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Further Rise In South African Unemployment

James Boston
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Further Rise In South African Unemployment

There is no material improvement in the South African unemployment situation this month according to statistics just released. The figures for the second quarter of this year show the unemployment rate to now stand at 25.5%, this is in comparison to a Q1 rate of 25.2% and a consensus estimate of 25.4%.

South Africa has experienced a damaging series of strikes throughout the first half of this year. Large sections of the country’s vital mining sector have been effectively shut down, this has caused many knock on industrial closures and upset international buyers who have begun to look elsewhere for their raw material inputs.

As a result of the industrial turmoil and weakening global demand the International Monetary Fund (IMF) have once again cut the projected South African growth rate. The predicted expansion in 2014 is now just 1.7% compared to a 2.3% outlook three months ago. This is the latest in a series of growth downgrades that the South African economy has undergone in the last 12 months.

There are some signs of a settling down of the industrial unrest situation that has been plaguing the South African economy. Yesterday the National Union of Metal Workers of South Africa agreed to return to work, this 220k strong union had effectively shut down the country’s steel and engineering sector for almost a month, by closing almost 12,000 companies including international auto manufacturers it is estimated that this move cost the economy almost $1Bn.

The South African Reserve Bank (SARB) has just added another 25 basis points to the country’s base interest rate bringing it to 5.75% in an effort to battle rising inflation which is over 6.5% and rising. The interest rate rise is a necessary move but it comes at a price which includes more expensive exports into a global economy that is itself slowing.

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