This report highlights the myriad interventions available to township firms to develop a more equitable industrial landscape that supports firm growth and employment growth. Many of these response measures aim to address the constraints facing small businesses and industrial development in townships. Gaps however remain. Economic geography is a key component of industrial policy, and requires appropriate policies that supports development in a decentralised urban landscape in order to bring about inclusive and sustainable industrialisation. Based on the gaps identified in this research, the policy recommendations to strengthen small manufacturing businesses in townships include:
Working Paper prepared by TIPS for the Department of Trade, Industry and Competition
Through the analysis of trends in South Africa's higher education enrollment of Southern African Development Community (SADC) citizens over the years, the study investigates the extent to which the country has strategically marketed its educational services and positioned itself as the educational hub of Southern Africa. The analysis reveals that South African universities' export of higher education services has been modeled in line with three of the four modes of supply identified in World Trade Organization's (WTO) General Agreement on Trade in Services (GATS). The three modes that the country has utilized are: (i) cross-border supply, (ii) consumption abroad, and (iii) commercial presence, and as a result of that, it has become the educational hub of southern Africa.
The study found out that South Africa can act as the educational hub of Southern Africa. It has been found out that it is competent in most education attraction factors. It has the highest number of public universities in Southern Africa. South Africa universities dominated the top ten highly rated Universities in Africa. In terms of factors that lead to internalisation of higher education South Africa Universities offers international recognized academic qualifications. South Africa in general is highly rated in terms of local availability of research and training institutions, quality of scientific research institutions quality of overall infrastructure and institutions. The study further provides some policy suggestions as to how best South Africa and SADC countries can improve their respective higher education laws, regulations and strategies in order to attract more foreign students into their respective universities. Some of the possible regulations to enhance enrolment of regional citizens in the universities of member states includes: (i) allowing students on study permit to also work in the country of study whilst studying without having to get a separate work permit, (ii) harmonizing recognition of educational qualifications across the region thus making it easier for potential students from one regional country to apply and be accepted at a university in another country, and (iii) introduction (or increasing) of flexibility in studies for instance, through block release where students come for a limited period for face-to-face tuition whilst distance and online learning constitute a larger proportion of the qualification tuition.
In discussing the relationship between governance and inclusivity this paper’s central argument is that unless there is an ability to build a responsive government at all spheres than there is no connection between the two. The ability of the state to respond to the citizenry requires that it can match the supply of goods and services to their political, social, and economic demands. The demand supply paradigm is interpreted in its broadest sense in that markets and its accompanying transactions are always present, the debate is how they are organised. The nature and aptness of the supply has to be based on a more nuanced understanding of demand. This understanding has to take into account the various markets that operate, particularly within the urban context and more often than not are spatially defined. Although demand and supply mechanisms range over a continuum from the formal to the informal, the need to put in place rules and (urban) management arrangements that have a sufficient consensus both within and outside of government is essential and must be based on public, private and civil society partnerships. This means while it is essential to have responsive mechanisms to ensure governance, i.e. the maximum participation possible, it is also imperative that there is governability which means the ability to ensure that rules that are agreed to are implemented. It must also be pointed out that the state has limits in its ability to respond, manage, fund, or control. It does have the responsibility to manage the myriad risks associated co-ordination, capacity, and corruption. Therefore the ability to make development work requires the development of social cohesion through the support of the organisations of civil society, not only as voices of advocacy, but partners in development and governance. This partnership, however, must have a clear delineation of roles and responsibilities.
In making this case this polemic deals with following issue:
This paper highlights ten key features of the Developmental State (DS) growth model by contrasting trends in economic indicators and institutions between China (and East Asia more generally) and South Africa.
