Abstract
This study analyses the nature and consequences of structural change in South Africa over the period 1970-2014. In other words, it investigates the decline in the share of the primary sector in total employment and a rise in the share of the manufacturing and services sectors in total employment and explores possible causes, including rising labour productivity growth and changes in demand. Moreover, it examines the character of employment in the manufacturing sector in the sense that high-technology sectors in the economy gain weight while the low-technology sectors become relatively less important all as a part of a structural change. To achieve this objective, the study utilises a growth accounting method and econometric regression analysis. Building on the literature on structural change, we differentiate the measure of structural change into the conventional measure of a sector and the vertically integrated sector. We do not, however, seek to ascertain which measure of the sector is inherently superior; rather, we analyse changes in the share of sectors employment in total employment. Utilising the accounting method, the study found that, in both measures of the sector, structural change has occurred in South Africa, but the impact has been rather small and does not account for the growth of the high-technology sectors. This is a result of the faster-than-average productivity in the manufacturing sector not leading to equally higher growth in demand for manufacturing goods. On the other hand, the econometric results show that a 10% increase in the domestic demand for the manufacturing goods is associated with a 12% increase in manufacturing employment as a share of total employment, ceteris paribus. In terms of policy, the study recommends that a fiscal expansion in the direction of manufacturing goods will engender a structural change that by nature is labour-intensive.
M.Phil. (Industrial Policy)