IntechOpen

Home > Books > Unemployment - Nature, Challenges and Policy Responses [Working Title]

Open access peer-reviewed chapter - ONLINE FIRST

Unemployment, Policy Responses and Challenges in South Africa: A Sectoral Analysis

Written By

Mapula Hildah Lefophane

Submitted: 17 May 2023 Reviewed: 10 July 2023 Published: 04 June 2024

DOI: 10.5772/intechopen.1005146

Unemployment - Nature, Challenges and Policy Responses IntechOpen
Unemployment - Nature, Challenges and Policy Responses Edited by Collins Ayoo

From the Edited Volume

Unemployment - Nature, Challenges and Policy Responses [Working Title]

Collins Ayoo

Chapter metrics overview

13 Chapter Downloads

View Full Metrics
Advertisement

Abstract

This chapter serves to examine the extent to which the policy responses undertaken by the South African government have achieved the objectives of growing the economy and creating employment. A synopsis of the macroeconomic, sectoral/industrial policies and sector-specific programmes indicates that the manufacturing sector as a whole, and certain manufacturing industries, were earmarked as one of the sectors and industries with the potential to achieve these objectives. Despite these efforts, South Africa’s manufacturing sector is faced with four main challenges, which hinder its ability to drive economic growth and create jobs as envisioned. These challenges were identified as high input costs, labour market rigidities, mismatches between education and skills and high import penetration. To overcome these challenges, it is recommended that the government should adopt a multi-prolonged approach involving a variety of policy strategies. The trends in labour productivity, employment and wages were explored to determine the extent to which labour productivity determines wages, and affects employment. Overall, the labour productivity-employment-wages nexus is influenced by various factors, which require the implementation of a combination of policy strategies.

Keywords

  • unemployment
  • policy responses
  • challenges
  • South Africa
  • sectoral analysis

1. Introduction

Since the attainment of democracy in 1994, the South African government has developed several policies to grow the economy and address the country’s high rates of unemployment. These policies encompass a range of policy plans at the macroeconomic and sectoral levels, as well as industry-specific programmes, labour laws and related labour market interventions. The macroeconomic policies range from the Reconstruction and Development Plan (RDP), South Africa’s first Development Plan post-1994 [1], to the National Development Plan (NDP), the country’s vision for 2030. To complement the macroeconomic policies, a range of sectoral/industrial policies has been developed as implementation plans of the macroeconomic policies. In addition to this, industry-specific programmes have been developed to capacitate the sectors/industries to contribute towards the macroeconomic and sectoral/industrial policy objectives of growing the economy and creating employment. Recently, a range of industry-specific Master Plans, briefly described as “action-oriented policies”, has been developed to boost local jobs through the development of local value chains [2].

The transition into democracy in 1994 also witnessed the implementation of various labour policies to redress the historical inequalities in the labour market. The labour policies also aim to promote the rights of workers and employment of historically disadvantaged groups, and improve the working conditions and wages of workers. The main policies include the Basic Conditions of Employment Act, the Employment Equity Act and the Labour Relations Act. Over the years, other labour policies have been introduced to improve economic efficiency and productivity, and to create employment and a conducive environment for investment. Several labour market interventions were also introduced, including job creation initiatives, programmes and interventions to address South Africa’s challenge of chronic youth unemployment (e.g., the Presidential Youth Employment Initiative (PYEI), the Presidential Employment Stimulus Programme (PES) and Operation “Vulindlela”) [3, 4, 5].

The government furthermore introduced the Skills Development Act, which led to the implementation of various training and skills development programmes to improve labour productivity and the employability of workers [6]. However, there has been stagnation in wage growth, characterised by unequal distribution of wages and low wages in various sectors of the economy [7]. In light of this, the National Minimum Wage Act was introduced in 2018 to promote equitable wage-setting mechanisms, and for the regulation and implementation of sectoral minimum wages [8].

Despite the aforementioned policy responses, South Africa has experienced stagnant economic growth and high rates of unemployment. For instance, before the COVID-19 outbreak, the economy had failed to achieve an annual gross domestic product (GDP) growth rate of 5%, as envisaged in the NDP 2030. Moreover, South Africa had one of the highest rates of unemployment in the world [9]. With the advent of COVID-19, the unemployment rate hit a record of 34.4% in the 3rd quarter of 2021 [10], the highest unemployment rate in the world, with about 52% of the population living in poverty in 2020 [10, 11].

Moreover, real GDP contracted by 8.2% in 2020 and wages of workers, for those who still had jobs, had decreased by 10–15% by the end of 2020 [10, 11, 12]. These figures suggest that COVID-19 deepened the economic challenges already facing South Africa. Of note, the figures suggest that policy responses undertaken thus far have been ineffective in achieving the intended outcomes of growing the economy and creating employment. This is due to several factors, including mismanagement of public funds and resources, inadequate infrastructure (power shortages and inefficient transport networks), lack of adequate skills among the workforce, trade tensions and policy uncertainty (concerns about property rights, land reform and mining regulations). Moreover, the country’s labour laws and minimum wage provisions are said to have hindered the labour market’s ability to attract foreign investment aimed at reducing poverty and unemployment rates [13, 14, 15]. They also led to high costs for employees (wages) [16], which are not accompanied by a rise in labour productivity [13, 14, 15]. Hence, the labour market has been ineffective in attracting the foreign investment needed to create jobs.

Given the aforementioned, this chapter serves to examine the extent to which the policy responses undertaken by the South African government have achieved the objectives of growing the economy and creating employment. This objective is achieved through a review of literature and document analysis of policy briefs, government policies and reports, as well as other relevant documents. The subsequent sections of this chapter are organised as follows. Section 2 describes the detailed policy responses undertaken to grow the economy and reduce unemployment in South Africa. Section 3 provides an overview of sector-specific challenges hindering the ability of one of South Africa’s economic sectors to create jobs (i.e., the manufacturing sector). Section 4 provides the theoretical nexus between labour productivity, employment and wages to underline how labour productivity and wages affect employment. Section 5 provides trends in labour productivity, employment and wages at the industrial level to highlight the extent to which labour productivity and wages have affected employment at the sectoral/industrial level. Section 6 summarises the chapter, and highlights the policy implications.

Advertisement

2. South African government’s policy responses to unemployment from 1994 to 2020

This section provides a rundown of the policies implemented in South Africa to support the growth and development of one of South Africa’s economic sectors (i.e., manufacturing sector). The rationale is to underline the point that the manufacturing sector has been earmarked as one of the strategic sectors to achieve South Africa’s goal of job creation. Special attention is given to policies developed post-democracy, from 1994 to 2019.

2.1 Macroeconomic policy plans

The notable macroeconomic policy plans include, successively, the Reconstruction and Development Programme (RDP), the Growth, Employment and Redistribution (GEAR) strategy, the Accelerated and Shared Growth Initiative for South Africa (AsgiSA), the New Growth Path (NGP) and the National Development Plan (NDP). Since these are macroeconomic policy plans, the discussion is centred on the policies at the national level instead of other spheres of government. It is important to note that various policy strategies at the local and provincial levels have been developed in line with these macroeconomic policy plans [17]. In this section, the policy plans are discussed in a chronological order to highlight changes in the government’s priorities.

2.1.1 The reconstruction and development programme (RDP)

After 1994, the development of macroeconomic policies started with the RDP. The RDP aimed at redressing the inherently gross inequalities in access to basic services, strengthening democracy for all South Africans and establishing a more equal society [18]. Thus, the priority of the RDP was to reverse the historical inequalities in access to basic services. For this reason, the sectors of priority comprised water and sanitation, primary agriculture, land reform, energy and electrification, health care and transport. However, this does not exclude the fact that the RDP underlined the need for the development of a large manufacturing sector that processes local raw materials and minerals, as the economy depended on mineral exports.