The paper argues for a broad based access to property, broader than access to title allows, with the potential for wider, quicker and more sustained reach. It motivates for a place for tenure security in the second economy strategy as a means for securing access to property, a pre-condition for actualizing the potential that property has to increase access to the economy by the poor. An over-emphasis on access to title has neglected other property based economic opportunities. The paper identifies the ways in which property may increase access to economic opportunities, shifting the emphasis from the dominant focus on the secondary market and capital gains to a more balanced and relevant consideration of opportunity in relation to the concentration of the country’s households on an income poverty continuum. These options are less promising than the beguiling prospect of bringing dead capital to life, or making capitalism work for the poor (de Soto, 2000). But they are more realistic and offer pragmatic and pro-poor avenues of support.
The argument is underpinned by a more sophisticated understanding of the nature of “the urban poor” (or alternatively a more pro-poor approach) than currently prevails in the policy discussions. The paper re-focuses attention on land based livelihood opportunities because of their relevance to the majority of the urban poor. It is a sobering, but realistic, perspective on the accumulation potential of property, and the deep rooted causes of poverty, rather than its symptoms (of which lack of title is an example). This approach is much more appropriate to a second economy strategy which seeks realistic opportunities in response to deep seated problems, rather than grandiose and unlikely achievements. The paper’s understanding of exclusion leads to intervention areas that include action in the “first economy”, rather than merely the imposition of mechanisms that are working for the wealthy, onto the poor. This approach opens the possibility of dealing with causes, rather than symptoms, and to alter the terms of incorporation into the economy in ways that benefit the poor more.
The task is to reflect on the building of the second economy in small and medium sized towns. This involves a review of secondary sources, as well as an input on quantitative measures to support the main arguments.
The paper should draw on:
i) Comparative policies for small and medium-sized towns elsewhere in the world
ii) South African studies of small towns
iii) South African sectoral policies (such as urban and rural development, land reform and business support) which can be promoted and expanded to small and medium-sized towns
iv) Other useful policies drawn from larger cities, which can be adjusted to smaller towns.
South Africa is continuing to urbanise, perhaps not as rapidly as some developing countries but certainly at a rate which has generated a considerable degree of policy anguish over its accompanying rising levels of urban poverty. The Presidency of the Republic of South Africa expressed concern that there is an apparent and emerging disconnect between the urban poor and other urban residents participating in networks of economic activity within these growing urban spaces. Statements from government sources describe circumstances in which many urban residents remain substantially marginalised from the engines of growth as are outlined in the National Spatial Development Framework (Presidency, 2007), and, as such, the intended poverty-reduction benefits have been minimal. Those who experience this marginalisation are said to be part of the “second economy”. While this paper will not engage directly with the “second economy” concept, it will seek to explore the scope of urban development programmes’ – primarily those originating within cities but including those originating in other spheres of government – contributions to urban poverty reduction in a meaningful manner. Although urban economic initiatives are the paper’s focus, it is the case that all urban programmes have an economic impact of some sort; that means that the discussion which follows will stray from the narrow confines of what are considered generally to be urban economic development programmes.
Since the start of the local government transition in the early 1990s, South African cities have been urged to find ways to respond to their economic circumstances. At that time, those circumstances were characterised generally by low levels of growth, high unemployment and deepening poverty (UNDP, 2005; Adelzadeh, 2007). For some years now, governing structures of major urban centres have committed to economic development interventions within either their Integrated Development Plans (IDPs) or their standalone economic development strategies (Nel and Binns, 2003). At a national level, policy signals, such as those related to the National Spatial Development Plan (NSDP), have also acknowledged increasingly the centrality of a number of urban centres to the country’s economic prospects, and have suggested an appropriate level of focus on these centres from national and provincial governmental departments.
