The impact of re-industrialization on economic growth and employment in South Africa

Abstract

The South African economy has an enormous task of addressing the triple challenges of high unemployment, poverty and inequality. There is a growing concern that sluggish economic performance and these challenges are putting the countryÕs young democracy at risk. There is a belief that manufacturing sector growth spurs economic growth and employment. Re-industrialization is an important policy to promote economic growth and the government has adopted a National Industrial Policy Framework to promote and facilitate re-industrialization. This study is an attempt to enhance and inform the robustness of the industrial policy design and implementation in South Africa. The study utilized a Vector Error Correction model to evaluate the impact of reindustrialization on economic growth and employment in South Africa. The sectoral output and employment data series were obtained from Statistics South Africa. The output and employment data covered the periods 1993 first quarter to 2016 fourth quarter and 2012 third quarter to 2017 first quarter respectively. The results revealed that the manufacturing sector output growth had a significant impact on trade, transport and mining sectors while the manufacturing sectorÕs employment growth does not necessarily guarantee employment growth in other sectors of the economy with the exception of the transport sector.