2.1.2 Growth, employment and redistribution (GEAR) strategy

The RDP was replaced by the GEAR strategy in 1996 because of its ineffectiveness in achieving one of its priority areas of “creating a strong, dynamic and balanced economy”. It is against this background that the GEAR focused on enhancing economic growth and stabilising the economy. As such, efforts were made to promote foreign investment and trade, and create a conducive environment for businesses. Thus, the GEAR differs from the RDP in that it contained specific targets, which were to be accomplished between 1996 and 2000. These targets encompassed an average real export growth rate (manufacturing) of 10.8%, an average annual GDP growth rate of 4.2%, an average inflation rate of 8.2% and the creation of an average of 270, 000 jobs by the year 2000 [19]. Of note, the manufacturing sector was identified as being one of the strategic sectors for achieving these targets.

2.1.3 Accelerated and shared growth initiative for South Africa (AsgiSA)

Despite being credited for achieving its targets, especially that of a GDP growth rate of 4.2% in 2000, the rates of unemployment and poverty escalated during the GEAR era. In response to this, the government implemented the AsgiSA in 2006. The AsgiSA focused on “shared growth” – growing the economy while reducing poverty levels and unemployment (i.e., to less than 15% by 2014). Remarkably, it is through the AsgiSA that specific manufacturing industries were identified as being among the strategic industries for achieving the required growth and development. These included the chemical sector, creative industries, metal beneficiation, the capital goods sector and some of the agro-processing industries (i.e., clothing and textiles, wood and pulp).1

2.1.4 New growth path (NGP)

Akin to the GEAR, economic growth under the AsgiSA coincided with high rates of unemployment, poverty and inequality; hence, the NGP was introduced. The NGP aimed to stimulate economic growth, generate 5,000,000 jobs and reduce the rate of unemployment from 24.68% in 2010 to 15% by 2020. The main difference between the NGP and preceding policy plans is that it was aimed at stimulating growth and reducing the high rates of unemployment, poverty and inequality by “creating a more labour-absorbing growth path” [20]. The other difference is that the NGP sets out targets that were to be achieved by the main sectors of the economy (i.e., agriculture, mining, manufacturing and services). As a result, the agro-processing sector (a subsector of manufacturing) was expected to generate 145,000 of the 5,000,000 planned jobs by 2020. In contrast to previous policies, which were abolished when new policies were being introduced, the NGP was implemented simultaneously with the NDP, the country’s strategic plan for 2030.

2.1.5 National development plan (NDP)

The NDP was introduced in 2011 to achieve GDP growth of at least 5.4% each year until 2030 (from 3% in 2010) and to reduce unemployment, poverty and inequality. Both the NGP and the NDP were implemented concurrently, with the NGP as a medium-term strategy and the NDP as a long-term strategy. In other words, the NDP is South Africa’s vision for 2030, while the NGP was the government’s strategy in pursuit of the NDP [21]. The two policy plans differ in that the NGP viewed employment creation as the top priority. Hence, employment growth targets were set for each of the identified economic sectors (e.g., 145,000 of the 5,000,000 planned jobs for the agro-processing subsector) and developed tangible actions to steer a more labour-absorbing growth path in the sectors [22]. On the other hand, the NDP is aimed at accelerating economic growth to reduce the high levels of unemployment, poverty and inequality by 2030. However, as with the NGP, the specific manufacturing industries were identified as being among the strategic industries with the potential to contribute towards the achievement of the NDP objectives [23, 24].

2.2 Sector-specific policy plans

In addition to the macroeconomic policy plans, various sector-specific policy plans were introduced to create more job opportunities within the industrial sectors and reduce the high levels of unemployment in the country. The notable sectoral/industrial policy plans are, sequentially, the National Industrial Policy Framework (NIPF), the Industrial Policy Action Plan (IPAP), the Nine-Point Plan (9-Point Plan), the strategy for the development of small and medium agro-processing enterprises and the Reimagined Industrial Strategy (RIS).2 These sectoral/industrial policy plans were developed as the implementation strategies for the macroeconomic policies [1]. From this perspective, the discussion of these sectoral/industrial policy plans also focuses on their interrelation with the macroeconomic policies, which are discussed in the section.

2.2.1 National industrial policy framework (NIPF)

The NIPF was introduced in 2007 as the implementation plan for AsgiSA to support industrialisation and industrial growth, particularly within the manufacturing sector [25]. Similar to the AsgiSA, the NIPF earmarked specific manufacturing industries as industries with the potential to contribute towards achieving growth and development goals. In particular, the NIPF focused on four categories of labour-absorbing manufacturing industries, which constituted the main targeted industries for the implementation of the NIPF. These industries include selected manufacturing industries, including agro-processing industries (i.e., pulp and paper, forestry and furniture) [25].

2.2.2 Industrial policy action plan (IPAP)

In 2008, the IPAP was developed as the implementation plan for the NIPF to “address cross-cutting and sector-specific constraints (and optimise opportunities)” to place the country on a stronger growth path [26]. The IPAP is related to the AsgiSA and the NIPF in that it acknowledges the need to support specific manufacturing industries for their ability to retain jobs because of their labour-intensive nature. These include some of the agro-processing industries, which include textiles, pulp and paper, leather, furniture and clothing and footwear. It is important to note that, while some policy plans were substituted when new plans were being implemented, this was not the case with the IPAP, as it was implemented alongside the NGP and NDP [1].

2.2.3 Nine-point plan (9-point plan)

In 2015, the 9-Point Plan was introduced to grow the economy and create jobs. It was conceived following the economy’s ineffectiveness in achieving the NDP’s growth targets. For instance, while the NDP aimed to achieve annual GDP growth of 5.4% up until 2030, the economy failed to achieve GDP growth of more than 3.5% between 2011 and 2014 [1]. Subsequently, the 9-Point Plan was launched. Based on the South African government [27], the plan is composed of nine actions to be undertaken to generate jobs and grow the economy, including advancing beneficiation and “revitalisation of the agro-processing value chain” [1].3

2.2.4 Strategy for the development of small and medium agro-processing enterprises

The strategy for the development of SMEs was launched in 2015 to provide specific support packages to SMEs involved in agro-processing. This was in response to the NDP’s acknowledgement of the SME sector as being a strategic sector with the potential to contribute towards attaining its objectives of creating jobs and growing the economy [28]. The strategy identified interventions to develop and support agro-processing SMEs, and was developed in conjunction with the NDP and IPAP [29]. The support is in the form of entrepreneurial support, enterprise development, access to finance, market access, business incubation, industry research and transfer of technology and infrastructure investment [1].

2.2.5 Reimagined industrial strategy (RIS)

The RIS was developed in 2019 following the inauguration of South Africa’s sixth administration. The strategy takes a multi-pronged approach to industrial development to unleash job-creating investment through the building of partnerships between the private sector, labour and government. In particular, the RIS aims to strengthen the ability of the value-added and manufacturing sectors to increase value addition, create decent jobs and increase competitiveness in both the domestic and export markets [30]. The RIS is coordinated by the Presidency and is operationalised through the implementation of industry-specific Master Plans. These Master Plans consist of actions that all stakeholders could undertake to facilitate the implementation of action plans and mechanisms to monitor the implementation of those plans [30, 31]. To date, various Master Plans have been developed for the cultural and creative industries (CCI), commercial forestry sector, poultry sector, retail-clothing, textile, footwear and leather (R-CTFL) value chain, automotive industry, sugar value chain, steel and metal fabrication, agriculture and agro-processing and furniture industry [32, 33].

2.3 Industry-specific support programmes

A variety of industry-specific support programmes were developed from 1994 to 2017 to capacitate the industries to contribute towards achieving the objectives of the macroeconomic and sectoral/industrial policies. The industry-specific support programmes range from the Workplace Challenge Programme (WPC) to the Black Industrialists Scheme (BIS). The comprehensive support programmes, their objective and beneficiary industries, are presented in Table 1.

