We’re counting different things.
Capitec CEO Gerrie Fourie recently claimed South Africa’s unemployment is closer to 10% than the official 32.9% if we count the enormous informal sector – which, by some accounts, represents more than 15% of GDP and 2.7 million jobs.
Fourie suggested the actual unemployment rate may be closer to 10% based on observations of informal economic activity. With 24 million customers, Capitec has a fair grasp of the transactional activity of nearly half the SA population and estimates the informal sector at nearly nine million – far larger than estimates by Statistics SA.
Stats SA hit back at this claim, pointing out that it does in fact measure the informal sector in its various surveys, but added that improvements could be made by gathering better data.
It says in a statement that it is “committed to advancing data integrity and is evaluating additional statistical tools, including a register for informal enterprises”.
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This is no idle debate. Unemployment figures are highly politicised.
They are a useful battering ram to shame the government – rightly so – and advance various political agendas.
Stats SA says it recognises that its unemployment figures are among the most scrutinised in the country, and that it welcomes this.
In South Africa, informal employment, defined by tax registration status and enterprise size, is captured in the Quarterly Labour Force Survey (QLFS) using International Labour Organisation (ILO) methodology.
To qualify as part of the informal sector, employees must be unregistered for income tax and work in establishments with fewer than five individuals.
This encompasses employers, own-account workers, and those providing unpaid assistance in household businesses who do not register for income tax or value-added tax (Vat).
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Same methodology, different results?
How we measure unemployment is of vast importance.
It makes no sense that Zimbabwe claims an unemployment rate of around 8%, a quarter of that of SA, when it supposedly uses the same ILO methodology used by Stats SA.
In other words, you are considered unemployed if you are without work, available to work and have been actively looking for work in the last four weeks.
The Zimbabwe informal economy accounts for 70-80% employment according to stats collection agency ZimStat, with millions involved in subsistence farming or small-scale trading.
Brazil and India, both fellow Brics countries, measure their unemployment at 6.2% and 7.9%.
These seem extraordinarily low in countries with populations of 213 million and 1.46 billion respectively.
Both also adhere to ILO methodology, but India defines the informal sector as ‘unorganised or unregistered enterprises’ employing fewer than 10 workers, or without social security benefits. You are also counted as employed if you worked sporadically over the last year.
On this basis, India’s low unemployment rate is flattered by its inclusion of a massive informal sector.
Brazil, too, includes its huge informal sector in its employment data.
You are considered employed if you worked at least one hour for pay or profit in the week in which the survey is conducted – or had a job but were temporarily absent. It separately measures underemployment as workers desiring more hours within the informal sector. On this measure, roughly a quarter of informal workers are underemployed.
Clearly, we need to know what is being measured when comparing national employment rates.
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Stats vs bank accounts
“We do not intervene in the labour market,” says Stats SA in a statement in response to Fourie’s comments.
“We do not regulate the informal sector. We do not enact economic policy or comment about policy due to the independent nature of our work.
“We measure. And in measuring, we provide the data that allows others – government, business, civil society – to act with insight and intent.”
Capitec – the country’s largest bank in terms of customers – has unique insights into the transactional nature of much of the population. Many customers appear to be receiving irregular income that seems to signify informal sector activity.
“The problem with this is that they could also have accounts with other banks where salaries are received,” says Solly Molayi, acting deputy director-general of population and social statistics at Stats SA, speaking to Moneyweb.
“Then there’s remittances to family members, such as siblings, from those who may be working in other parts of SA or other countries.
“So one has to be careful when talking about the informal sector. This is a term with widely differing meanings in different parts of the world.”
For example, someone growing vegetables in their garden for own consumption would be considered part of the informal sector in countries such as Zimbabwe – and therefore counted as employed – but not in SA.
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Youth stats?
Evans Maphenduka, executive coordinator for the Development Microfinance Association (DMA), an umbrella body for several microfinance organisations, notes that youth unemployment at 62.4% is especially worrying.
Very few of the three million odd informal businesses in SA are owned by the youth.
What’s needed, he adds, is a dedicated and appropriate microfinance and informal sector policy framework that separates them from small and medium businesses.
“Only then can we, as a country, know how many informal businesses there are, and what their contribution to employment is,” he says.
“Right now, statements made by different people such as those made by Capitec CEO Gerrie Fourie cannot be substantiated, and may be regarded by some as speculation and bordering on neglecting our responsibility to create the needed employment in our country.”
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Standardised global measurement
Measuring employment and the informal sector is an issue that has seized the attention of the ILO, which in 2023 passed a resolution to standardise stats on the informal sector across the world.
Not everyone has yet adopted this new definition of informal employment which is “any activity of persons to produce goods or provide services for pay or profit that is – in law or in practice – not covered by formal arrangements such as commercial laws.”
Informal employment would also cover anyone not covered for formal procedures to report economic activities, income taxation, labour legislation and social security laws and regulations.
That would cover family members helping out in the business without any formal employment arrangement, as well as employees and ‘dependent contractors’ not formally recognised by the employer.
Molayi says Stats SA is now implementing this definition, the real benefit of which will be to provide more granular detail on the informal sector which is already well measured.
As more countries adopt the same measure, cross-country comparisons of unemployment and the informal sector will become more meaningful.
This article was republished from Moneyweb. Read the original here.
