Inequality and Economic Inclusion

The Spatial Development Initiative (SDI) programme has been in existence since 1995, with the primary aims of generating investment projects in key economic sectors in specific areas of the country thereby increasing employment in these sectors and areas. The key objective of the paper is to provide an assessment of the capacity of the SDIs to restructure the economy and enhance employment creation in South Africa. This will include the extent to which the SDI strategy conforms to economic theory on industrial location and economic development, as well as the extent to which the SDIs have been (and can be) successful in employment creation. The paper includes an overview of the SDI programme, current trends in the South African economy and a review of the economic theory of economic development in a spatial context. Finally, the SDIs are assessed in terms of their success in creating employment opportunities.

The conclusions of the paper are as follows:

  • The capital required by the potential projects of the SDIs are substantial when measured against their potential job creation (e.g. R381 000 per job on average). The issue in this regard is whether key projects should be prioritized in terms of their ability to create jobs in the near future;
  • The bulk of the envisaged SDI projects are focused on the traditional sectors of the South African Economy, i.e. Agriculture, Mining and Manufacturing. Globalization and the "New Economy" might dictate that this emphasis be revised to include sectors which are poised for growth, e.g Tourism, Financial & Business Services and "hi-tech" manufacturing. The case for this would seem to be even stronger if the hierarchy of development is considered (see Meier, 1984), whereby economies become more dependent upon tertiary sectors and less dependent upon primary and secondary sectors for economic growth;
  • Certainly in terms of the location of the SDI areas, it seems that the gradual widening of the SDIs to include more areas of the country has resulted in an alignment of SDIs with those areas which have experienced employment growth between 1980 and 1996. This should ensure that the SDIs are located in areas of economic growth and the core of the economy as opposed to the periphery.
  • The extent to which government can directly influence the decision to invest could be limited because the final decision is a "firm-level" one. However, government could very well play a useful role indirectly in terms of influencing the structure of the firm's decision through infrastructure provision, reduction of transportation costs and enhancement of education levels. For SDIs to be successful, the importance of the legal and institutional framework supporting investment will have be favourable. An example would be the objective of creating 35,000 jobs in the agricultural and related sectors in the context of a land tax and the legal framework pertinent to employment.

  • Year 2000
  • Publication Author(s) Cliff Naude and S.K. McCoskey

The main objective of this paper is to analyze the agricultural sector and identify the major factors impacting it's performance. This paper contains a situational analysis of the agricultural sector, a review of factors that contribute to the growth of the agricultural sector and the relative significance of factors impacting on output, employment, wages and investments of the sector. The situational analysis involves a discussion of general trends, regional differences and possible commodity specific differences with comparison to other sectors of the economy. A qualitative analysis of the factors affecting the sector is also provided. The paper looks at both the supply and demand side factors impacting on the contributions of the agricultural sector to the economy with particular emphasis on employment and wages. Specification and econometric estimation of output, employment, investment, import and export equations are undertaken for the agricultural sector.

  • Year 2000
  • Publication Author(s) Samuel Bonti-Ankomah

This paper examines how distributive outcomes and unresolved distributive conflicts affect the rate of productive investment and what the implications are for the level of joblessness people face in South Africa. The link between investment and employment is developed within a context of "Keynesian" and "classical" unemployment. Using time-series and cross-sectional data, estimates of the relative importance of different determinants of the rate of investment in South Africa show strong robust effects from profit rates, economic growth, and the degree of social and political conflict. The results support the argument that both distributive outcomes and distributive conflicts are important influences on the rate investment. A short discussion of policy implications concludes the paper.