Support programmeObjectiveTargeted sector/industry
Workplace Challenge Programme (WPC), 1997To ensure job creation through enhancement in labour productivity and competitiveness [34]Agriculture, mining and beneficiation businesses [34]
Seda Technology Programme (STP), 2006To promote technological innovation of small enterprises to accelerate their contribution to economic growth and development [35]Small and women-owned enterprises [35]
Sector specific assistance scheme (SSAS), 2009To provide financial support to organisations that contribute to the industrial development and growth of South Africa’s export base [36]Industry associations, joint action groups, export councils, and those involved in the development of emerging exporters [36]
Clothing and textiles competitiveness Programme (CTCP), 2010To provide financial assistance to industries to offset competition from low-cost producing countries, while creating employment and sustainability in these industries [37, 38]Footwear, textiles, clothing, Leather & Leather Goods Industries [37, 38]
The manufacturing competitiveness enhancement Programme (MCEP), 2012To support enterprises involved in production, following the global economic recession in 2008, to cope with adverse market conditions, secure higher investment, increase competitiveness, and preserve employment [39]Sectors involved in advanced manufacturing, agro-processing, chemicals, green technology, metals and mining and pharmaceuticals [40]
Aquaculture development and enhancement Programme (ADEP), 2013To stimulate investment in the aquaculture sector to develop emergent farmers, increase production, and create and sustain jobs [41]Fish farms and hatcheries involved in the production, processing and preservation of aquaculture fish [41]
Critical infrastructure Programme (CIP), 2015.To stimulate investment growth, in line with the NIPF and the IPAP, by supporting critical infrastructure, thus lowering the costs of doing business [42]Small enterprises, comprising state-owned industrial parks, Defence National Strategic Testing Facilities and aerospace, distressed municipalities and agro-processing enterprises [42]
Support Programme for industrial innovation (SPII), 2016To promote the technological development of the relevant industries by providing financial assistance for the development of innovative products and/or processes [43]Individual and all enterprises, including small, very small and micro-enterprises [43]
Technology and human resource for industry Programme (THRIP), 2016To support manufacturing industries through research and technology development [44]All firms involved in SET (i.e., science, engineering and technology) research [44]
The agro-processing support scheme (APSS), 2017.To promote investment by south African Agri-business (i.e., agro-processing/beneficiation) enterprises [45]Agri-business and agro-processing enterprises [45]
Black Industrialists Scheme, 2017To promote transformation, sustainable economic growth and industrialisation by supporting black-owned businesses in the manufacturing sector [46]Black-owned enterprises in selected value chains and industrial sectors of manufacturing [46]

Table 1.

Industry-specific support programmes.

Source: Adapted from Lefophane [1].

Overall, the industry-specific support programmes focus on five key areas, which are namely, (1) investment, (2) technological innovation, technological development and research and technology development, (3) labour productivity, (4) export and (5) transformation. The support programmes with a focus on investment are namely, the Manufacturing Competitiveness Enhancement Programme (MCEP), the Aquaculture Development and Enhancement Programme (ADEP), the Critical Infrastructure Programme (CIP) and the Agro-processing Support Scheme (APSS). The overall aim of these programmes is to stimulate investment growth by supporting critical infrastructure, thus lowering the costs of doing business. Such investments are expected to increase production, create and sustain jobs, modernise machinery and equipment, improve productivity and competitiveness and broaden participation in manufacturing/agro-processing. The support provided to the beneficiary industries/firms is through a cost-sharing grant (APSS, ADEP and CIP), as well as financial loan facilities and production incentives (MCEP).

Industry-specific support programmes, which are namely, the Support Programme for Industrial Innovation (SPII), Seda Technology Programme (STP) and Technology and Human Resource for Industry Programme (THRIP) focus on promoting technological innovation, technological development, as well as research and technology development. Overall, these programmes aim to promote technological innovation and development and support industries through research and technology development. The support offered to the beneficiary industries/firms is in the form of a cost-sharing grant (THRIP), business incubation, technical support, market access and financial and non-financial support for technology transfer (STP) and non-repayable grant for defined qualifying costs incurred (SPII).

The support programme, which focuses on labour productivity, is the WPC, which aims to ensure job creation through enhancement in labour productivity. The support provided to beneficiary industries is through coaching in areas of leadership, management systems, goal alignment, cleaning and organising, teamwork and “green productivity”. In terms of competitiveness, the CTCP, a Customised Sector Programme (CSP) for the clothing, textiles, footwear and leather goods industries is aimed at providing financial assistance to these industries to offset competition from low-cost producing countries, while creating employment and sustainability in these industries. The support offered to beneficiary industries is in the form of grants and interest-free loans.

In terms of exports, the SSAS aims to provide financial support to organisations that contribute to the industrial development and growth of South Africa’s export base. The support is in the form of generic funding, project funding and project funding for emerging exporters. Finally, the (BIS aims to promote transformation, sustainable economic growth and industrialisation by supporting black-owned businesses in the manufacturing sector. The BIS provides both financial and non-financial support to black industrialists in these sectors to accelerate their contribution to economic growth, exports, investments and employment.

In conclusion, the South African government has developed various policies post-1994 as a response to the country’s economic challenges of slow economic growth and high unemployment rates. Notably, the manufacturing sector has been earmarked in the macroeconomic policy plans as the strategic sector with the potential to drive economic growth and generate jobs. In addition to the macroeconomic policies, the sectoral/industrial policy plans were developed as implementation plans of the macroeconomic policies. Of note, the agro-processing subsector has been earmarked in the policy plans as one of the sectors with the potential to achieve the objectives of growing the economy and creating jobs.

Various industry-specific support programmes were developed to capacitate the industries to contribute towards achieving the objectives of the macroeconomic and sectoral/industrial policies. The industry-specific support programmes comprise various incentives, including grants for infrastructural development, research and technology development and the development of emerging exporters. Despite these efforts, South Africa’s manufacturing sector is faced with a variety of challenges. This hinders its ability to drive economic growth and create jobs, as envisioned in the macroeconomic and sectoral/industrial policies. The challenges facing South Africa’s manufacturing sector are discussed in the next section.

Advertisement

3. Challenges facing the South African manufacturing sector

South Africa’s manufacturing sector has faced numerous challenges over the years, which contributed to high unemployment in the country. This is despite the support programmes that have been developed to strengthen the manufacturing sector’s ability to drive economic growth and reduce unemployment. The main challenges facing South Africa’s manufacturing sector are high input costs, labour market rigidities, the mismatch between education and skills and competition from cheaper imports.

3.1 High input costs of production

There are high input costs of production in the capital-intensive manufacturing industries that require massive capital expenditure, such as the basic chemical, steel and aluminium smelting industries [46], as well as the automobile manufacturing, telecommunications and transportation industries (e.g., airlines and railways). Further, high input costs are seen as employees’ costs in the form of salaries, bonuses, medical aid, life insurance benefits, pension benefits and other employee-related benefits. These costs contribute towards the high cost of manufacturing [16], and obstruct the labour market’s ability to attract foreign investment [47].

3.2 Labour market rigidities

Following the advent of democracy in 1994, various labour policies were developed to promote the rights of workers and the employment of historically disadvantaged groups, to improve the working conditions and wages of workers, and to redress the historical inequalities in the labour market. The key policies include the Basic Conditions of Employment Act, the Employment Equity Act, the Labour Relations Act and the Minimum Wages Act. Thus, the labour market in South Africa is highly regulated through these policies, making it difficult for firms to employ and dismiss workers.

This has led to the inability to attract foreign investments aimed at tackling the country’s challenges of high rates of poverty and unemployment. This is attributable to the unions’ demands for high salaries, which are often above the inflation, despite low manufacturing productivity, industrial export output and economic growth [13, 14, 15]. Low productivity signifies that workers are contributing less to manufacturing output. However, a 2018 report by Statistics South Africa highlighted the point that employees’ costs contributed 14% (R340 billion) of total expenditure by the formal business sector [16]. These costs, which are not accompanied by a rise in labour productivity, have led to a situation where employers are reluctant to hire new workers, especially in the formal sector.

