Growth path on wrong track - study

2011-10-02 10:47

Johannesburg - The government has not created the right climate to achieve the targets of the new growth path economic strategy, according to a study by the Bureau of Market Research (BMR) at Unisa released on Sunday.

"It became clear that the conditions created by government do not favour the achievement of the stated targets,"the BMR said in a a statement.

The new growth path (NGP) aims to increase economic growth to sustainable rates of between 6% and 7% a year in order to create five million jobs by 2020. This would reduce the unemployment rate to 15%.

Official unemployment in the second quarter of this year, according to Statistics SA, was 25.7%.

For higher economic growth to translate into more jobs, economic growth needed to be labour absorptive.

The researchers - Professor Carel van Aardt, Professor André Ligthelm and Johan van Tonder - looked at whether this would happen in South Africa.

They found that employment growth was negative in five of the 10 years between 2001 and 2010, while only one year of negative economic growth occurred.

"Employment in especially the agricultural and mining sectors suffered, each registering seven negative employment growth years," the BMR said.

They came to this finding through analysing the relationship between gross value added (GVA) - a measure of the value of goods and services produced in an area, industry or sector - and employment per sector.

The researchers also found a weak relationship between GVA and employment creation in most of the sectors.

"This implies that factors other than economic growth have a major impact on both job creation and job destruction in South Africa," the researchers said.

This could be due to employers favouring capital over labour in production.

"Higher economic growth, for example of 7%, will thus not automatically translate into the creation of 5 million jobs," the BMR said.

"Should this preference for capital persist, economic growth rates of more than 10% per year might be necessary to create the 5 million jobs."

The researchers calculated a capital to work ratio to see whether the sectors the NGP was focusing on would create jobs.

The NGP had identified utilities, transport and communication, construction, agriculture, mining, and manufacturing as sectors which could create jobs.

The researchers found a major shift away from workers to capital in all but one of the economic sectors.

"Interestingly, in all the sectors identified by the NGP to be or become labour absorptive, a preference for capital over labour has developed since 2000. In fact, only in the financial sector did the capital-worker ratio decrease." 

  • gatvol4corru - 2011-10-02 11:18

    The ANC gravy train is dragging the country in a dark hole. We all know it,yet the comrades will carry on loading the pockets

  • clark - 2011-10-02 12:09

    - What's the point of all these warnings to the Anc govt. , when they continue to ignore them all ? Their only focus is on self- enrichment - growth and employment are the least of their worries.

  • Phiwe - 2011-10-02 12:20

    I thought what made the NGP different to other economic policies, which have brought us good, stable economic growth over the past 17 years, was that it was job creation driven. That's what many experts say about it, including a Noble Prize Laureate who endorsed it as an employment postive policy. Unlike the policy of the past. So I think the new growth plan has a job creation purpose provided everything is okay. I think if the NGP was in place during the boom years, it would have succeeded. But in the current climate, where markets are in panic and major trading partners in Europe afraid to invest anywhere, it has ultimately had a knock on effect on South Africa. Manufacturing is down because the buyers are thn on the ground ergo jobs are lost; other than go look for alternative buyers there's literally little the government can do to stop the global market panic. And manufacturing has the potential to create us a lot of jobs.

      muttlet - 2011-10-03 19:05

      HUH? Manufacturing does not seem to be down in other BRIC countries, at least not to the extent of SA. The reason Phiwe is because if a company cannot fire a worker; they will not hire a worker.You correct that and you will see job growth. Unfortunately, labour unions are so militant about protecting slugs that it hinders job growth. Why would a private sector company hire someone at a rate higher than say a worker in Vietnam or China. If a company has to hire a local worker, they would have to be more productive and efficient than their Asian counterparts. Again, they are not so the company is paying more for labour and getting less for the priviledge of doing so. Of course, I could be wrong; it must be Aparthied!

  • rory - 2011-10-02 13:04

    This is very interesting indeed. What are the conditions in the economy that are causing business people on an expansion path to prefer capital investment over seeking additional employees? Business people are no different to the rest of us, they look for the promise of the greatest return with the minimum of associated hassles. Clearly,, capital investment compared to increasing the number of employees offers a greater return with fewer associated hassles. I would think Government and unions need to drastically reduce the hassles associated with employing labour if they are serious about reducing unemployment.

  • Meanleader - 2011-10-03 16:31

    yeah right Phiwe ..

  • eh - 2011-10-03 17:20

    You dont need to do a study to understand that if government imposes anti-business labour laws that business will employ less people. It is just our clever politicians who cannot understand this or who feel that their legislation is so special it will buck global trends.

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