Abstract
South African is faced with a high unemployment rate; however, the country’s manufacturing sector is one of the sectors that have been linked with job creation. Nevertheless, the growth in manufacturing production may not increase employment opportunities if this sector continues to shift to technology-intensive methods of production, which displace labour. This study uses a vector autoregressive (VAR) model to estimate the interaction between manufacturing production and the employment rate in South Africa from 1970 to 2013. Results revealed that both variables were stationary at the first difference and there was a long-term equilibrium relationship between the variables. In the short term, a significant positive relationship between manufacturing production and employment rate was observed. Granger causality test showed that there is a causal link from manufacturing production to the employment rate. A comparison between apartheid and post-apartheid periods showed the long-run relationship only existed in the post-apartheid period of a more open economy. Findings of this study revealed that a growth in the South African manufacturing sector is linked with employment opportunities in the short-run. However, these opportunities may be reduced by changes in technology which promote capital intensive production. As such, policy-makers should encourage policies that promote a mix of labour and capital intensive production in order to maintain these employment opportunities in the manufacturing sector.
Highlights
South Africa is regarded as the gateway to Africa, it stands as a country with one of the highest levels of unemployment, especially amongst the youth (Meyer, 2014)
Findings of these study showed that the contribution of the South African manufacturing sector to job creation change changed during the post-apartheid period of the open economy
This study investigated the relationship between manufacturing production and the non-agricultural employment rate in South Africa.Findings revealed that there is a link between the growth in the manufacturing sector and nonagricultural employment in the South African economy
Summary
South Africa is regarded as the gateway to Africa, it stands as a country with one of the highest levels of unemployment, especially amongst the youth (Meyer, 2014). In the period of 1930–1960, the South African economy went through a long phase of virtually uninterrupted growth in total economic activity, and in particular the output of the manufacturing sector; this performance started deteriorating to negative growth in the 1980s (McCarthy, 2005). This poor performance was attributed to international trade sanctions and isolation imposed on the apartheid government, as well as poor factor utilisation. After 1994 productivity performance in the manufacturing sector started improving due to the abolishment of the apartheid era which led to the removal of international trade restrictions (McCarthy, 2005)
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