An increase in employees’ costs at a rate that is higher than a rise in labour productivity may threaten South Africa’s cost competition, if other costs are not adjusted to compensate for the increase [48]. Thus, the country’s labour laws and minimum wage provisions, which were introduced to inhibit the exploitation of workers, contribute towards higher costs of manufacturing. This hinders the labour market’s ability to attract foreign investment, reduce unemployment and improve labour productivity.

3.3 Mismatch between education and skills

There is a significant mismatch between the qualifications attained by job seekers and the skills required by employers. In support of this, a report on “facts and figures on skills in manufacturing” found that the majority of technicians in the manufacturing sector did not have the required qualifications, as only 42.4% of them had tertiary qualifications. Moreover, the majority of the technical workforce in manufacturing (i.e., artisans) do not have the prerequisite qualifications. However, it should be noted that those who are unqualified probably have significant experience. The manufacturing sector faces a low-growth environment, which is characterised by a poor skills profile and weak competition for goods and services. To support this, it has been found that the semi-skilled labour force dominated manufacturing employment (61.9%), followed by the skilled labour force (21.8%) and low-skilled labour force (16.4%) [49].

Other challenges include redundant skills, with technology outpacing the limited supply of skilled workers [50]. This is because there has been a transformation in the skill levels of employment in the manufacturing sector. This transformation is attributed to the diffusion of technology, including robots and automation in the manufacturing industries [49]. Companies that are at the forefront of automation are those in the automobile manufacturing. For example, automation gave rise to smart connected products, in which the three main components (the physical, smart and connectivity parts) of the product are integrated.

As such, information technology has become an integral part of the product itself (physical component). For example, the product’s mechanical and electrical parts (tyres, engine block and batteries in the car) constitute the physical component. Smart components comprise an enhanced user interface and an operating system consisting of software, sensors, data storage, microprocessors and controls. Examples of smart components in a car include an antilock braking system, engine control unit, touchscreen displays and rain-sensing windshields with automated wipers. Connectivity components comprise the ports, antennae and protocol- enabling wired or wireless connections with the product. According to Staff Writer [51], these advances in automation and computing have accelerated the demand for analytics professionals in South Africa. These professionals are included among South Africa’s higher-skilled and higher-paying jobs [52]. Thus, manufacturers depend on skilled workers to operate advanced technology, which is a basic requirement of the manufacturing sector [49]. Hence, there is a need for alignment between the education and training systems and the manufacturing sector’s labour market needs. There is also a need for the government to incentivise investment in plants, technologies, automation, computing and smart products.

3.4 Competition from cheaper imports

From a trade perspective, growth in import penetration from China has contributed towards a decline in output in the labour-intensive manufacturing industries, giving rise to a reduction in total employment [53]. The industries that are significantly affected by cheap imports are those involved in the manufacturing of clothing, textiles and wearing apparel. This is because manufacturers in these industries are struggling to compete with the cheap, mass-produced items that are produced in other countries (e.g., India, China, Lesotho, Swaziland, Vietnam and Bangladesh) and imported into South Africa [47]. As such, import penetration from these countries contributes towards a loss of profit, as well as a decline in output and employment in the manufacturing sector.

In conclusion, whilst support programmes have been introduced to strengthen the manufacturing sector’s ability to drive economic growth and tackle unemployment, the sector has faced numerous challenges over the years. The main challenges facing South Africa’s manufacturing sector are high input costs, labour market rigidities, mismatches between education and skills and competition from cheaper imports. These challenges hinder the sector’s ability to drive economic growth and tackle unemployment.

Overall, addressing the challenges facing South Africa’s manufacturing sector requires a multi-pronged approach to be taken. This approach should include labour market regulation and reform, as well as investments in education, technology and skills development programmes. This would drive labour productivity, which is crucial for wage determination, and increase output and employment in the manufacturing sector. Hence, the next section provides a synopsis of the theoretical nexus between labour productivity, wages and employment.

Advertisement

4. Theoretical nexus and trends

4.1 Theoretical nexus between labour productivity, employment and wages

A theoretical nexus exists between employment, labour productivity and wages. This nexus is described as “complex and multifaceted”, and has been the subject area of constant debate among policymakers, economists and academics. To simplify this nexus, the theoretical relationship is broken down into three sub-nexuses: the labour productivity-employment nexus, employment-wages nexus and labour productivity-wages nexus. The labour productivity-employment nexus aims to underline how labour productivity growth affects employment, while the labour productivity-wages nexus highlights how labour productivity growth affects workers’ wages. Finally, the employment-wages nexus aims to underline how employment growth affects the wages of workers. After discussing each theoretical nexus, empirical evidence is highlighted to justify/dispel each theoretical nexus within the South African context.

4.1.1 The labour productivity-employment nexus

Labour productivity is defined as the production of greater output with the same labour input. Therefore, higher labour productivity is associated with higher employment. The reason is that an increase in productivity increases the demand for labour (i.e., causes the demand for labour curve to shift to the right). However, this does not preclude the point that firms might also choose to substitute labour with capital machinery, resulting in a decrease in employment. This applies to cases wherein the costs of capital are lower than the costs associated with hiring and retaining labourers, and in the capital-intensive industries.

However, it should be noted that the theoretical nexus between labour productivity and employment differs in the short and long terms. In particular, in the short run, higher labour productivity might result in a decrease in employment (temporarily), as firms would require fewer workers to produce the same output level. On the other hand, in the long run, higher labour productivity could result in increases in employment. This occurs in situations in which firms can reduce costs and use the savings to invest in the development of new products, services, or expansion of existing operations, which creates new jobs and stimulates economic growth. This assertion is validated by empirical evidence reported by Habanabakize et al. [54], who found that labour productivity had a positive impact on the employment absorption rate in South Africa.

However, it is notable that, in reality, other factors besides labour productivity can stimulate employment, as labour productivity per se is not a source of employment growth. These factors include government’s investment in education, technology and training programmes, aimed at improving the skills and productivity of the workforce. Other factors include labour policies and labour market conditions, as well as demographic and structural factors.

4.1.2 The labour productivity-wage nexus

A range of theories has been developed to explain how wages are determined. These include Ricardo’s subsistence theory of wages, Smith’s wage-fund theory, Marx’s theory of value, Walker’s residual theory of wages, Davison’s bargaining theory of wages and Clark and Wicksteed’s marginal productivity theory of wages. The labour productivity-wages nexus is built on the marginal productivity theory of wages. According to the marginal productivity theory of wages, the marginal productivity of workers determines their wage rate.4 As such, workers will be paid a wage rate according to their marginal productivity. Such a wage rate represents the maximum amount that employers can pay without reducing their profits. Since the wage rate is based on the marginal productivity of workers, the workers’ wages will increase as their productivity increases and vice versa. Hence, it is assumed that employees would strive to maximise their marginal productivity to earn higher wages, and that employers would reward workers for their marginal productivity by paying them higher wages.

An empirical study undertaken by Meagre and Speckesser [55] found an association between labour productivity and wages in 25 countries from 1995 to 2009. This evidence supports the theory that the marginal productivity of workers determines their wage rate. This could lead to an increase in employment through increased labour demand, if marginal productivity increased (at given wages) owing to further expansion of existing operations, which would increase firms’ profits.

However, in the South African case, an empirical study by Habanabakize et al. [54] found that real wages had a negative effect on long-run employment absorption rates. This implies that higher wages would lead to a decline in employment.5 The divergence in the findings between the two studies is attributed to South Africa’s highly unionised labour market, characterised by rising costs of employees (wages) despite the low marginal productivity of workers [13, 14, 15, 16].

