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The SA Daily 24 August 2018

Sustainable growth matters

  • In this week’s The SA Daily titled Only growth can deliver more jobs, we found an employment-GDP intensity (elasticity) in SA of around 0.5, implying a 1pps increase in real GDP growth being associated with a 0.5pps increase in employment. While elasticity of 0.5 is crucial for employment generation, employment-GDP elasticity has fallen from just over 1pps in the late 1970s to just 0.5pps now.
  • Before 1994, the SA economy enjoyed both favourable GDP growth and employment outcomes, albeit relatively lower wages, while post-1994 shows less employment generation. During the first period, cumulatively 3.8m formal jobs were generated but, between 1994 and 2017 only 1.3m. Nonetheless, during 2004-2007, when real GDP growth averaged 5.2% per annum, employment growth averaged 3.1%; this was the only period post-1994 that both real GDP and employment recorded robust growth rates.
  • SA is in dire need of sustainable growth, such as it had in 2004-2007. Such growth would have to be accompanied by addressing SA’s structural problems, which should ultimately increase SA’s employment-GDP elasticity. SA needs to address skills shortages, declining labour productivity, lack of sufficient support for SMMEs, de-industrialisation, persistently depressed business confidence, and low fixed-investment growth (see Employment and GDP of 16 August by Thanda Sithole).

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