South Africa’s unemployment crisis is no longer simply a cyclical labour market problem. It is a structural economic challenge that requires a coordinated and sustained policy response. The latest Quarterly Labour Force Survey confirms the severity of the situation. In the second quarter of 2026, the official unemployment rate increased to 33.6%, up by 0.9 percentage points from the previous quarter. The number of unemployed people increased by 345,000 to 8.481 million. The expanded unemployment rate, which includes discouraged work-seekers, reached 43.8%, while overall labour underutilisation stood at 46.3%.
These figures should not be viewed simply as labour market statistics. They represent substantial underutilisation of South Africa’s productive capacity and have significant implications for household income, consumer demand, investment, social stability and long-term economic development.
The burden is particularly severe among women and young people. Female unemployment stood at 37.5%, compared with 30.3% among men. Among people aged between 15 and 34, unemployment was 47.4%, affecting approximately five million young people. When discouraged young people are considered, the proportion excluded from meaningful participation in the labour market is considerably higher.
This is important because prolonged exclusion from employment has economic consequences beyond the immediate loss of income. It weakens skills accumulation, reduces household purchasing power and makes future labour market integration more difficult. South Africa is consequently dealing with both current unemployment and the risk of creating a permanently excluded segment of the working-age population.
The underlying problem is that economic growth has been too weak and insufficiently employment intensive. Growth remains necessary for job creation, but the relationship between GDP growth and employment is not automatic. An economy can grow without generating sufficient employment if growth is concentrated in capital-intensive sectors or if structural constraints prevent businesses from expanding.
South Africa therefore needs to focus not only on the rate of economic growth, but also on the composition and quality of that growth. The objective should be an economy in which investment, productivity and employment reinforce one another.
Fixed investment is particularly important in this regard. Without sustained investment in productive capacity, it is difficult to envisage a meaningful improvement in employment. Investment in energy, water, transport, logistics, manufacturing facilities, digital infrastructure and public transport creates immediate demand for labour while increasing the economy’s capacity to generate employment over the longer term.
Infrastructure constraints have, however, become a significant impediment to this process. Electricity reliability, freight logistics, water security and municipal infrastructure directly influence the cost and risk of doing business. When these systems are inefficient, businesses invest less, production becomes more expensive, and employment opportunities are constrained.
The policy response must therefore place productive investment at the centre of South Africa’s economic strategy. Government cannot create all employment directly, nor should it attempt to substitute permanently for a dynamic private sector. Its role should be to create the conditions under which businesses can invest, expand and employ.
This requires better alignment between fiscal policy, infrastructure policy, industrial policy and labour market policy. Public expenditure should be assessed not only according to its immediate fiscal cost, but also according to its contribution to productive capacity, economic activity and employment. At the same time, fiscal discipline remains important.
Small and medium-sized enterprises must also become a much larger part of the employment solution. South Africa has considerable entrepreneurial potential, but many businesses struggle to move beyond survival because of limited access to finance, inadequate market access, regulatory barriers and unreliable infrastructure. A more effective enterprise development framework should connect finance with procurement, market access, infrastructure and business development.
Government procurement can play a particularly important role by opening supply chains to emerging enterprises, including youth- and women-owned businesses. Development finance institutions and commercial banks should also work more effectively together to provide appropriate forms of capital for businesses with credible growth and employment potential.
The transition from education to employment requires similar attention in that South Africa needs a stronger partnership between universities, TVET colleges, government and industry to expand apprenticeships, internships and workplace-based learning. Training should be linked more closely to actual economic demand. Young people should acquire practical experience in sectors such as construction, manufacturing, energy, logistics, information technology, healthcare and financial services.
The macroeconomic policy response must be more deliberate as part of our strategy. South Africa does not need abstract debates about growth in the future, rather it needs an immediate employment strategy anchored in realistic macroeconomic policy. The state has a central role to play in creating the conditions for job creation. Fiscal policy should be aligned with industrial policy, education policy and labour market policy.
There is also a strong case for closer coordination between National Treasury and the South African Reserve Bank within their respective mandates. Monetary and fiscal policy cannot be considered in isolation when unemployment is this high. There should be a more coherent macroeconomic framework in which fiscal, monetary and structural policies reinforce one another. Lower and more predictable financing costs, combined with credible public investment and structural reforms, can improve business confidence, stimulate private investment and strengthen the economy’s capacity to absorb labour. The objective should be macroeconomic stability that supports productive economic expansion, rather than stability being pursued independently of the country’s employment and development challenges.
Finally, economic policy cannot be separated from institutional capacity. Investment requires policy certainty, reliable infrastructure, effective regulation and confidence that public institutions can implement decisions. Corruption, weak governance, regulatory delays and poor municipal performance increase the cost of doing business and ultimately constrain employment.
South Africa’s unemployment crisis should therefore be treated as a national economic priority. The solution will not come from a single intervention. It requires a coherent strategy that combines productive investment, infrastructure development, enterprise growth, skills development, improved governance and an employment-centred approach to economic policy.
The central question should no longer be whether South Africa can achieve economic growth, but whether the growth we achieve is capable of broadening economic participation and creating sustainable livelihoods.
At an official unemployment rate of 33.6% and an expanded rate of 43.8%, unemployment cannot remain one policy objective among many. It must become one of the central measures by which the success of South Africa’s economic strategy is judged.
South Africa cannot grow its way out of unemployment passively. It must pursue an active, employment-centred growth strategy that expands opportunity at scale. If the country is serious about inclusive development, then job creation must become the central metric by which economic policy is judged.
Prof Cameron Modisane is the Deputy Executive Dean, College of Accounting Sciences at Unisa.