Thus, in the case of South Africa, it appears that Davison’s bargaining theory of wages, rather than the marginal productivity theory, applies. According to Davison’s bargaining theory of wages, no single participant has the power to regulate wages, as wages are determined through a bargaining process between employers and employees. In the bargaining process, employees and employers have conflicting objectives, with the employers aiming to pay employees the lowest possible wages and employees striving to earn the highest possible wages. As such, the wage rate depends on the bargaining power of employers and labour unions, representing employees. Given this, employees’ bargaining powers depend on their ability to negotiate with employers as a group and leverage their collective action (i.e., threat to strike). However, it should be noted that other factors besides bargaining powers determine the wage rate. These include the levels of experience and skills required by employers, the availability of substitute jobs, the country’s economic conditions and the level of competition in the industry.

4.1.3 The employment-wage nexus

According to the neoclassical theory of the labour market, wage rates and employment levels are determined by the labour market. In particular, an increase in wages leads to an increase in the quantity of labour supplied and a decrease in the quantity of labour demanded, ceteris paribus. In such a perfectly competitive labour market, employers accept the wage rate as determined by the market and so do employees (i.e., wage-takers). This implies that no single employee/employer has any power to influence the wage rate. Hence, the competitive wage rate determines the levels of employment [56].

However, in the South African case, the bargaining power of employees, rather than the competitive labour market, is more likely to determine the wage rate. However, in reality, greater bargaining power can lead to higher wages, which are higher than market-clearing wages. These higher wages can lead to a decrease in employment, as higher wages increase the quantity of labour supplied and reduce the quantity demanded of labour – both of these result in an increase in the rate of unemployment. However, this does not preclude the point that firms might strive to maximise profit by paying lower wages. This often takes place in situations wherein employers substitute local labourers with migrant labourers without bargaining power, owing to the government’s inability to regulate the labour market and enforce labour laws.

Figure 1 depicts the theoretical nexus between labour productivity, wage and employment. In particular, Figure 1 shows the nexus between an increase in productivity and its effects on both employment and wages.

Figure 1.

Effect of productivity on employment and wages.

Point E1, marks the initial equilibrium in the labour market before increases in labour productivity. At this point, the quantity of labour demanded by employers (Q1) equals the quantity that the market can supply, resulting in an initial equilibrium E1. Thus, the point of intersection between demand and supply results in wage rate (W1), implying that, in a perfectly competitive labour market, the workers’ wages are determined by both the supply and demand for labour.

An increase in labour productivity causes the demand for labour curve to shift from D1 to D2, wages to increase from W1 to W2 and for the employment levels to increase from Q1 to Q2. The new equilibrium (E2) emerges at a point of intersection of the new demand curve for labour (D2) and Q2. At this point, both the wage rate and employment level have increased, relative to the initial equilibrium (E1). Graph W2, the horizontal line from the new equilibrium point (E2) to the Y-axis, represents the new wage rate after an increase in productivity. It shows that the wage rate has increased due to the higher demand for labour (Q2) following increased productivity. The level of employment has also increased due to increased demand for labour. Thus, increased labour productivity causes the demand curve to shift from D1 to D2, resulting in higher wages (from W1 to W2) and increased employment in the labour market.

In conclusion, the theoretical nexus between labour productivity, employment and wages is complex and multifaceted. Hence, in this section, the nexus was broken down into sub-nexuses. Notably, there was a need to validate/dispel the theoretical sub-nexuses within the South African context. Moreover, it is important to note that, in reality, the nexus between labour productivity, employment and wages is influenced by various factors. This includes the government’s investment in programmes aimed at improving the skills of the labour force, as well as labour market regulation and reform. This would drive labour productivity, which is crucial for wage determination, and increase output and employment in the manufacturing sector. Accordingly, the next section describes trends in labour productivity, employment and wages of a subsector of the manufacturing sector (i.e., agro-processing subsector). The aim is to provide an insight into whether the theoretical nexuses discussed in this section hold at an industrial level and within the South African context.

4.2 Trends in labour productivity, employment and wages in the agro-processing subsector

This section presents an overview of trends in labour productivity, employment and wages in the agro-processing subsector. The aim is to examine the extent to which the agro-processing subsector has contributed towards the attainment of the macroeconomic and sectoral/industrial objectives in terms of labour productivity and employment. This also includes the extent to which the labour policies and minimum wage provisions have affected wages. The trend analysis focuses on the agro-processing subsector of the manufacturing sector for the following reasons. The agro-processing subsector has been earmarked in the policy plans as one of the sectors with the potential to achieve the objectives of growing the economy and creating jobs. Furthermore, the agro-processing industries have been identified as the beneficiary industries in the industry-specific support programmes, which were launched to capacitate the industries to contribute towards the macroeconomic and sectoral/industrial policy objectives. The next section describes the variables (i.e., labour productivity, employment and wages) and sources from which the data were extracted.

4.2.1 Description of variables and data sources

The trend analysis is limited to the period from 1993 to 2017 owing to data availability. This enabled calculation of the annual average growth rates from 1994 to 2017. The data consist of the labour productivity, employment and wages of 10 agro-processing industries, which form part of the agro-processing subsector. The 10 agro-processing industries are part of the manufacturing sector. In line with Lefophane [1], the United Nations’ International Standard Industrial Classification (ISIC), Revision 4, was used to disaggregate agro-processing industries from other manufacturing industries. Table 2 provides a description of the variables, their units of measurement and the data source.

VariableDescriptionUnit of measurementSource
Labour productivityGross output per hour workedIndexSouth African Standardised Industry Indicator Database [57]
EmploymentTotal number of employees in each industry, including formal, informal, casual and permanent employeesNumberSouth African Standardised Industry Indicator Database [57]
WagesThe total amount paid to employees in money or in kind, and includes salaries, bonuses and employers’ contributions to pension and provident fundsSouth African RandsSouth African Standardised Industry Indicator Database [57]

Table 2.

Description of variables and data sources.

Source: Author based on Quantec [57].

4.2.2 Results

Given the various units of measurement for the variables, the weighted annual average growth rates of labour productivity, employment and wages were calculated in line with previous studies [58, 59, 60, 61]. Table 3 presents the weighted annual average growth in labour productivity, employment and wages of the agro-processing subsector from 1994 to 2017.6

IndustryLabour productivity (%)Employment (%)Wages (%)
Food3.20−0.1010.20
Beverages0.10−0.8012.06
Tobacco0.20−0.6013.02
Textile2.80−2.707.85
Wearing apparel4.60−2.908.59
Leather4.40−1.708.76
Wood1.000.6010.16
Paper−0.101.806.74
Rubber1.40−1.909.41
Furniture2.90−2.208.55
Total agro-processing2.1−1.09.53

Table 3.

Weighted annual average growth rates for the industries (1994–2017).

Source: Author, based on Quantec [62].

In terms of labour productivity growth, the agro-processing subsector in its entirety performed well, as evidenced by the weighted annual average growth rate of 2.1%. In particular, all the agro-processing industries (except the paper industry) achieved positive annual average growth rates in labour productivity. These results are in line with the previous results for the manufacturing sector, which showed that there had been a growth in labour productivity in South Africa’s manufacturing sector for the period 1994 and 2014 [63].

However, some industries performed better than others did in terms of labour productivity growth. In particular, the wearing apparel industry achieved the highest labour productivity growth, while the paper industry achieved the negative labour productivity growth. In the case of employment growth, the subsector performed poorly, as evidenced by a negative weighted annual average growth rate of 1.0. Across the industries, 8 out of 10 agro-processing industries achieved negative annual average growth rates, while the remaining two achieved positive annual average growth rates (i.e., the wood and paper industries). Notably, the industries that were earmarked as beneficiaries of the CTCP experienced negative annual average growth rates (i.e., the textile, leather and wearing apparel industries). The observed negative growth implies that productivity in these industries was achieved by the production of more output, which reduced the demand for labour input, resulting in a decline in the growth rate of employment. This suggests that the CTCP has been ineffective in increasing employment in the sector.

