South Africa's unemployment rate just surged to a 12-year high

South Africa’s unemployment rate just hit a 12-year high.

The country’s unemployment rate increased to 26.7% in the first quarter of 2016, up from 24.5% in the fourth quarter of 2015, according to the Quarterly Labour Force Survey.

Economists were expecting the rate to increase to “only” 25.30%.

Meanwhile, the “expanded” unemployment rate, which includes people who stopped looking for work, also ticked up. It came in at 36.3%, above the previous quarter’s 33.8%. That rate was even worse in some rural regions, exceeding 50% in a few areas.

The two hardest hit sectors were construction and manufacturing, which saw quarterly employment drops of 88,000 and 80,000, respectively.

“Today’s employment figures are very grim, but tell us little that we didn’t already know about South Africa’s troubled labour market,” wrote Capital Economics’ Africa economist John Ashbourne after the data crossed.

“The continued rise of unemployment may, however, have significant political implications,” he argued. Municipal elections will be happening in August, and “today’s data may embolden populist figures hoping to capitalise on the ruling party’s recent missteps.”

Notably, South Africa also has huge youth unemployment problem. The International Labour Organisation (ILO) estimates that the country saw a youth unemployment rate of 52.9% in 2014 — which is particularly noteworthy given that a whopping 46.95% the population is under the age of 24.
“South Africa’s high rate of [total] unemployment is largely due to a combination of the structural legacies of the country’s Apartheid period and very poor educational outcomes, which leave many young people unprepared for the labour market,” noted Ashbourne.

Data from fall 2015 show that each year, only about 15% of students who begin a degree program at a South African university or technical college graduate. Many dropouts can’t afford to pay the tuition — especially those in the much-poorer black population. These people who leave school then do not have the required skills demanded for the labour market.

Moreover, earlier in 2015, universities wanted to increase the cost of education by 10% to 12%, which led to mass protests by South African students in October. The students were ultimately successful, as universities decided not to increase fees in 2016.

The South African rand is down 2.4% at 15.1861 as of 1:03 p.m. ET.

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