To a large extent, these processes have centred on the local state’s role in mobilising urban actors to collaborate in interventions supporting economic growth (Nel and Rogerson, 2005). Two objectives motivated that. In the first instance, there is a widespread belief that this growth has the potential to generate employment and incomes which will benefit increasingly a growing number of households in terms of direct opportunity. Such thinking is partly derived from policy signals from the national government via its frameworks such as the Growth, Employment and Redistribution Strategy or GEAR (Government of South Africa, 1996). In the second instance, a case was made that a growing local economy will support a more robust revenue flow into local government’s coffers and, therefore, would secure resources for upgraded urban living environments. Many of those endeavours were accompanied by processes with varying levels of redistributive intent, such as those encompassing small business development and broad based black economic empowerment (BBBEE). A variety of assessments of such endeavours have suggested, despite often laudable goals, that efforts were often been erratic, fragmented and lacking in sustainability (Nel and Rogerson, 2005; Rogerson, 2006). Furthermore, many urban residents living in the former townships or informal settlements have not witnessed the gains accruing from such processes; the rising levels of urban inequality suggest that the so-called “pro-poor” orientation of such agendas has been lacking and underemphasised (UNDP, 2005).
National endeavours, as well as particular provincial ones, to boost local economic circumstances have, as of yet, not demonstrated a significant degree of success in supporting directly and at scale the urban poor’s livelihood prospects. Initiatives such as Spatial Development Initiatives and Blue IQ, among others, have lacked an informed urban perspective and while, in some cases, they have responded to critical investment imperatives, they have also left the bulk of the urban poor little better off in immediate terms than might have been suggested in some of their motivating documentation.
In response to the persistence of high levels of urban poverty and the apparent shortcomings in the policy and delivery frameworks guiding different spheres of the state, this paper argues that the urban agenda in South Africa needs to give particular attention to:
This paper’s discussion opens with some key conceptual issues and follows that with a short discussion of the experience of cities in other regions of the world. After that, the particular experiences of South African major cities are highlighted, both in relation to their own commitments and how they might have been impacted by initiatives of other spheres of government. In the conclusion, some possible fields for policy attention in South Africa are identified.
This report provides an analytical reflection on the provision of infrastructure services in urban areas, with the aim of enhancing the access of the poor in urban areas to these services. It commences by considering what is meant by “access” to services, pointing out that much more is involved than simply providing services in physical proximity to the intended users of those services.
The report summarises principles that must underlie the provision of infrastructure services in urban areas for all in society and in the economy, especially the urban poor. Infrastructure is only a means to an end. Specific characteristics of the community to be served are all-important in making decisions on infrastructure. Also, selection of infrastructure (specifically levels of service) and its planning and design is wittingly or (often) unwittingly made in the context of a set of planning, design, construction, operation, maintenance and upgrading assumptions. The validity of those assumptions needs to be investigated - and, if it is found that they are not valid, then those selection decisions need to be reviewed.
Understanding of this is essential in:
• Addressing the end (enhancing the access of the poor to services in urban areas) by the most appropriate means (which may not be an engineering service, but could be by education, or an institutional means);
• Integrating the service with other means to the same end; and
• Selecting levels of service and standards.
The bulk of this report is devoted to a discussion of the three ways that “the poor” in urban areas and “urban services” interface. These three ways are as follows:
The poor get services. Their quality of life is thereby raised. In addition, the availability of these services opens up possibilities for earning income.
The poor getting services directly raises their quality of life. But the services could also (dependent on the peoples’ initiative and other factors as well) enable them to generate income in the short term (in the sense that they can do work, and get paid for it, because they now have water or electricity) and in the future (because they now have electricity to study and so on, and can improve their ability to get jobs, or to get better jobs). Issues of the quality and reliability of services, and ways in which the poor can or cannot cope if services are of poor quality and/or are unreliable, are best discussed under this heading.
The poor get income. This better enables them to get services.
The poor can obtain more services if their income rises or if the cost of services falls. Incomes rising relative to the cost of services gives households greater ability to purchase what they need -- which could include more or better quality services.
Issues of the cost of services are discussed under this heading.
The poor get income from playing a part in the service provision chain.
The poor earn income through building, operating or maintaining the infrastructure, or through selling the service.