Despite these results, the subsector fared very well in terms of remuneration of employees, as exhibited by a positive weighted annual average growth rate of 9.53%. Notably, all the agro-processing industries achieved a positive annual average growth in wages. It is noted that the subsector as a whole and the individual industries achieved higher growth in wages than labour productivity and employment growth. These findings are in line with the observation that South Africa’s labour market is characterised by rising costs of employees (wages) [13, 14, 15, 16]. However, there are variations in performance across industries. In particular, the tobacco industry achieved the highest growth in wages, relative to the paper industry, which achieved the lowest growth.

The overall results are used to support the query of whether the theoretical nexuses discussed in the subsequent section hold for the agro-processing subsector. In terms of the labour productivity-employment nexus, the subsector’s labour productivity growth increased, while the growth rate of employment declined. The implication is that, in the short run, higher labour productivity may result in a decrease in the growth rate of employment (temporarily), as industries would require fewer workers to produce the same output levels. Thus, the labour productivity-employment nexus does not hold for the agro-processing subsector. However, the wood industry experienced an increase in the growth rate of both labour productivity and employment. These findings are in line with an empirical study by Habanabakize et al. [54], which found a positive correlation between labour productivity and employment in South Africa.

In the case of the labour productivity-wages nexus, the subsector as a whole experienced an increase in both labour productivity and wages. In particular, the results suggest that workers’ wages increased as productivity increased, in line with the marginal productivity theory of wages. However, the growth in wages is higher than that in labour productivity. This observation is as expected given that the percentage increase in wages is equal to the percentage increase in marginal productivity and percentage increase in the prices of the product in the concerned sector.

In the context of the employment-wages nexus, the subsector’s growth rate of employment declined, while the growth rate of wages increased. Thus, the observed increase in the growth rate of wages and a decrease in the growth rate of employment can be explained by a leftward shift in the supply for labour curve due to an increase in the costs of labour. This signifies that the competitive wage rate did not determine the levels of employment in the agro-processing subsector, as suggested by the neoclassical theory of the labour market. Instead, higher employee costs (wages) hindered firms from increasing employment. This assertion is in line with the observation that the high costs of employees (wages) in South Africa [16] hinder the ability of the labour market to attract foreign investment needed to reduce unemployment [13, 14, 15]. However, across the industries, the employment-wages nexus holds for two agro-processing industries, namely the wood and paper industries. In particularly, the two industries experienced an increase in the growth rate of both employment and wages. Thus, the observed increase can be explained by a rightward shift in the demand for labour curve.

Advertisement

5. Summary, conclusion and policy recommendations

This chapter serves to examine the extent to which the policy responses undertaken by the South African government have achieved the objectives of growing the economy and creating employment. To achieve this objective, various policy plans at the macroeconomic and sectoral levels, as well as industry-specific programmes, were reviewed. A key point derived from the review is that the manufacturing sector as a whole and some manufacturing industries (such as agro-processing) were earmarked as being one of the sectors and industries with the potential to achieve the objectives of growing the economy and creating jobs. Despite these provisions, it was observed that South Africa’s manufacturing sector is faced with four challenges, which hinder its ability to drive economic growth and create jobs as envisioned. The four main challenges were identified as high input costs, labour market rigidities, the mismatch between education and skills and competition from cheaper imports.

To overcome these four challenges facing the manufacturing sector, it is recommended that the South African government should take a multi-pronged approach. This approach should include labour market regulation and reform, as well as investments in education, technology and skills development programmes. This would drive labour productivity, which is crucial for wage determination, and increase output and employment in the manufacturing sector. To deal with high import penetration, it is recommended that the government should implement a variety of policy strategies.

The first policy strategy encompasses the imposition of tariffs on imports to make imports more expensive and less competitive with domestically manufactured clothing, textiles and footwear items. The second strategy includes enforcing quality control measures to improve the quality of locally produced clothing, textiles and footwear items. The third strategy requires the government to provide financial and technical support to SMEs for them to overcome barriers to entry into the clothing, textile and footwear market, and compete with larger corporations. The final strategy requires investment in the skills development of workers to improve the productivity and competitiveness of the local clothing, textile and footwear industries.

The labour productivity-employment-wages nexus was explored to determine the extent to which labour productivity could determine wages, and affect employment. For simplicity, the labour productivity-employment-wages nexus was divided into three nexuses, which are the labour productivity-employment nexus, the labour productivity-wages nexus and the employment-wages nexus. The trends in labour productivity, employment and wages were explored to determine the extent to which the three nexuses hold for the agro-processing subsector of manufacturing. In terms of the labour productivity-employment nexus, it was found that, in the short run, higher labour productivity might result in a decrease in the growth rate of employment (temporarily), as industries would require fewer workers to produce the same output level.7

In the case of the labour productivity-wages nexus, the results showed that workers’ wages increased with an increase in labour productivity. However, the growth in wages was higher than the growth in labour productivity, suggesting that employees were receiving a wage rate higher than their marginal productivity. This is attributed to a highly unionised labour market and the ability of workers to negotiate with employers as a group and to leverage their collective action (i.e., threaten to strike).

For the employment-wages nexus, workers received wages above the market rate, which could have hindered the ability of firms to increase employment. However, in some industries, employees were paid wages less than the market rate, such that there was an increase in the demand for labour and a decline in the supply of labour. This leads to a situation where there is a strong demand for labour but nobody is willing to take up those jobs. Overall, it is important to note that, in reality, the nexus between labour productivity, employment and wages is influenced by various factors. This includes the government’s investment in programmes aimed at improving the skills of the labour force, as well as labour market regulation and reform. This will drive labour productivity, which is crucial for wage determination, and increase output and employment in the manufacturing sector.

