Abstract
Employment creation remains the pinnacle standard of sound social welfare and economic progress. It is a fundamental driver of economic development for any economy. However, such a pursuit faces tenacious challenges, especially amidst the growing global market integration. This study unravelled the effects of the underlying trade environment mechanisms such as trade openness, foreign direct investment(FDI) and the exchange rate on South Africa’s job creation efforts within the tradable sectors. The study employed a quantitative analysis and included time series explanatory variables of trade openness, netFDI flows and the real effective exchange rate. Employment series of both South Africa’s mining and manufacturing tradable sectors served as the dependent variables. The study made use of quarterly observations starting from 1995 to 2016. In doing so, various econometric methods were utilised. These included descriptive analyses, the standard Autoregressive Distributed Lag (ARDL) model, and the TodaYamamoto Granger Non-Causality test. Empirical ARDL results of employment in the individual mining sector, established no long-run and short-run relationships with trade openness, the real effective exchange rate and net-FDI. Employment in the manufacturing tradable sector presented significant and negative longrun relationships with trade openness, the real effective exchange rate and net-FDI. Meanwhile, the short-run findings exhibited significant and positive relationships between employment in the manufacturing tradable sector with trade openness, and significantly negative for net-FDI. However short-run results of manufacturing employment and the real effective exchange rate were not significant. Based on these results, South Africa’s mining sector seems unresponsive to mechanisms in the trade environment while these relationships are relatively dynamic in the manufacturing sector. Further recommendations were thus provided to improve these interrelationships in promoting job growth and its responsiveness to trade components.
Highlights
Foreign trade has emerged as a driving force of various economies in the midst of intensifying globalisation processes
The present study examines the effects of trade-related factors, trade openness, the real effective exchange rate and foreign direct investment (FDI), on South Africa’s tradable sector job creation patterns
Results indicate that employment within the manufacturing tradable sector has a moderately negative and significant relationship with trade openness, while employment within the mining sector exhibits a weak positive and non-significant relationship
Summary
Foreign trade has emerged as a driving force of various economies in the midst of intensifying globalisation processes. Its ability to maximise national and global welfare encapsulates the analytical advantages of free trade (Karunaratne, 2012) Economies such as the “Asian Tigers” have been characterised by groundbreaking economic breakthroughs, led by active foreign trade participation (Segerstrom, 2013). In spite of its profound acclamations, foreign trade presents potential economic challenges and uncertainty characterised by globalisation and trade liberalisation factors (Cetkovic & Zarkovic, 2012). The country's mounting trade exposure has left the government compelled and pressurised to establish neoliberal macroeconomic policy. This has instilled the build-up of various ramifications in the form of intensifying unemployment, job insecurity and inequality (Mathekga, 2009). South Africa has had a challenging employment sector where job creation patterns are incapable of sustaining the growing job-seeking population as indicated by the low labour absorption-rate (Rogan et al 2013)
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