Each of these three types of interface needs its own approach, drivers, incentives, 6 facilitators, etc. Nonetheless, they cross-cut: each in some or all other ways affects the other. For example a particular change in technology might be able to both improve reliability (and therefore improve income generation potential) and reduce cost.
The report concludes with a comment about quick wins (in individual situations there is much scope for these, but there are no broad-based (i.e. with national impact) quick wins to be had), and recommendations.
This report is based on work undertaken towards developing the urban component of a second economy strategy, as part of the Second Economy Project, an initiative of the Presidency. Within this project Urban LandMark (ULM) was appointed by Trade and Industrial Policy Strategies (TIPS) to investigate the urban development component of a second economy strategy. The invitation was “To identify the priority interventions and processes required to build cities that are inclusive and efficient for poor people, as a contribution to the development of a wider strategy for ‘the second economy’”.
The task has focused on public investment in urban infrastructure and on the capacity of such investment to impact positively on the socio-economic integration of poor and marginalised urbanites.
This paper unpacks from a spatial perspective, the duality of urban contexts in South Africa that is of unprecedented opulence on the one hand and remarkable deprivation on the other, as stated by Sen (1999: xi). Although focused on the second economy as required by the terms of reference and the targeted sector of this paper, the paper argues for a position where the binary of first and second economy, formal and informal, planned and unplanned and so on, in the minds of policy makers, technocrats and professionals in the built environment begins to collapse into a unified conceptual spatial imaginary of the city, the urban, the container that we all value as the space to respond to the needs and desires of urban society, both us and them, poor and non-poor.
It considers the contents of government policies and programmes in terms of a number of urban problems that continue to exist despite well-intentioned interventions, using a limited sector analysis approach and case studies and/or secondary sources, mainly based in Cape Town and the Western Cape. Five strategies are put forward including: 1) Take stock of the urban – make cities, not constructed landscapes; 2) Creating a soulful city; 3) Generating homes for all; 4) Designing a sustainable city; and 5) Moving towards urban economic interdependence. A direction for the role of government concludes the paper.
The world's interest in forced displacement, including refugees and forced migrants has increased considerably during the last decades as the number of people displaced became a global concern. At the end of 2005, the global figure of "persons of concern" to the United Nations Higher Commission on Refugees (UNHCR) stood at 21 million. By the close of 2006 the number increased to 32.9 million or almost one in every one hundred and fourteen people in the world.
Migrants and refugees from across the African continent move to South Africa and mostly settle in urban areas. The figure of refugees in South Africa increased notably over the years from 6 619 in 1997 to almost 30 000 in 2006 and estimates of the amount of forced migrants in the country vary from two to eight million. The large discrepancies in the estimates of forced migrants reflect the difficulty quantifying the often clandestine population movement. South Africa is not familiar with the hosting of refugees and migrants and therefore these groups experience great hardships
It is against this background that the importance of establishing the wellbeing of refugees and migrants need to be considered and included in policy decisions. Studies have been undertaken to establish the reasons for migration and to emphasize the risk of impoverishment of displacees, but research on the measure of poverty or well-being in these communities is scarce.
In this paper the concepts related to forced displacement will be defined. The rights and the protection of refugees and forced migrants on international and regional level and in South Africa will be investigated. In addition the wellbeing of refugees and migrants in urban areas in South Africa will be measured by making use of the Atkinson's method.
Data collected by the Forced Migration Research Group on urban refugees and forced migrants in Johannesburg will be analysed and income, expenditure and remittances will be used in the approach. Considering the outcomes of the analyses suggestions will be made to improve policy measures.
The aim of the paper is to articulate necessary state interventions to improve transport services for the urban poor in South Africa. The paper forms part of a larger study intended to inform a strategic response to the challenges of the “second economy” in the South African urban areas. The definition of the “second economy” is defined more elaborately in other papers in this series of papers. Simply, however, the second economy, in contrast to the first economy, forms part of the South African population whose households are collectively characterised by low skilled labour and high unemployment rates as a result of mismatch between skills they possess and those required by the economy.