References

  1. 1. Lefophane MH. The effects of information communication technology policy alternatives on South Africa’s agro-processing industries [thesis]. Pretoria: University of Pretoria; 2021
  2. 2. The Department of Trade, Industry and Competition. Sectoral Master Plans Bearing Fruits, Creating Jobs, Transforming the Economy – Deputy Minister Gina [Internet]. Pretoria, South Africa: The Department of Trade, Industry and Competition; 2022. Available from: http://www.thedtic.gov.za/sectoral-master-plans-bearing-fruits-creating-jobs-transforming-the-economy-deputy-minister-gina/ [Accessed: May 6, 2023]
  3. 3. National Treasury. Presidential Youth Employment Intervention (PYEI). Pretoria, South Africa: National Treasury; 2021. Available from: http://www.jobsfund.org.za/pyei.aspx [Accessed: May 6, 2023]
  4. 4. Department of Basic Education. Presidential Youth Employment Initiative. Pretoria, South Africa: Department of Basic Education; 2021. Available from: https://www.education.gov.za/PresidentialYouthEmploymentInitiative.aspx [Accessed: May 6, 2023]
  5. 5. The Presidency of the Republic of South Africa. State of the Nation Address 2023: The Presidential Employment Stimulus (PES). Pretoria, South Africa: The Presidency of the Republic of South Africa; 2023. Available from: https://www.stateofthenation.gov.za/priorities/growing-the-economy-and-jobs/presidential-employment-stimulus#:~:text=The%20Presidential%20Employment%20Stimulus%20(PES,a%20wider%20economic%20recovery%20progress [Accessed: May 6, 2023]
  6. 6. Parliamentary Monitoring Group. The Skills Development Act, 1998. Cape Town, South Africa: Parliamentary Monitoring Group; 2000. Available from: https://static.pmg.org.za/docs/2000/appendices/000229SDASummary.htm#:~:text=The%20Skills%20Development%20Act%20aims,of%20work%20and%20labour%20mobility [Accessed: May 6, 2023]
  7. 7. Organisation for Economic Cooperation and Development. Good Jobs for all in a Changing World of Work: The New OECD Jobs Strategy - How Does South Africa Compare? Paris, France: Organisation for Economic Cooperation and Development; 2018. Available from: https://www.oecd.org/southafrica/jobs-strategy-SOUTH_AFRICA-EN.pdf [Accessed: May 6, 2023]
  8. 8. Department of Employment and Labour. The National Minimum Wage: A Tool to Close the Wage Gap and to Overcome Poverty. Pretoria, South Africa: Department of Employment and Labour; 2023. Available from: https://www.labour.gov.za/DocumentCenter/Publications/Basic%20Conditions%20of%20Employment/National%20Minimum%20Wage%20-%20Wage%20increase%202023%20flyer.pdf [Accessed: May 6, 2023]
  9. 9. World Population Review. Unemployment by Country 2023. New York City, U.S: World Population Review; 2023. Available from: https://worldpopulationreview.com/country-rankings/unemployment-by-country [Accessed: May 6, 2023]
  10. 10. Statistics South Africa. Quarterly Labour Force Survey (QLFS) – Q3: 2021. Pretoria, South Africa: Statistics South Africa; 2021. Available from: https://www.statssa.gov.za/?p=14957#:~:text=The%20official%20unemployment%20rate%20was,2021%20to%2014%2C3%20million [Accessed: May 6, 2023]
  11. 11. World Bank Group. Poverty & Equity Brief Sub-Saharan Africa South Africa. Washington D.C, U.S: World Bank Group; 2020. Available from: https://databankfiles.worldbank.org/public/ddpext_download/poverty/33EF03BB-9722-4AE2-ABC7-AA2972D68AFE/Global_POVEQ_ZAF.pdf [Accessed: April 24, 2023]
  12. 12. African Development Bank Group. South Africa Economic Outlook: Recent Macroeconomic and Financial Developments. Abidjan, Côte d’Ivoire: African Development Bank Group; 2021. Available from: https://www.afdb.org/en/countries/southern-africa/south-africa/south-africa-economic-outlook#:~:text=Real%20GDP%20contracted%20by%208.2,32.4%25%2C%20recorded%20in%20investment [Accessed: April 24, 2023]
  13. 13. Agence France-Presse (AFP). World Bank Fingers SA Labour Costs. Washington D.C, U.S: Agence France-Presse (AFP); 2010. Available from: https://www.news24.com/fin24/world-bank-fingers-sa-labour-costs-20100729 [Accessed: April 24, 2023]
  14. 14. Smit S. Explainer: Why Wage Talks Are Inflation’s Next Battlefront. Johannesburg, South Africa; 2022. Available from: https://mg.co.za/business/2022-05-31-explainer-why-wage-talks-are-inflations-next-battlefront/ [Accessed: April 24, 2023]
  15. 15. de Wet P. It's official: SA's lowest paid must get above-inflation wage increases in the coming years. Cape Town, South Africa; 2023. Available from: https://www.news24.com/fin24/economy/its-official-sas-lowest-paid-must-get-above-inflation-wage-increases-in-the-coming-years-20230509 [Accessed: April 24, 2023]
  16. 16. Statistics South Africa. How Much Does SA Business Spend on its Employees? Pretoria, South Africa: Statistics South Africa; 2018. Available from: https://www.statssa.gov.za/?p=11661 [Accessed: April 24, 2023]
  17. 17. Small Enterprise Development Agency (SEDA). Research on the Performance of the Manufacturing Sector. Small Enterprise Development Agency (SEDA); 2012. Available from: http://www.seda.org.za/publications/publications/research%20on%20the%20performance%20of%20the%20manufacturing%20sector.docx [Accessed: May 6, 2023]
  18. 18. Parliament of the Republic of South Africa. Reconstruction and Development Programme (RDP). White Paper on Reconstruction and Development Programme. Parliament of the Republic of South Africa; 1994. Available from: https://www.gov.za/sites/default/files/governmentgazetteid16085.pdf [Accessed: May 6, 2023]
  19. 19. National Treasury. Growth, Employment and Redistribution: A Macroeconomic Strategy. 1996. Available from: https://www.treasury.gov.za/publications/other/gear/chapters.pdf [Accessed: May 6, 2023]
  20. 20. South African Government. The New Growth Path: The Framework. Pretoria, South Africa: South African Government; 2010. Available from: https://www.gov.za/about-government/government-programmes/new-growth-path [Accessed: May 6, 2023]
  21. 21. Nkwinti GE. The National Development Plan and the New Growth Path: Transforming the economy. 2019. Available from: http://kzntopbusiness.co.za/site/search/downloadencode/nLaqaaKelpO8mnjc [Accessed: May 6, 2023]
  22. 22. Hendriks S. South Africa’s National Development Plan and new growth path: Reflections on policy contradictions and implications for food security. Agrekon. 2013;52(3):1-7
  23. 23. South African Government. Executive Summary-National Development Plan 2030 - Our Future - Make it Work. Pretoria, South Africa: South African Government; 2012. Available from: https://www.gov.za/sites/default/files/Executive%20Summary-NDP%202030%20-%20Our%20future%20-%20make%20it%20work.pdf [Accessed: May 6, 2023]
  24. 24. South African Government. National Development Plan 2030: Our Future - Make it Work. Pretoria, South Africa: South African Government; 2012. Available from: https://www.gov.za/documents/national-development-plan-2030-our-future-make-it-work [Accessed: May 6, 2023]
  25. 25. The Department of Trade Industry and Competition (the dtic). Implementation of Government’s National Industrial Policy Framework: Industrial Policy Action Plan. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2007. Available from: http://www.thedtic.gov.za/wp-content/uploads/IPAP_r1.pdf [Accessed: May 6, 2023]
  26. 26. Tsedu M. Reflections on the National Industrial Policy Framework and industrial policy implementation in South Africa post-2007. 2015. Available from: https://www.tips.org.za/policy-briefs/item/3100-reflections-on-the-national-industrial-policy-framework-and-industrial-policy-implementation-in-south-africa-post-2007 [Accessed: May 6, 2023]
  27. 27. South African Government. Nine-Point Plan. Pretoria, South Africa: South African Government; 2019. Available from: https://www.gov.za/issues/nine-point-plan [Accessed: May 6, 2023]
  28. 28. SBP Alert. Examining the Challenges Facing Small Businesses in South Africa. Pretoria, South Africa: SBP Alert; 2014. Available from: http://www.sbp.org.za/uploads/media/SBP_Alert_-_Examining_the_challenges_facing_small_businesses_in_SA_01.pdf [Accessed: May 6, 2023]
  29. 29. Department of Agriculture Forestry and Fisheries (DAFF). Strategy for the Development of Small and Medium Agro-Processing Enterprises. Pretoria, South Africa: Department of Agriculture Forestry and Fisheries (DAFF); 2015. Available from: http://www.daff.gov.za/index.php/core-business/economic-development-trade-marketing/agro-processing-marketing-rural-industrial-development/agro-processing-support [Accessed: May 6, 2023]
  30. 30. The Department of Trade Industry and Competition (the dtic). SA: Ebrahim Patel: Address by Minister of Trade and Industry and Economic Development, Budget Vote Speech, National Assembly (11/07/2019). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.itac.org.za/upload/Budget%20Vote%20Speech%20Patel.pdf [Accessed: May 6, 2023]
