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IOL News
29-06-2025
- Business
- IOL News
62. 4% of under 24s Jobless: Experts call for urgent reform
The very idea that youths born after the dawn of democracy in 1994 are referred to as 'born frees' must surely feel like a cruel joke to those facing one closed door after another while trying to make something of their lives. The facts become even more sobering at the lower end of this age group, with a staggering unemployment rate of 62.4% listed for those aged under 24. Unemployment among those aged between 15 and 34, who make up almost half of the country's working age population, surged to 46.1% in the first quarter of 2025 , Statistics South Africa recently reported. This was up from 44.6% in the previous quarter. South Africa's younger citizens had little to celebrate this Youth Month. 'When fewer individuals are contributing to tax revenue, there is further strain on the fiscus,' she added. 'This diverts much-needed funding for enhancing the potential growth of the economy through infrastructure spending or for delivering on social services to maintain the overall standard of living for millions,' Packirisami told IOL. According to Sanish Packirisami, an economist at Momentum Investments, the most significant cost to the economy associated with unemployment is the strain that it puts on the fiscus, which must support an expanded social welfare programme . Youth unemployment is also incredibly costly to the economy. Reset restore all settings to the default values Done Beginning of dialog window. Escape will cancel and close the window. Social grants, necessitated by widespread unemployment, are a drain on the fiscus. South Africa's social welfare programme is believed to cost the Treasury around R285 billion per year. This funding includes the R370-per-month Social Relief of Distress grant that many unemployed youths apply for. Youth unemployment isn't simply a loss of productivity, it's also a loss of potential, says Dr Thabo Mashongoane, CEO of the Mining Qualifications Authority. 'Every unemployed young person represents a stalled contribution to GDP, a missed innovation, and in many cases, a future cost to the public through welfare or social assistance,' Mashongoane told IOL. Role of the informal sector While youth unemployment remains one of the most pressing challenges in South Africa, it is mitigated, to a degree, by the informal sector, says Maarten Ackerman, Chief Economist at Citadel. However, this situation also brings a set of unique challenges. 'While the informal economy is thriving and provides many youth with opportunities to earn a living, the downside is that these individuals lack access to formal financial services,' Ackerman said. 'For instance, without a payslip, it's much harder to qualify for a loan to buy a home or a car. This exclusion creates a significant gap in the economy.' Youth unemployment brings an economic as well as a human toll. Given that joblessness in South Africa is more prevalent across lower-income earning groups, it can fuel social unrest and crime, which damages the very fabric of society, Packirisami adds. An often unspoken aspect of the youth unemployment crisis is mental health. 'Poor mental health, substance abuse, limited digital access and gender-based barriers also create a divide for the unemployed,' Packirisami explained. 'More government support for those affected by poor mental health and substance abuse is necessary to provide a healthier workforce in SA.' Better support for women facing caregiving burdens was also needed to encourage female labour force participation in the economy, Packirisami added. What are the potential solutions to youth unemployment in South Africa? Addressing the youth unemployment crisis in South Africa will require a multi-pronged approach. At the very least, government needs to address the poor quality of basic education, which leaves gaps in literacy and numeracy, Packirisami said, leaving the workforce ill-equipped when it comes to foundational job-specific skills. 'Government needs to encourage more students to enter Technical and Vocational Education and Training (TVET) to provide practical skills, but these TVET colleges often suffer from underfunding, outdated curricula, and social stigma, as they are viewed as second-best options,' Packirisami added. A telling statistic is that 72% of the 'multidimensionally' poor youth in the former homeland areas of South Africa lack adequate education, according to the most recent Youth Multidimensional Poverty Index. People in these areas, deprived of essential infrastructure and services during the apartheid era, continue to suffer from widespread poverty. Addressing the skills mismatch Educational opportunities that are created also need to align with demand patterns in the economy, says Nkosinathi Mahlangu, Youth Employment Portfolio Head at Momentum Group. 'Alignment between institutions of higher learning and the economic drivers is key to getting young people to acquire skills that are in demand, instead of graduating or pursuing courses that will not result in employment.' Critical and scarce skills should also be listed and tracked, in order to steer the youth into careers that will help turn the tide, Mahlangu added. 'Skills that are imported need to be part of a knowledge transfer and upskilling plan that will subsequently give South Africans a chance to fill those roles in the medium to long term.'
Bloomberg
20-06-2025
- Business
- Bloomberg
South African Stocks Tipped to End Decade of Foreign Outflows
The valuation discount of South African equities relative to developing peers is set to narrow as some of the capital flowing out of the US and into emerging markets finds its way to Johannesburg stocks, according to Momentum Investments. Foreign investors have been net sellers of South African stocks every year since 2016, and net outflows year-to-date already amount to $6.3 billion, according to JSE Ltd. data. Even so, the benchmark FTSE/JSE Africa All Share Index is outperforming the MSCI Emerging Market stock index and the S&P 500 in dollar terms this year.
