By Prof. Joseph Sekhampu, chief director of the NWU Business School.

Every society organises its economy around a set of implicit bargains about power, access, and reward. Those bargains determine who enters markets easily, who must navigate layers of permission, who receives protection, and who absorbs risk. The labour market does not rise above this architecture. It reflects it.

The new South Africa’s political settlement sought to balance democratic redress, macroeconomic prudence, and gradual transformation within a market economy. It expanded political rights and fiscal redistribution, while preserving a production structure that remained concentrated, capital intensive, and spatially unequal. The settlement stabilised the macro economy and avoided fiscal crisis, yet did not fundamentally reconfigure ownership patterns, lower barriers to small businesses entry at scale, or dismantle the geography of economic exclusion. Political inclusion advanced more rapidly than economic participation.

The most recent labour force data confirm a pattern that has endured for more than a decade. The official unemployment rate has edged lower, yet the absorption rate remains subdued. Of more than forty-two million working-age adults, just over seventeen million are employed, leaving almost twenty-five million outside work. Broader measures of underutilisation remain elevated, and participation fluctuates without sustained expansion.

Over time, the persistence of this gap invites a more difficult question. If exclusion endures across cycles of recovery and reform, it may not reflect insufficient growth alone. Its durability raises the possibility that the very framework that delivered stability may also have narrowed the pathways to broad-based economic participation.

Compared with upper middle-income economies at similar levels of development, South Africa’s unemployment rate is unusually high and persistently so. This is not a short cycle, but a structural continuity.

That continuity should not be misread as resilience. It signals a low-absorption equilibrium in which output expands without integrating labour at scale. In this context, unemployment is not merely a temporary mismatch between skills and vacancies, but an enduring misalignment between institutional incentives and the requirements of mass employment.

The labour market is where multiple systems converge. Education policy shapes the supply of skills, yet returns depend on labour demand. Spatial fragmentation increases commute costs and narrows search radii. Crime and energy instability alter investment decisions and encourage capital deepening rather than labour hiring. Logistics bottlenecks reduce competitiveness in labour-intensive sectors.

These constraints are mediated through the capacity of the state. A capable state reduces regulatory uncertainty, coordinates infrastructure provision, enforces contracts consistently, and limits discretionary rent extraction. When capacity is uneven, firms rationally respond by limiting expansion, automating where feasible, or concentrating operations in secure enclaves. Smaller firms struggle to scale in an environment of compliance complexity and infrastructure unreliability. The labour market absorbs the aggregate effect of these rational responses.

The Quarterly Labour Force Survey reflects this structure. Employment rises in some sectors and falls in others, yet the employment frontier barely shifts. The unemployment rate oscillates within a narrow band. Youth not in employment, education, or training remain persistently high. Even post school qualifications do not reliably secure entry into stable employment. The system adjusts internally but does not expand outward.

It is tempting to frame this as a jobs crisis. This language suggests cyclical weakness and eventual recovery once growth accelerates. An inclusion crisis, in contrast, recognises that growth alone may not alter the structural ceiling. In a low absorption equilibrium, growth can coexist with exclusion. Capital-intensive sectors can expand without large payrolls. Productivity gains can increase output while limiting labour demand. Redistribution can stabilise households without integrating them into production.

The political settlement matters because it shapes incentives. If regulatory discretion creates predictable rents, the effort flows toward access rather than expansion. If procurement systems reward political alignment more reliably than competitive efficiency, capital allocation skews accordingly. If coordination failures fragment reform, policy ambition dissipates before it matures. These outcomes are not accidental. They are institutional consequences.

South Africa is therefore not confronting a jobs crisis alone. It is facing an inclusion crisis produced by institutional design. Until labour absorption becomes the organising objective of reform and until state capacity is aligned to lower the cost of entry, scale, and hiring, the labour market will continue to function as a lagging indicator of a settlement that has yet to reconcile stability with participation.