  31. 31. Patel E. South African R-CTFL Value Chain Master Plan to 2030. 2020. Available from: http://www.thedtic.gov.za/wp-content/uploads/Masterplan-CTFL_Value_Chain.pdf [Accessed: May 6, 2023]
  32. 32. Parliamentary Monitoring Group. Agriculture and Agro-Processing Master Plan Social Impact. Cape Town, South Africa: Parliamentary Monitoring Group; 2022. Available from: https://static.pmg.org.za/220607Agriculture_and_Agro-processing_Master_Plan_Signed.pdf [Accessed: May 6, 2023]
  33. 33. The Department of Trade Industry and Competition (the dtic). Master Plans. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2023. Available from: http://www.thedtic.gov.za/media-room/master-plans/ [Accessed: May 6, 2023]
  34. 34. The Department of Trade Industry and Competition (the dtic). Workplace Challenge (WPC). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: https://productivitysa.co.za/workplace-challenge-wpc [Accessed: May 6, 2023]
  35. 35. The Department of Trade Industry and Competition (the dtic). SEDA Technology Programme: Technology Transfer and Innovation – Information Sheet. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.seda.org.za/Programmes/HighImpact/TechnologyTransfer/Shared%20Documents/Seda%20Stp%20Technology%20Transfer%20-%20Information%20Sheet%202018.pdf [Accessed: May 6, 2023]
  36. 36. The Department of Trade Industry and Competition (the dtic). The Sector-Specific Assistance Scheme. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/wp-content/uploads/SSAS_Guidelines.pdf [Accessed: May 6, 2023]
  37. 37. The Department of Trade Industry and Competition (the dtic). Clothing and Textiles Competitiveness Programme. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/clothing-and-textiles-competitiveness-programme/ [Accessed: May 6, 2023]
  38. 38. The Department of Trade Industry and Competition (the dtic). Clothing, Textiles, Footwear and Leather Growth Programme (CTFLGP). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2023. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/clothing-textiles-footwear-and-leather-growth-programme-ctflgp/ [Accessed: May 6, 2023]
  39. 39. The Department of Trade Industry and Competition (the dtic). The Manufacturing Competitiveness Enhancement Programme (MCEP). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/mcep/ [Accessed: May 6, 2023]
  40. 40. Manufacturing Competitiveness Enhancement Programme (MCEP). 2023. Available from: https://mcep.co.za/about/ [Accessed: May 6, 2023]
  41. 41. The Department of Trade Industry and Competition (the dtic). Aquaculture Development and Enhancement Programme (ADEP). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/aquaculture-development-and-enhancement-programme/ [Accessed: May 6, 2023]
  42. 42. The Department of Trade Industry and Competition (the dtic). Critical Infrastructure Programme. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/critical-infrastructure-programme/ [Accessed: May 6, 2023]
  43. 43. The Department of Trade Industry and Competition (the dtic). Support Programme for Industrial Innovation (SPII). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/support-programme-for-industrial-innovation-spii/ [Accessed: May 6, 2023]
  44. 44. The Department of Trade Industry and Competition (the dtic). Technology and Human Resource for Industry Programme (THRIP). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/technology-and-human-resource-for-industry-programme/ [Accessed: May 6, 2023]
  45. 45. The Department of Trade Industry and Competition (the dtic). The Agro-Processing Support Scheme (APSS). Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/agro-processing-support-scheme/ [Accessed: May 6, 2023]
  46. 46. Black A, Craig S, Dunne P. Capital intensity, employment and sustainability in the South African manufacturing sector. In: Trade & Industrial Policy Strategies Conference. Pretoria, South Africa: Trade & Industrial Policy Strategies (TIPS); 2017
  47. 47. Invest Cape Town. Clothing & Textiles Industry: Why Is it Currently Cheaper to Import Clothing? Cape Town, South Africa: Invest Cape Town; 2020. Available from: https://www.investcapetown.com/opportunities/clothing-textiles/question-and-answer/ [Accessed: May 6, 2023]
  48. 48. Venter I, Botes E. Note on unit labour cost measurement in South Africa. South African Reserve Bank Quarterly Bulletin. 2016;2016:84-88
  49. 49. The Department of Trade Industry and Competition (the dtic). Facts and Figure on Skills in Manufacturing. Pretoria, South Africa: The Department of Trade Industry and Competition (the dtic); 2019. Available from: http://www.thedtic.gov.za/wp-content/uploads/publication-Facts-and-Figures.pdf [Accessed: May 6, 2023]
  50. 50. Deloitte. The Skills Gap in Manufacturing. Johannesburg, South Africa: Deloitte; 2015. Available from: https://www2.deloitte.com/za/en/pages/manufacturing/articles/the-skills-gap-in-manufacturing.html [Accessed: May 6, 2023]
  51. 51. Staff Writer. This Is One of the Hottest Job Titles to Have in South Africa Right Now. Centurion, South Africa: Staff Writer; 2018. Available from: https://businesstech.co.za/news/technology/257209/this-is-one-of-the-hottest-job-titles-to-have-in-south-africa-right-now/ [Accessed: May 6, 2023]
  52. 52. Staff Writer. 57 of the Highest Paying Jobs in South Africa – With Earnings up to R5 Million a Year. Centurion, South Africa: Staff Writer; 2022. Available from: https://businesstech.co.za/news/wealth/636423/57-of-the-highest-paying-jobs-in-south-africa-with-earnings-up-to-r5-million-a-year/ [Accessed: May 6, 2023]
  53. 53. Edwards L, Jenkins R. The impact of Chinese import penetration on the South African manufacturing sector. The Journal of Development Studies. 2015;51(4):447-463
  54. 54. Habanabakize T, Meyer DF, Oláh J. The impact of productivity, investment and real wages on employment absorption rate in South Africa. Social Sciences. 2019;8(12):330
  55. 55. Meager N, Speckesser S. Wages, productivity and employment: A review of theory and international data. European Employment Observatory. 2011:1-73
  56. 56. Saros DE. Labor, Industry, and Regulation during the Progressive Era. Oxfordshire, England: Routledge; 2011
  57. 57. Quantec. South African Standardised Industry Indicator Database, Sources and Description. Pretoria, South Africa: Quantec; 2018. Available from: https://www.easydata.co.za/documents/IND/folder/documentation/ [Accessed: May 4, 2018]
  58. 58. Engelbrecht HJ, Xayavong V. ICT intensity and New Zealand’s productivity malaise: Is the glass half empty or half full? Information Economics and Policy. 2006;18(1):24-42
  59. 59. Lovrić L. Information-communication technology impact on labor productivity growth of EU developing countries. Zbornik radova Ekonomskog fakulteta u Rijeci, časopis za ekonomsku teoriju i praksu-Proceedings of Rijeka Faculty of Economics, Journal of Economics and Business. 2012;30(2):223-245
  60. 60. Vu KM. Information and communication technology (ICT) and Singapore’s economic growth. Information Economics and Policy. 2013;25(4):284-300
  61. 61. Lefophane MH, Kalaba M. Estimating effects of ICT intensity on productivity, employment and output in South Africa: An industry-level analysis. Information Technology for Development. 2022;28(2):346-371
  62. 62. Quantec. South African Standardised Industry Indicator Database. Pretoria, South Africa: Quantec; 2018. Available from: www.quantec.co.za [Accessed: May 4, 2018]
  63. 63. Rankin N. Labour Productivity, Factor Intensity and Labour Costs in South African Manufacturing. Cape Town, South Africa: Research Project on Employment, Income Distribution and Inclusive Growth Working Paper; 2016

Notes

  • The creative industries encompassed film, television (TV), content and music.
  • The sectoral/industrial policy plans include those developed from 1994 to 2019.
  • The comprehensive plan is available at https://www.gov.za/issues/nine-point-plan.
  • Marginal productivity is defined as extra output that is generated by employers for hiring an extra unit of labour.
  • However, it should be noted that this is true only when we are focusing on the demand for labour.
  • The results are based on data from Quantec spanning the period from 1994 to 2017 and are useful for the broad trends that they reveal rather than their absolute magnitudes.
  • However, the wood and paper industries experienced an increase in both labour productivity and employment, in line with Habanabakize et al. [54].

Written By

Mapula Hildah Lefophane

Submitted: 17 May 2023 Reviewed: 10 July 2023 Published: 04 June 2024

© The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution 3.0 License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.