Capitec CEO Gerrie Fourie recently claimed SA’s unemployment is closer to 10% than the official 32.9% if we count the enormous informal sector which, by some accounts, represents more than 15% of GDP and 2.7 million jobs.

As Moneyweb recently reported, this ignited fierce debate between Stats SA and Capitec.

With 24 million customers, Capitec has a fair grasp of the transactional activity of nearly half the SA population, and estimates the informal sector at nearly nine million – far larger than estimates by Stats SA.

Stats SA hit back at this claim, pointing out that it does in fact measure the informal sector in its various surveys, but added that improvements could be made by gathering better data. “Stats SA is committed to advancing data integrity and is evaluating additional statistical tools, including a register for informal enterprises,” says the organisation in a statement.

As Moneyweb notes:

This is no idle debate. Unemployment figures are highly politicised, and a useful battering ram to shame the government – and rightly so – and advance various political agendas. Stats SA says it recognises that its unemployment figures are among the most scrutinised in the country and it welcomes this. 

So how is it Zimbabwe reports an unemployment rate of 8%, India 7.9% and Brazil 6.2%.

Are we measuring the same thing?

No, we’re not. Like SA, all these countries use the same International Labour Organisation (ILO) methodology, but the devil is in the details. 

Zimbabwe counts as an informal sector worker who grows vegetables for own consumption in their back yard. SA does not.

India defines the informal sector as ‘unorganised or unregistered enterprises’ employing fewer than 10 workers, or without social security benefits. You are also counted as employed if you worked sporadically over the last year. On this basis, India’s low unemployment rate is flattered by its inclusion of a massive informal sector.

Brazil, too, includes its huge informal sector in its employment data. You are considered employed if they worked at least one hour for pay or profit in the week in which the survey is conducted or had a job but were temporarily absent. It separately measures underemployment as workers desiring more hours within the informal sector. On this measure, roughly a quarter of informal workers are underemployed.

It appears that cross-country comparisons of unemployment and the size of the informal sector are relatively meaningless until we standardise the way we report these figures. This is precisely what the ILO is trying to do with new standardised definitions – agreed by resolution in 2023. All we are waiting for is all countries to adopt this resolution. 

Until then, treat cross-country unemployment comparisons with suspicion.

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