Asanda Notshe, Chief Investment Officer at Mazi Asset Management
The South African labour market has experienced significant difficulties over the last 10 years. Often characterised as the lost decade, total employment in the country has been stagnant at 16 million over this period. This followed a period of growth, where employment increased from 13.9 million in 2010. Predictively, the pandemic accelerated the stagnation in terms of job losses over the last five years. The stagnation is further alarming as it has meant that employment numbers have lagged the growth in the labour force. The manufacturing, mining and construction sectors were key culprits regarding job losses over this period – for example, manufacturing has shed an average of 1% per annum of its employment numbers. These developments have resulted in the statistics that we often hear being reported widely: a doubling of unemployed persons (currently c.8 million), a long-term unemployment rate of 78%, and an expanded unemployment rate approaching 45%. Key reasons often sighted for the emergence of these concerning trends include skills mismatch, unfavourable conditions for SMEs as well as the persistent de-industrialisation of the country’s value chains.
A concerning state of affairs indeed – made more so by the current and future impact of these developments. Consequently, my thesis is that we are fast approaching a cliff – a cliff of the financial variety to be specific! This comes about as retrenched workers gradually deplete their savings as well as the proceeds from their retirement fund arrangements. As cliffs go, one’s initial approach appears untroubled and therefore deceptive given what’s to come. Similarly, there’s a risk to the broader economy that the spending power of a vast section of our population will suddenly disappear beneath our collective ‘feet’. In the absence of alternative employment prospects, many of these fellow citizens will simply have no other meaningful alternatives for generating income. The statistics above signal a jobless recovery since the pandemic, impacted further by impending retrenchments that have been signalled by corporates and lamented by trade unions. With private consumption contributing up to 68% to the nominal GDP of the country, a significant reduction in spending capacity will have an extensive impact generally.
As a self-respective investment professional, it is important to validate my thesis with evidence and relevant statics – and as I do so, my anxiety levels rise in seeing the proverbial cliff fast approaching. Beyond the retirement savings, there are limited alternative social safety nets available. Severance pay and the Unemployment Insurance Fund (UIF) often provide minimal support and are premised on the prospect of the affected individual gaining alternate employment. A 2025 study also found that c.51% of frontline workers have no significant savings buffers – further exacerbating the impact of joblessness. This extends even to high income earners, where rising living costs have eliminated the possibility of savings for a rainy day (or approaching cliff). The recently implemented two pot system provides perhaps the most direct insight into the situation. Roughly R73bn had been withdrawn in total by February 2026, with over 5.6 million people having applied for tax directives in the first 18 months of the system’s implementation. It is also instructive to note that 71% of two pot claims were for amounts of less than R10,000 – suggesting that these withdrawals may be for immediate liquidity needs (such as groceries, school fees, utilities etc.). Repeat withdrawals also offer some clues – of the claims submitted in early March 2026, 62% were third time claims whilst 33% and 5% were for second and first claimants respectively. Administrators have also collected data on the usage of the monies claimed under the system, with 48% of reasons given for claiming being the need to cover daily expenses and 46% sighting debt repayments.
On the strength of the evidence, there appear to be considerable elements that are cause for concern regarding the potential financial cliff in the country. In isolation, retrenchments and stagnant job creation can appear to be just interesting statistics from the comfort of one’s position far from the cliff. The challenge, of course, is that components of any economy are interconnected. It is only a matter of time before a regressing section eventually impacts other parts. The call to action is therefore to take collective responsibility for the challenge and not leave it to someone else to solve. It was not surprising to learn that South Africa holds the record of the most colours in our flag (six – in a primary design) – emblematic of the country’s heritage in harnessing diversity and variety to solve complex challenges. Now is the time for action – the cliff is coming!
ENDS
