With unemployment increasing, one can expect further pressure on the Government fiscus. While the energy situation has improved, the same cannot be said for the economy or employment. There will be a significant lag effect post loadshedding, which is what we’re seeing now.
Loadshedding resulted in low economic growth and alternative energy solutions increased operating expenses while solving for energy. When conditions improve a lag effect is a reality, and it takes time for businesses to recover before they can grow. So, while Eskom can now provide sufficient power, the increase in electricity costs is harming many businesses and one of the solutions is, unfortunately, to lay off people.
In terms of the impact of unemployment in the agriculture sector specifically, fewer people employed implies that fewer people can afford to buy food. The increase in unemployment impacts the agricultural industry as fewer people have purchasing power, which means demand for food decreases. In addition, the recent drought at the beginning of the year and the recent extreme cold impacted agriculture severely and the high energy costs linked to these conditions are impacting the profitability of agriculture.
Further, while it’s disappointing that 45 000 jobs were lost in the agricultural sector (+21 000 in Q1) it’s important to note that the sector is highly concentrated with seasonal labour and unskilled labour, which explains why employment might vary from quarter to quarter. We also can’t ignore the skills shortage in agriculture, which can be seen as multi-dimensional given the rapid changes in technology and an ageing workforce, which is resulting in a lack of technical skills in advanced farming techniques and agronomic practices. We also see the younger generation showing less interest in agriculture from a career perspective.
So, one cannot determine a trend based on the relative short-term variations – we need to consider the longer-term employment trends in the sector. Also, the industry needs to focus on making agriculture more desirable from an employment point of view and concentrate on training and upskilling, especially given technological changes such as precision farming and biotechnology.
Distributed on behalf of Nedbank: Gillian Gernetzky
