Job count rises by 56,000 but confidence remains low
The increase in employment in the first three months of 2018 is unlikely to be sustained, mainly because of damped business confidence.
The key driver of the job creation was the community and construction sectors, Statistics SA said on Tuesday.
However, after a weak performance by the manufacturing and construction sectors in the first quarter, which weighed on economic growth, this is unlikely to be sustained.
“Given just how poorly the manufacturing and construction sectors have performed, we are sceptical that the job gains in these two industries can be sustained,” said FNB senior economic analyst Jason Muscat.
Overall 56,000 jobs were created, but the trade and mining sectors had huge job losses.
The release of the data came on the same day credit rating agency Moody’s released a research report that found that the excitement created by President Cyril Ramaphosa’s election had not filtered down to the ground.
It had not translated into investment largely because of uncertainties brought by land and mining reforms.
In the report, Moody’s senior credit officer Lucie Villa said while consumer and business confidence improved in the first quarter of 2018, investment weakened as uncertainty over land reform and the mining charter persisted.
“Uncertainty over how [land reform] will be achieved continues to limit near-term investment,” said Villa. [It] could lead to a more pronounced fall in investment should the final terms of land reform be particularly onerous to businesses.”
In February, the National Assembly adopted a resolution brought by the EFF to begin a process to amend the Constitution to allow for land expropriation without compensation in order to address the racial inequalities that persist more than two decades after the end of apartheid.
The prolonged uncertainty has seen confidence levels dive.
While business and consumer confidence made a jump in the first quarter, this has begun to wane as confidence has fallen to levels in the pre-Ramaphosa period.
The increase in jobs does not suggest that the first quarter pick-up in business and consumer confidence resulted in any lift in private sector employment, said Muscat.
“The subsequent fall in the second quarter business confidence portends that there may be more job shedding in the second quarter,” he said.
There was hope there would be an increase in investment with the boost in confidence, said Citibank economist Gina Schoeman.
“Did we all maybe get a little too excited in the first quarter? We know business confidence went up and with that we knew at some point investment had to come back,” Schoeman said
“But although it has come back again, it’s not higher than the averages in the last three years,” she said.
In fact, SA has fallen off the foreign direct investment confidence index, an annual ranking of which global markets are likely to attract the most investment over the next three years based on a global survey of business executives.
“Given the high-profile corruption scandals in major emerging markets such as SA, it is not surprising that investors are concerned about this issue,” said Paul Laudicina, who compiled the index.