The Citizen
18-06-2025
- Business
- The Citizen
What Israel–Iran conflict means for South African economy
The Israel-Iran conflict definitely rattled world markets and might affect the fuel price if it does not stop within the next few days. In a globalised world, what happens on one continent invariably affects the rest of the world, and the conflict between Israel and Iran will probably be no different. Oil prices have become volatile, while investors go for gold as a safe haven, and the rand feels the shock. Frank Blackmore, lead economist at KPMG, says the impact of the conflict between Israel and Iran on global markets, including South Africa, will depend on two key factors. 'Firstly, the scale of the conflict matters. Will it escalate, and will other nations become involved by taking sides? 'If the conflict intensifies beyond what we are currently witnessing, the impact will be far more significant. Secondly, the duration of the conflict also matters. If it is resolved swiftly, the effects on the markets will likely be limited. 'The impact will be felt in two ways. Firstly, through the oil price, and we have already seen an increase since the onset of the conflict. Secondly, through the exchange rate, the rand has already depreciated due to heightened uncertainty, which could lead to inflationary pressure on the local economy and the possibility of interest rates remaining higher for longer.' Blackmore says that given that both oil and the exchange rate affect the impact of the cost of transporting people and goods around the economy, the inflationary impact will be shifted down onto the consumer in the form of higher inflation. The Reserve Bank may then be forced to maintain elevated interest rates for an extended period. ALSO READ: Israel vs Iran: Why you may soon have to pay more for petrol in South Africa Israel-Iran conflict already rattled global markets Sanisha Packirisamy, chief economist at Momentum Investments, says the intensifying sectarian conflict between Israel and Iran, driven by Israel's airstrikes on Iranian nuclear and military facilities and Iran's subsequent missile responses, has indeed rattled global markets. 'Oil prices spiked by more than 10%, with international Brent Crude Oil prices briefly reaching $78 per barrel due to concerns over potential disruptions in the Strait of Hormuz, which is a vital oil corridor for global oil supply. Although prices later stabilised, ongoing tensions could fuel inflation, constraining central banks' flexibility to lower interest rates in 2025, particularly against the backdrop of a protectionist environment marked by higher trade and tariff barriers.' Packirisamy, also points out that equity markets saw initial declines but later recovered as hopes for de-escalation grew, particularly with the US reaffirming its defensive rather than offensive position. 'Safe-haven assets, including gold, US treasuries and the US dollar, gained traction amid rising uncertainty.' ALSO READ: SA economy expected to improve in 2025, but geopolitical risks remain Geopolitical shocks historically have fleeting impact She says historically, geopolitical shocks tend to have fleeting market impact unless they significantly impair economic growth or trigger stagflation. 'Currently, Iran's oil exports remain mostly unaffected, with their domestic markets largely targeted so far. 'OPEC's spare capacity also has the ability to mitigate global oil supply concerns, given that spare capacity could match any shortfall from Iran. However, prolonged conflict or a blockade of the Strait could drive oil prices significantly higher, threatening global economic stability. 'However, blocking the Strait would prevent their own shipments from getting out and could trigger retaliation from other exporters.' Packirisamy also notes that signs of diplomatic efforts, particularly from the US administration, will be critical to watch, given that a de-escalation in the conflict and a lower risk of spilling over into a broader-based regional conflict are necessary for market normalisation. ALSO READ: Policy Uncertainty Index drops sharply due to various local and global risks Volatile oil prices due to Israel-Iran conflict George Brown, senior economist at Schroders, also notes that oil prices are volatile as the conflict continues. He says similar incidents in recent years amounted to a limited exchange, with Iran's response typically sufficient to demonstrate domestic strength without escalating tensions further. So far, he says, this conflict has proved to be more brutal than other recent escalations. 'Even so, it remains a direct exchange of fire between Iran and Israel with minimal disruption to the oil market. 'The US and several Middle Eastern nations, including those that already condemned the attacks, such as the UAE and Saudi, have no interest in a flare-up of tensions in the region, nor do they wish for disruption of global oil markets. Previously, they intervened to calm situations like this. 'Israel has stated that the operation will continue for 'as many days' as it takes to remove the Iranian threat, but hostilities could settle if Middle Eastern countries and the US mediate a resolution.' Brown says the likelihood of Iran taking any action in the Strait of Hormuz, the often-touted disaster scenario for oil markets, appears remote. 'Such action would impact flows for the other Middle East nations, which are aiming to mediate the situation, while inflicting little harm on Israel.' ALSO READ: Weekly economic wrap: Dramatic jumps for gold and oil Oil facilities not primary target in Israel/Iran conflict Iranian oil supply makes up 3.5% of the global supply. However, Brown says Israel's stated aim has been to impede Iran's nuclear program, consistent with the fact that most strikes so far targeted Iranian nuclear and military facilities. 'While oil production facilities remain a potential target for Israel, it has yet to target them directly, quite possibly restrained by the knowledge that pushing oil prices higher would damage its relationship with its allies, such as the US.' Outside of the conflict, Brown points out that other dynamics in the market continue to point to a global market oil surplus continuing to build in the coming months. 'Although oil prices are sensitive to this type of conflict, as in previous similar events, the initial price rise moderated in the following hours. 'If Brent Crude settled at $75 per barrel, it would imply that G7 energy inflation would be a little above 5% over the next year.' Would this lead to broader inflationary pressure? Brown says probably not. 'Our previous research on the relationship between oil prices and inflation suggests that every 10% rise in oil prices adds just 0.1% to core inflation.' ALSO READ: Trump's ultimatum undermines US credibility If US joins, Israel-Iran conflict could push oil price higher Bianca Botes, director at Citadel Global, warns that tensions are rising in the Middle East, with speculation mounting that the US could soon join the ongoing conflict. 'High-level security meetings and strong public statements have added to the sense of urgency, while both Israel and Iran appear determined to escalate the conflict after several days of hostilities.' She says these developments pushed oil prices higher, as markets brace for the possibility of a broader confrontation. 'Asian stocks have been mixed, while Wall Street closed in the red. Investors are also cautious ahead of a key monetary policy decision from the Fed today. 'Expectations are that rates will remain unchanged, but it is the forward guidance that will play a critical role in market dynamics. The dollar has softened, and emerging market assets are under pressure as traders weigh both geopolitical risks and uncertainty over future US interest rate moves. 'Risk appetite remains subdued as global markets await further clarity.' The rand is under pressure amid risk-off sentiment, trading at R17.98/$, R20.68/€ and R24.17/£, Botes says.
