South Africa's economic policies on unemployment: A historical analysis of two decades of transition

Abstract

Upon South Africa’s transition to democracy in 1994, there were great hopes for an economic revival in the country, underpinned by supportive economic policies that prioritised job creation and the elimination of longstanding poverty and inequality. Until now, the efficacy of economic policy in bringing about these much-coveted outcomes – particularly improvements on the employment front – has received little attention. This paper ventures into relatively uncharted territory by analysing how political dynamics and accompanying economic policy frameworks have impacted the structure and momentum of employment growth in South Africa over the past two decades. This is achieved by examining the changes in employment and, more specifically, the changes in the cost-neutral change in the capital-to-labour (K/L) ratio from 1995 to 2013. For the purpose of the analysis, a dynamic CGE model of the South African economy is used, with the focus being primarily on changes in the capital and labour markets during the period in question across a range of sectors. Among the results are that there was an increase in capital relative to labour (K/L) during the period, despite there being an increase in the rental price of capital relative to wages (PK/PL). The results suggest that at any given ratio of real wages relative to the rental price of capital, industries would choose a K/L ratio 8.1% higher in 2013 than in 1995. The study offers new insights into what is hampering employment in South Africa, which has been eroding the economy’s productive base and prompting serious questions about the country’s growth prospects. Clearly, South Africa needs a well-informed and responsive economic policy framework if it is to escape the potentially explosive unemployment crisis in which it has long been mired.

Relationship between fiscal deficits and unemployment in South Africa

“…The finding naturally leads to a typical Keynesian demand management policy, which focuses at reducing cyclically induced unemployment. However, unemployment in South Africa seems to be involuntary largely and structural in nature (Banerjee et al 2008;Ferreira & Rossouw 2016;Kingdon & Knight 2004, 2007Schoeman & Blaauw 2009;Simkins 2004;Thwala 2011;Vogel 2015). A short-term Keynesian aggregate demand management policy would not deliver stable jobs that the South Africa society really wants.…”

“…Only government intervention, they said, could reduce structural unemployment. Ferreira and Rossouw (2016) also found rising capital-labour ratios since 1994, suggesting rising capital intensity. Kingdon and Knight (2007) and Kingdon and Knight (2004) found that stubborn unemployment levels in South Africa were involuntary, and they maintained that expanded public works programmes could deliver the jobs if designed optimally.…”

Linking strategy implementation to financial performance and firm survival in women- owned small to medium enterprises

“…South Africa faces numerous economic, political and social challenges in its new democracy, of which the fundamental problem is that of massive and growing unemployment (Herrington et al, 2010;Ferreira, 2016;Alenda-Demoutiez & Mügge, 2020). The diverse nature of the South African economy requires special attention to work out solutions on women entrepreneurship since it can play an essential role in enhancing job creation and overall economic growth (Urban, 2010: Irene, 2017.…”

The influence of culture on the development of youth entrepreneurs in a selected suburb in Cape Town

“…The initiatives, as mentioned earlier, made an impact and have managed to achieve reasonable success. However, these programs' performances do not meet the government's expectations [1,2]. Economic development is, therefore, still a crucial pursuit in South Africa.…”