Unemployment, policy responses and challenges in South Africa: a sectoral analysis

Abstract

This chapter serves to examine the extent to which the policy responses undertaken by the South African government have achieved the objectives of growing the economy and creating employment. A synopsis of the macroeconomic, sectoral/industrial policies and sector-specific programmes indicates that the manufacturing sector as a whole, and certain manufacturing industries, were earmarked as one of the sectors and industries with the potential to achieve these objectives. Despite these efforts, South Africa’s manufacturing sector is faced with four main challenges, which hinder its ability to drive economic growth and create jobs as envisioned. These challenges were identified as high input costs, labour market rigidities, mismatches between education and skills and high import penetration. To overcome these challenges, it is recommended that the government should adopt a multi-prolonged approach involving a variety of policy strategies. The trends in labour productivity, employment and wages were explored to determine the extent to which labour productivity determines wages, and affects employment. Overall, the labour productivity-employment-wages nexus is influenced by various factors, which require the implementation of a combination of policy strategies.