Urban areas within the context of the paper refer to both metropolitan and urban areas defined spatially by Statistics South Africa (making up 65% of households and 59% of the population in 2003), and as implemented in the 2003 National Household Travel Survey conducted by the Department of Transport in association with Statistics South Africa. Indications are that South African population is rapidly urbanising and at the same time the household size is declining. From a transport perspective this is basically indicative of the large strain that urban transport systems are increasingly experiencing, where an increase in the number of small sized households implies that per capita travel demand is likely to be on the increase. As a result, transport network congestion is likely to be on the increase, and it can be shown that congestion impacts on poorer households the more severely as a result of increased generalised costs of travel.
With specific reference to the urban areas of South Africa, the paper attempts to address the following terms of reference, in which the author was requested to provide:
The 1996 White Paper on National Transport Policy remains the backbone of transport policy in the country, and therefore provides a good point of departure. Some of the interesting features of the White paper are the explicit policy targets that include: limiting one-way travel distance/time to 40 km or one hour, a ratio of 80:20 between public transport and private car usage, limiting commuter spending on transport to less than about 10 percent of disposable income and limiting walking distances to one kilometre in urban areas. While the White Paper has these bold policy targets, it does not explicitly deal with the issue of poverty. The White Paper has subsequently been translated in numerous transport legislations, and some researchers have argued that by virtue of making fundamental interventions and improvements in the land-based transport industry, the National Land vi Transport Transition Act (one of the White Paper derivatives) will ameliorate urban poverty in respect of the following:
In the urban areas of South Africa, and in line with the provisions of the National Land Transport Transition Act, local authorities are required to produce Integrated Transport Plans (ITPs). ITPs are to be used as transport-related service delivery instruments and are in turn supposed to be incorporated into the Integrated Development Plan of the authority. Any transport interventions in the area of jurisdiction of the local authority must be informed by the ITP, and conversely, the authority should not allow any transport related intervention if it is not part of its ITP. Therefore, ITPs remain a powerful instrument that should be used by the local authorities for poverty eradication. This includes ensuring that the design and operation of transport facilities allow for effective incorporation of small businesses (trading facilities) and increased employment (for example infrastructure and vehicle maintenance activities). However, in order to achieve this, more innovative contracting regimes, and the generation of more revenue streams, are needed to facilitate more effective business models.
This document is a response to the aspiration of National Treasury to define practical mechanisms which will enable emergency relief for informal settlements and associated urban economy interventions to rapidly occur on a national basis. This aspiration flows largely from a draft urban strategy for the second economy formulated for the Office of the Presidency by Urban LandMark and in particular one of the constituent position papers which focussed specifically on informal settlements .
SUMMARY OF MAIN FINDINGS ON INFORMAL SETTLEMENT UPGRADING
For a range of reasons, conventional approaches to IS by the state, and most notably that of ‘slums eradication’, are unworkable at scale. Unless there is a radical change of approach, limited progress will be made in addressing the living conditions and economies of the urban poor.
In particular, it is not possible to provide all informal settlement residents with the ‘ideal’ housing solution (40sqm starter home on a fully serviced site with a title deed costing on average over R80,000 as a total package) in the near term, and certainly not by 2014. The following are among the key factors which cause this to be the case:
• Insufficient capital funding for the necessary housing, land and services (both internal and bulks).
• An acute scarcity of developable and well located land for green-fields projects (including those catering for relocations).
• Obstacles to conventional, full scale in-situ upgrading due to the high levels of relocations which result (often around 50%) and which are unavoidable due to such factors as high settlement densities and the marginal nature of the underlying land parcels (e.g. steep slopes, powerline servitudes etc).
• Insufficient capacity within the state to deliver conventional housing and ‘slums eradication’ at the desired rate associated with low levels of involvement of the NGO and private sectors (this has reduced over time due mainly to the nature of state policies and is exacerbated by high competition from other major infrastructural initiatives in the country).
