BackgroundSouth Africa continues to grapple with the “triple challenge” of persistently high unemployment, inequality, and poverty, despite its upper middle-income status. The country’s labour market exhibits the characteristics of both developed and less developed countries, with a high level of industrialisation existing side by side with rudimentary production processes, especially in townships, rural areas, and the informal sector. The average unemployment rate has been historically high, rising steadily from 23.2% in 2008 to 37.8% today. A sharp increase was seen during the Covid-19 pandemic when millions of workers exited the labour market, mostly due to layoffs. In terms of the economy’s capacity to create employment, the employment-to-population ratio (also known as the labour absorption rate), was about 40% in 2021 compared to an average of about 60% for upper middle-income countries, of which South Africa is one.
Recovery from the crisis, both in terms of economic growth and employment creation, has been weak. Economic growth has recovered from the contraction of 6.4% in 2020 to positive growth of 4.9% in 2021. However, GDP remains below the pre-pandemic levels of R1,148 billion. Certain key sectors, particularly manufacturing, were hard hit. Output in the “motor vehicles, trailers and parts” industry shrank by 50.4%, whilst its employment declined by 40.7%. The comparable figures for the leather and footwear industry were 22.5% and 19.6%, respectively. Both sectors have been selected for the project.
Overall productivity flatlined from the mid-2000s and that of manufacturing only improved marginally with the sector’s contribution to output declining from 18.9% in 2000 to about 12.0% in 2019, whilst its share of merchandise exports plunged from 53.0% to 38.3% over the same period. Shortfalls in electricity production since 2008 have steadily undermined economic growth the country’s economic performance over the years. The persistence of the shortfalls in 2022 and beyond will invariably continue to hobble economic and job creation, broadly.
To tackle these multi-faceted challenges, South Africa needs to accelerate economic growth by tackling structural constraints to productivity growth and various institutional vulnerabilities against decent work that had built up long before Covid-19. Among other things, this would require strong policies to improve productivity and enhance international competitiveness, whilst promoting job creation, decent work, and inclusiveness. Given South Africa’s relatively high level of industrialisation, the manufacturing sector in general, and SMEs in particular, are expected to play a key role in any such effort to “reboot” the economy. The needs of marginalised or excluded groups, such as women, young people, and persons with disability, will have to be prioritised in all policies or initiatives aimed at the recovery, expansion, and reconstruction of the economy.
ApproachTo address constraints to productivity growth and decent job creation, the ILO has launched the Productivity Ecosystems for Decent Work Programme, built on the recognition that productivity growth is determined by a myriad of interfacing dynamics. It uses an ecosystems approach to improve productivity and working conditions. This means addressing productivity in an integrated way – across enterprise, sector and national-level (see “Conceptual Framework” below) – rather than intervening at just a single level. The Programme aims to address the root causes of why low productivity and high informality exist – and not just to treat the symptoms. Put another way, it means looking at the issues that create the problem in the first place. Low firm productivity, for example, is not just caused by a lack of knowledge and know-how in individual firms, much is often related to structural factors such as policies, access to capital, skilled labour, support and information.
Productivity Ecosystem Conceptual Framework showing a “slice” of the ecosystem:
An ecosystem approach enhances productivity drivers at the enterprise, sector and policy-level.
Key implementation partners include
- Productivity South Africa
- Department of Trade, Industry and Competition
- Department of Small Business Development
- Business Unity South Africa
- Congress of South Africa Trade Unions (COSATU)
- National Council of Trade Unions (NACTU)
- Federation of Unions of South Africa (FEDUSA)
- National Treasury
- Office of the President