GENEVA (ILO News) – A detailed review of South Africa’s labor market and economic conditions suggests that the country’s unemployment rate, often reported as the highest globally, might actually be significantly lower than previously estimated.

According to research from the International Labour Office in Geneva, South Africa’s true unemployment rate could be up to one-third lower than the figures commonly cited. The review, which includes analysis across major industrial sectors, also indicates that South Africa’s labor market is “highly flexible by international standards.”

The ILO study points out that while unemployment in South Africa is a serious issue, it is just one aspect of the broader labor market crisis. The report emphasizes that poverty and inequality need to be addressed with equal urgency.

Commissioned by the South African Government, the findings were recently presented to the Cabinet and President Nelson Mandela. The study highlights the key challenges for economic growth and social stability, such as addressing income inequality, reducing unemployment, and enhancing industrial productivity.

Guy Standing, the economist who coordinated the ILO report, warns against overestimating unemployment rates. He cautions that focusing solely on reducing unemployment might exacerbate poverty and income inequality. Standing notes that many of the poorest South Africans are nominally employed and that effective redistribution is crucial for overcoming the legacy of apartheid.

The report attributes the uncertainty in unemployment figures to outdated and inadequate statistics. Much of the labor market data comes from surveys and censuses conducted before 1995, which may have missed various economic and social activities due to the political context of the time.

Analysis suggests that employment levels and growth rates since 1994, when the South African economy began to expand, have been underestimated. Despite the seriousness of unemployment, the ILO report proposes that the commonly cited 33% figure is likely inflated, with a more accurate estimate closer to 20%. Other sources have reported unemployment rates as high as 46%.

The study also highlights that income distribution in South Africa remains among the most unequal globally, with significant disparities based on race, gender, region, and type of area. While racial income gaps have stabilized, intra-racial inequalities are widening, particularly affecting rural women.

The report notes relatively low labor productivity in South Africa, often due to outdated management and organizational practices rather than high wages. High non-wage labor costs also contribute to this issue. South African workweeks are long, averaging over 48 hours, with many firms operating on a single shift.

Recommendations from the report include reducing working hours and increasing shift work, supported by higher overtime rates. Although shift work is growing, South African industry still lags behind Southeast Asian economies in this regard. Foreign companies are more likely than domestic ones to operate multiple shifts per day and more weekly shifts.

The report identifies a lack of training, rigid job structures, and outdated job-grading and wage systems as major issues. It calls for improved collective bargaining mechanisms and industrial policies to address poverty, income gaps, and strengthen the economic foundation of a multi-racial South Africa.

Finally, the report warns that productivity problems and the inaccurate reputation of South Africa as having the world’s highest unemployment could undermine international confidence and obscure the real labor market issues, which include wage and income inequality and insufficient industrial relations mechanisms. It concludes that South Africa’s economy has the potential for strong growth, provided that macroeconomic policies remain balanced and supportive of investor, worker, and consumer confidence.