This paper contributes to the urban component of the forthcoming ‘second economy’1 strategy. The brief called for a reflection on the issue of urban land use management (LUM), and extraction of the implications for the urban poor. For the most part the task involved a secondary analysis of work undertaken for the CUBES/Planact-managed investigation into land use management in Johannesburg in 2007: five case studies and the related overview report. These sources have been supplemented with a selection of other documents. The brief notes that the work is intended to focus on extracting the implications for enhancing the access of the poor to urban spaces. Of importance are the implications of the findings of the land use management study for urban investment.
In this paper, the background section briefly locates land use management within broader land and planning activities. The paper then describes the rationality and nature of the current land use management approach in South Africa. The third section discusses a number of key issues raised when considering LUM from a second economy perspective, and elaborates on the consequences of these issues. These issues have a strong metropolitan bias due to the nature of the source information. The last part of the paper draws out the implications of the discussion when considering interventions in urban areas.
LUM at first glance might appear to be a fairly technical and procedural activity. However a consideration of the field quickly reveals its deeper ideological and conceptual underpinnings, and the relevance of this to considerations from a second economy perspective. This paper therefore engages with LUM issues at various levels and in various ways, possibly more broadly than originally envisaged. In fact the paper has very limited engagement with the step-by-step activities involved in land development applications or changes to approved land use. It broadens consideration of LUM partly to flag the limitations of focusing only on ‘what activities to regulate’ on a particular portion of land, and also to consider the current impacts and outcomes of land management more generally. Whilst widening the set of issues discussed, the paper does however retain a focus on issues of relevance to ‘the urban poor’, although this terms is used loosely without exploring an important set of debates to do with definitions, issues of heterogeneity, diversity, and so on. The paper does not deal with many of the issues in land use management relevant to more wealthy developers.
Improving commuter rail service delivery is a high-priority programme of the Department of Transport (DOT). Faced with a failing business, the DOT has launched a reform programme for commuter rail, foreseeing increased public investment and possibly an extended role for the private sector. The object of this working paper is to contribute to the emergence of a robust commuter rail reform programme that is built on sound transport principles. It presents a model for understanding the appropriate role and extent of public transport and the harnessing of the private sector to complement government-led reform.
Commuter rail services provide mass transport for the poorest category of commuters, providing 458-million passenger journeys in 2003. However, the effectiveness of the R2.5-billon spent on the service currently is in doubt. The state of the assets and the quality and extent of services are in decline, approaching a critical state. Dissatisfaction, accompanied by outbursts of public anger, is rising because of slow delivery by government on promised improvements in living and economic conditions of the poor who constitute the majority of our population.
Government has to find sustainable ways to improve performance and increase capital spending on infrastructure and rolling stock. It has recognised the urgent need to replace the current dysfunctional industry structure and has acted by launching a process to merge commuter and passenger rail assets into a single entity, PAXCo, under the control of the DOT.
A technical planning team has begun to develop a business plan for PAXCo. It envisages three phases managed retreat and stabilisation, recovery, and service development and growth. The structures of government, management and supporting institutions have to be equipped to manage the fallout of a situation that will worsen before it gets better. This paper provides an analysis of the situation and proposes a basic model for the successful and sustainable delivery of commuter rail services.
Recent studies using South African household survey data have questioned the exogeneity of household size and composition from income flows and labour market outcomes. (Maitra and Ray, 2001, and Klasen and Woolard, 2000). Research on unemployment in South Africa has occasionally viewed the household as either an important source of labour market information, as providing incentives or disincentives to participate, and its composition at a point in time as outcome of members' labour market possibilities. It has been proposed that household structure and a household's location in South Africa has a major impact on an individual's decision to participate in the labour market and their success in looking for work. In the absence of long-term unemployment insurance in South Africa, jobless people have been found to live in households where they can share in wage income or other income, i.e. make use of a private safety net (Klasen and Woolard, 2000). The relatively large state old age pension may further have led to larger pensioner-headed households and larger households when a pensioner is present (Case and Deaton, 1998; Edmonds, Mammen and Miller, 2002). The above-mentioned studies employ household survey data collected in 1993 and 1998, and the Census 1996 but neither use more recent datasets nor compare trends across them.
