South Africa's unemployment hits 14-year high as recession looms

A man pulls a trolley full of recyclable waste material which he sells for a living, in Daveland near Soweto, South Africa August 4, 2015. (Photo: Reuters)

South Africa's unemployment rose to its highest in 14 years in the first quarter as agriculture and informal sectors shed jobs and more people stopped looking for work, data showed on Thursday, in a sign the economy may be headed for recession.

The unemployment rate climbed to 27.7 percent of the labour force in the first quarter, the highest since September 2003, from 26.5 percent in the last quarter of 2016.

The expanded definition of unemployment, which includes people who have stopped looking for work, rose to 36.4 percent, or 9.3 million people out of a total workforce of 22.4 million.

Statistics South Africa warned that recent credit downgrades to sub-investment grade and the threat of further cuts were taking its toll on the economy as the currency depreciated and made imports more expensive.

"Certainly you are better off without a downgrade than you are with one," said Statistician General Pali Lehohla. "The depreciation of the currency works for you when it is deliberate."

South Africa lost its coveted investment grade status in April when S&P Global Ratings and Fitch downgraded the country following the sudden firing of the finance in a midnight cabinet purge by President Jacob Zuma.

The rand lost about 10 percent in the wake of the cabinet shake up and subsequent downgrades, making it one of the worst performing emerging market currencies this year.

The two ratings firms, which cited political and economic instability as reasons for the downgrades, are due to announce follow-up ratings decisions this week.

The statistics department said half a million jobs were lost in the quarter, with agriculture sector shedding 44,000 jobs and 14,000 lost in the informal sector.

South Africa's economy shrank 0.3 percent in the last quarter of 2016 and if it shows a contraction when domestic product results are released on Tuesday the continent's most industrialised economy will be in technical recession.