  • Year 2000
  • Publication Author(s) James Heintz

Agricultural employment in South Africa's commercial farming sector is declining at an alarming rate. During the 11 year period from 1988 to 1998, for example, the commercial farm sector shed a staggering 140 000 regular jobs, a decline of roughly 20%. Moreover, there is a trend away from employment of regular, permanent workers, and a simultaneous - though not commensurate - increase in the use of casual workers, meaning jobs of less security and consistency. If the decline in employment continues in this fashion, then the already grave problem of rural unemployment will become graver still. The purpose of this paper is to investigate the causes of this trend. On the face of it, South Africa is merely following the same trajectory mapped out by other medium and high-income countries practising predominantly land-extensive agriculture, whereby agricultural mechanisation and modernisation displace labour in response to relative changes in factor costs. However, processes in South Africa are arguably only superficially related to those in these other countries. The paper provides preliminary evidence from a survey of farm workers, as well as from a survey of institutions serving commercial farmers, that indeed the underlying logic that is driving labour shedding and casualisation in South Africa is different. The findings suggest that farmers' collective decision to shed permanent workers is in large measure being driven by 'non-economic' considerations, including above all: i) fear of losing control of one's land to resident farm workers due to new (and possible future) legislation; and ii) a sense that, because of democracy and a commitment by the state to safeguard human rights, farm workers are more difficult to manage than they were prior to 1994. The paper then reflects on the distinctive policy implications that flow from this interpretation.

  • Year 2000
  • Publication Author(s) Tracey Simbi; Michael Aliber

The paper utilises data from a survey of plastics firms and six firm case studies to examine the relationships between production and technology changes, and employment. The analysis examines associations between different factors influencing firms in making such changes and firm performance. These factors include trade liberalisation and the export performance of firms. The paper further explores the institutional relationships involved in technology changes, the sources of technologies which are introduced, and the nature of competition in which firms are engaged. In particular, the analysis distinguishes between defensive changes associated with cost minimisation and constructive changes associated with growth in employment and turnover. We find that it is important to consider the development of firm capabilities, and that these are based largely on the domestic market.

  • Year 2000
  • Publication Author(s) Chris Malikane; Simon Roberts

A key component of labour market policy debate in South Africa, has been around the role of wages in either hindering employment creation, or conversely as a tool for reducing poverty and acting as a catalyst for aggregate demand growth. This debate has come to the fore more recently with the Department of Labour’s recent call for public submissions and public comment on the issue of minimum wages and conditions of employment for domestic and farm workers. An analysis of the first of these two issues, namely wages, will place into sharp focus the stringent trade-offs faced by the Department of Labour in this part of the workforce.

This paper therefore attempts a very basic simulation exercise to test some of these hypotheses concerning the functioning and response behaviour of the labour market. In trying to focus on the poor in the labour market, the study chooses three unskilled labour categories, with the emphasis being on the two most indigent groups amongst the employed, namely domestic workers and farm workers. It is amongst these two groups, that the trade-offs between poverty reduction and employment losses are most starkly evident.

  • Year 2000
  • Publication Author(s) Haroon Bhorat

There is a line in the works of an ancient poet that reads ‘The fox knows many little things, but the hedgehog knows one big thing’2. Scholars have differed on the exact meaning of these dark words. Taken figuratively, these words provide a comparison of the deepest differences that divide economists on the question of infrastructure delivery. On the one hand, many argue for a singular vision of infrastructure delivery, as meeting basic needs, within fiscal constraints. Moreover, that accelerating delivery will require the introduction of private sector management and finances. On the other hand, there is a growing body of literature that is focussed on understanding infrastructure delivery as part of programme for eradicating poverty, reducing income inequality and employment creation. This school of thought prioritises the understanding of social, economic and human development linkages in infrastructure delivery. This paper argues that the delivery of water and sanitation, housing, energy and roads must be assessed through the capabilities they provide, rather than the narrow focus on meeting delivery targets.

Today, development economics has embraced a wider set of considerations, than simply meeting basic needs. Recent studies have suggested that poverty is best understood as the being excluded through “lacking resources” (Townsend P:1985), or the absence of certain “capabilities to function” (Sen A. : 1993). The importance of these emerging approaches – which have many variants- are that they focus evaluation of government programmes away from simple figures towards understanding the wider impacts on society. Moreover, it poses the questions of directly and indirectly creating employment squarely within the ambit of public action.