The reform of the telecommunications sector in the mid-1990s had as one of its areas of focus an expansion of access to telecommunications - both at the household ownership and the broader access levels. This paper examines the performance of policies around ownership and suggests alternative options for the future. It finds that despite the large rollout programme in fixed line telecommunications, there has been only very limited gains for rural and low-income users. Almost all the gains in ownership have come from the adoption of cellular by these groups. The paper demonstrates that this is the rationale choice for most low-income consumers given the different tariff structures and the average monthly spend on communication. The paper suggests that any future use of universal service funds should be more technology-neutral, which would enhance the roll of cellular telecommunication in such plans.
This paper examines whether endogenous growth processes can be found in middle income country contexts. Estimation proceeds by means of dynamic heterogeneous panel analysis. Empirical evidence finds in favour of both knowledge spill-over effects, and of positive impacts on total factor productivty growth by Schumpeterian innovative activity. A crucial finding is that spill-over effects emerge from investment in human rather than physical capital, and that the quality dimension in human capital investment is vital in generating innovation.
Explaining the Growth Absence: reviewing the evidence that can account for the poor growth performance of the South African economy
South Africa's democratic transition now lies close to a decade in the past. The transition carried with it much by way of hopes in terms of a greater access by its population not only to an improved rights environment. It was envisaged that the political self-realization of all South African citizens would bring with it access to improved economic well-being also. Employment as well as rising per-capita income are obvious indicators of progressive development for the population of a country.
In this paper we review evidence that has emerged over the past four years that can provide some insight into the growth and employment creation performance of the South African economy. The emphasis is explicitly on why limitations in the growth performance of the South African economy may have emerged. As such, the tone will have a tendency toward the gloomy. So let me start at the outset by reminding ourselves that the past decade has seen much by way of achievement on the policy front. Success particularly with regard to macroeconomic stabilization policy is notable, and should not be obscured behind the veil of woe that is the topic of the present discussion. But enough of optimism - and to the task in hand.
We begin with a consideration of some evidence on the long run growth performance of the economy, as well as the track record of employment creation in the economy. Growth in the South African economy is decomposed into its primary sources, in order to identify any fundamental structural changes in the source of economic development. The evidence will indicate that not only has growth and employment creation in South Africa been subject to long term structural decline, but the source of economic growth has also shifted from capital accumulation to TFP growth over time.
Section 2 of the paper is concerned with an analysis of the determinants of perhaps the most fundamental driver of long term growth: investment in physical capital stock. The evidence suggests that rates of return on capital and the user cost of capital are fundamental to the determination of investment in fixed capital stock, but exercise their influence subject to a powerful impact exercised by uncertainty. What is more, the evidence reviewed demonstrates that uncertainty is crucial not only for investment in physical capital stock, but also for the determination of the capital flows that are required to finance the short-fall of savings relative to investment expenditure in South Africa.
In the case of South Africa, uncertainty has strong institutional underpinnings, which section 3 elaborates on. The evidence reviewed in section 3 points to a number of crucial institutional dimensions that exercise an influence not only on capital accumulation, but on employment creation, international trade flows, and the efficiency of output markets in South Africa.
Finally, in section 4 of the paper we consider evidence on the importance of the factors identified by modern (endogenous) growth theory in determining South Africa's growth performance. While a number of different determinants are considered, the discussion focuses on the contribution of investment in human capital. The evidence suggests that what counts is quality of human capital investment rather than quantity. In an extensive review of published evidence we establish that in generating quality human capital, South Africa still leaves much to be desired.