in easing the burden on low-income families.

The rising cost of living, particularly food and hygiene essentials, is one of the most visible and painful consequences of SA’s economic struggles. By removing VAT on these items, the government can provide a much-needed buffer for households already facing financial distress.

The reality of job losses highlights the need for labour market reforms. There must be a greater focus on creating opportunities for workers to upskill and transition to other industries.

The government should work in tandem with private sector stakeholders to design training programmes, apprenticeships and partnerships that help displaced workers gain the necessary skills for emerging sectors, such as renewable energy, tech and the green economy. This will ensure that our workforce is resilient and adaptable, better able to navigate future disruptions.

Inequality, already one of the most pressing issues facing SA, will worsen if swift action is not taken to address the underlying structural problems in our economy. The government must implement policies that tackle wealth inequality, land reform and access to quality education. Policies aimed at redressing imbalances and promoting greater economic inclusion will be essential in mitigating the adverse effects of this economic downturn.

Tightening household budgets and saving wherever possible will help cushion the impact of reduced incomes and job uncertainty. With many South Africans likely facing challenges in meeting debt obligations, it is critical to adopt strategies for managing debt.

Citizens should seek advice on debt consolidation and consider negotiating payment terms with creditors. Avoiding further credit accumulation will help prevent individuals from spiralling into unmanageable debt, which could further worsen their financial position.

With the job market shrinking, South Africans should look for ways to diversify their income streams. Entrepreneurship and self-employment offer viable alternatives for those who have lost their jobs or are facing uncertainty.

The 1.2% employment loss in SA is a stark reminder of the deep structural issues plaguing our economy. Without swift and comprehensive action from both the government and citizens, 2025 will begin with severe economic challenges.

Only through a concerted effort can we begin to reverse the trend of economic decline and build a more resilient, inclusive and prosperous SA.