Drawing on this approach to assessing public action, this paper explores two themes. First, an assessment of the economic impact of infrastructure delivery is provided. This analysis focuses on income security and employment opportunities. In arguing for a wider set of development objectives to be met through infrastructure delivery, the question of whether the public sector has the capabilities to meet a wider set of outcomes is raised. The question of public sector transformation (and in particular the ownership of state owned assets) is then succinctly addresses as the second theme.

  • Year 2000
  • Publication Author(s) Ebrahim-Khalil Hassen

  • Year 2000
  • Publication Author(s) Geeta Kingdon; John Knight

  • Year 2000
  • Publication Author(s) Gary Fields

The aim of this paper is to explore some of the major differences in the ways in which governments influence the process of skill formation. In particular, we focus on the ways in which governments use the market as a means of delivering the skills required for economic growth. We argue that the exclusive reliance on the market to co-ordinate the supply and demand for skills works well for societies characterised by the Anglo-Saxon approach to skill formation. However, the market takes time to make adjustments. Therefore this approach may be more suited to societies where the process of industrialisation has been operating over a long period of time. The Tiger economies industrialised in a much shorter period of time. They therefore had to find ways of accelerating the process of skill formation and did this by using the agencies of the state to speed up the operation of the market. In conclusion, we argue that this experience of the Tiger provides a new set of options from which developing societies can draw lessons.

  • Year 2000
  • Organisation TIPS
  • Publication Author(s) David Ashton; Johnny Sung

This paper describes formal employment trends in the South African economy since 1970, through using both survey and time-series data. In addition, the study tries to understand the forces that have shaped these employment trends. The descriptive statistics reveal that the primary sectors have shed close to 1.5 million jobs in the period 1970-95. The marginal net employment growth that occurred was to be found primarily in the service sectors. Noticeably, net employment creation in manufacturing was 400 000 jobs over this period. These sectoral trends are matched by occupational trends, which show a significant rise in the demand for highly skilled workers at the expense of unskilled workers. The racial dimension to this is that non- African workers have gained from these labour demand trends, while African workers have lost out significantly.

Utilising an established methodology, the second component of the paper is to try and assess what factors have caused these employment trends which have disproportionately favoured skilled workers. The results of the analysis show that the key cause of the shift toward high-end workers has by and large been technological change within the individual sectors. The rising capital intensity in sectors, coupled with greater computerisation, has prompted the need for more high-end workers. Interestingly though, the results suggest that when examining lower skilled workers, the importance of technological factors remains, but diminishes. Instead, for those at the bottom end, the altering shares in national output of different sectors had a more significant role in understanding relative employment shifts.

The third and final segment of the paper attempts to estimate the impact of trade flows on labour demand, using both survey and time-series data. The results illustrate that the correlation between international trade and employment has been positive. The employment of all workers, by occupation, race and education level, grew as a result of the flows of exports and imports in the economy between 1970 and 1995. However, these gains were not skills, race and education-neutral. Specifically, employment expansion for skilled individuals, or those who had high educational qualifications or workers who were non-African, was appreciably greater than for individuals who did not fit into either of these cohorts. In short, workers at the bottom gained from international trade but gained significantly less than their counterparts at the top end. The time series evidence for manufacturing yields slightly different outcomes. The results here suggest that in the period 1970-1988, unskilled workers gained more than skilled employees did from international trade. However in the subsequent period, and particularly in the 1993-97 period, the reverse effect occurred. In these later years then, there were high job losses for those in unskilled categories, while skilled workers gained significantly.

  • Year 1999
  • Organisation DPRU
  • Publication Author(s) Haroon Bhorat
  • Countries and Regions South Africa
Published in SADC Trade Development
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