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02 June 2005

Factsheet 9 : Human resources development and the economy

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South African economic policy in the past decade has successfully promoted export growth but has not brought about more pressing improvements in employment and overall economic growth. Indeed, a series of chapters in the HSRC?s HRD Review 2003 argue that significant areas of economic and industrial policy have exacerbated rather than eradicated the apartheid legacy of a focus on a high skill at the expense of growing employment.

The poor performance of macroeconomic policies

Since 1994 South Africa has followed a strong policy of liberalisation, privatisation and stabilisation as it has sought to enter the world economy. The key economic indicator that has improved as a result of the government?s policies has been exports. Average export growth across the 1990s was 5.5%, whilst manufacturing exports grew by 11%. Most significantly, exports to the rest of Africa grew by more than five-fold.

However these policies have not been sufficiently successful in meeting the major objectives to which they were meant contribute: growth, employment and redistribution. Over the 1990s, GDP growth averaged a weak 1.3%. The current official unemployment rate stands at around 30%. Moreover, the persistence of racialised practices in the labour market means that there continue to be significant differences in wage and employment rates according to race. However, it is youth unemployment that is the worst manifestation of the failure of the economy (see Fact Sheet 1).

Industrial policy too has failed to develop sufficiently into a strategy for employment and growth. The history of a high capital ? high skill intensive focus as part of import substitution largely remains even though the import substitution focus has been replaced by one of export-led growth.

The new policies have contributed to the rapid growth of manufacturing exports, for instance in the automobiles industry. However, the exports that have grown have been highly capital intensive and have not generated significant new employment.

This criticism does not suggest that South Africa should seek to follow the East Asian model of low skills-based exportation, as some commentators have suggested. This is simply not a realistic strategy from South Africa’s development base. Rather, it is clear that South Africa needs to build high skills alongside intermediate and low skills. The latter in particular may best be developed for non-tradeable sectors as a way of reducing unemployment.

The informal economy

Survey data shows an apparently sharp growth in the size of the South African informal economy since 1994. Whilst this seems to be largely due to improvements in measurement, the recent estimations of the informal economy as consisting of approximately two million workers highlights the importance of this segment of the labour market, long neglected by policymakers. Indeed, if recent International Labour Organisation (ILO) estimates putting all informal employment at four million are believed, the degree of informal work in the economy as a whole is even more dramatic. These ILO figures attempt to include those who are employed casually or otherwise informally by formal employers.

Much of the work in the South African informal economy is survivalist, characterised by poor working conditions, long hours and little income. However, there is a large segment of the informal economy with higher levels of skill and income. It is this segment that is often seen as the target by those developing youth self-employment programmes. However, international evidence emphasises the difficulties of accessing better employment in the informal economy from a position of limited education and experience.

HRD dimension of economic challenge

Economic weaknesses in South Africa are compounded by persistent problems in developing skills and education. There are problems with educational quality at all levels. There are unacceptable drop out and repetition rates across much of formal education. There has been a time lag between the decline of the old skills development system and its replacement by the new, learnership-driven, model, whilst FET colleges are still largely reliant on subjects that have seen little reform since the Apartheid era.

However, it is apparent that HRD needs to be an important part of overall economic strategy. This requires going beyond a simplistic focus on building higher skills ? it is far more complex than this. Some sectors are likely to grow much faster than others in the foreseeable future and each sector has its only likely future pattern of skills needs. Some sectors, such as finance, have predicted skills needs at the high skill level. Others, such as energy, are likely to see skills needs at all levels, whilst yet other, such as forestry and tourism, can be expected to have their greatest need for skills towards the lower end. Whilst some professions such as engineering and biotechnology do see an increasing emphasis on postgraduate skills, this needs to be understood in the context of their low overall levels of demand.

Indeed, the talk of a skills crisis in professional skills seems mistaken when looked at in historical context. Current shortage rates in most South African professions appear to be in the region of 3-4%. However, in the early 1980s, rates in key professions were two to three times higher than this. Building better professional skills in South Africa will be important for future economic performance, but so will be building better intermediate and lower skills.

Upgrading skills for all could help South Africa to move out of its current economic problems if addressed in conjunction with economic policies that prioritise growth and employment.

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