Why SA’s employment target is set to fail – expert

Manufacturing only accounts for about 12% of the US economy, but it is slowing as global demand, especially in China, declines, according to new government data. AFP/File/STR

Manufacturing only accounts for about 12% of the US economy, but it is slowing as global demand, especially in China, declines, according to new government data. AFP/File/STR

South Africa’s manufactured exports have grown far slower than its peers and manufactured exports are well below potential.

South Africa may not be able to achieve its employment target as set out in its Industrial Policy Action Plan (Ipap), due to slow growth in manufacturing.

According to David Kaplan, professor emeritus at the School of Economics, University of Cape Town, the decline in manufacturing employment arose not only because of the slow rate of manufacturing growth, but because the employment intensity – the number of jobs per unit of output – is low or declining.

Despite the declared objective of Ipap to create an additional 350,000 manufacturing jobs by 2020, manufacturing employment has fallen by 32,000 jobs from its 2008 figure, with manufacturing output still below that of 2008.

In contrast, emerging markets overall have increased manufacturing output by some 50%. The jobs haemorrhaging in various key industries has prompted the ANC-aligned Congress of South African Trade Unions (Cosatu) to call for intervention to stem the rising tide of job losses.

In a paper published in the Centre for Development and Enterprise (CDE) publication Viewpoints, Kaplan argued that while the declining employment intensity of growth is not confined to South Africa, it is far more pronounced here.

Kaplan has examined the major instrument of South Africa’s industrial policy – the investment subsidies and the three major priority sectors: autos and components; clothing and textiles; and mineral beneficiation. He looked at the failure of industrial policy to realise its objectives and the poor performance of manufacturing compared to peer countries.

He said there was no indication that the local auto industry has become more competitive despite substantial government support, and therefore a comprehensive review of policy’s focus on this sector was needed – if increasing employment was the key objective of the policy.

South Africa’s manufactured exports have grown far slower than its peers and manufactured exports are well below potential, Kaplan wrote.

Large exporters are exporting fewer new products and to fewer new destinations. South Africa’s labour market flexibility was low and its costs of labour, including the costs of hiring and firing, are increasing, Kapan said.

The national minimum wage will result in significant cost increases, particularly for labour-intensive firms.

– ericn@citizen.co.za

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