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Suz
ette
Siu
Form
al e
mpl
oym
ent i
n m
anuf
actu
ring
has
decl
ined
from
1.6
milli
on in
199
0 to
1.2
m
illion
in 2
004.
S
emi-
and
unsk
illed
empl
oym
ent a
lso
decr
ease
d fro
m 1
.0 m
illion
to 0
.7 m
illion
.W
hat i
s th
e re
ason
for s
uch
high
un
empl
oym
ent?
Wha
t is
behi
nd S
outh
Afr
ica’
s ec
onom
ic
unde
r per
form
ance
?
polit
ical
dem
ocra
tic tr
ansi
tion
Mal
aysi
a co
mpa
rison
Issu
es w
ith g
row
thP
atte
rns
of e
mpl
oym
ent a
nd s
truct
ural
ch
ange
Sou
th A
frica
und
erw
ent a
dem
ocra
tic
trans
form
atio
n in
199
4 w
ith th
e en
d of
the
Apa
rthei
d re
gim
e.P
rior t
o 19
94, t
he S
outh
Afri
can
econ
omy
and
polit
y w
ere
dom
inat
ed b
y w
hite
min
ority
.Th
e de
moc
ratic
tran
sitio
n he
lped
redi
strib
ute
inco
me
thro
ugh
out t
he e
cono
my.
Is it
pos
sibl
e th
at th
e pr
ior r
egim
e de
laye
d th
e cr
eatio
n of
soc
ial a
nd o
ther
net
wor
ks n
eede
d to
m
aint
ain
larg
e-sc
ale
info
rmal
ity?
Why
com
pare
Sou
th A
frica
to M
alay
sia?
W
ell,
both
sha
re m
any
sim
ilar e
cono
mic
feat
ures
in th
e 19
80s:
1.) B
oth
med
ium
siz
ed e
cono
mie
s, w
ith d
eep
raci
al c
leav
ages
.2.
) Eth
nic
maj
ority
con
trols
the
polit
y bu
t eco
nom
ic p
ower
lies
w
ith e
thni
c m
inor
ity.
3.) S
imila
r eco
nom
ic s
truct
ures
.4.
) Out
put p
er h
ead
and
TFP
wer
e al
mos
t ide
ntic
al a
t som
e po
int.
5.) H
uman
cap
ital l
evel
s cl
ose.
6.) B
oth
econ
omie
s ha
ve s
imila
r dep
ende
ncie
s on
min
ing.
The
mai
n di
ffere
nces
bet
wee
n th
ese
two
coun
tries
ar
e:a.
) Mal
aysi
a w
as a
ble
to p
ull a
n in
crea
sing
sha
re o
f its
wor
kfor
ce in
to m
anuf
actu
ring
(the
sect
or w
ith th
e hi
ghes
t lab
or p
rodu
ctiv
ity in
the
econ
omy)
, in
the
proc
ess
of b
ecom
ing
an e
cono
mic
“tig
er, "
whi
le in
S
.A.
man
ufac
turin
g ha
s lo
st g
roun
d to
the
terti
ary
sect
or.
b.) S
.A. n
on-m
iner
al tr
adab
le (i
nclu
ding
m
anuf
actu
ring)
are
inte
nsiv
e in
low
-ski
lled
labo
r co
mpa
red
to s
ervi
ces.
How
ever
, the
big
gest
diff
eren
ce b
etw
een
thes
e tw
o co
untri
es is
that
Mal
aysi
a be
gan
expe
rienc
ing
indu
stria
lizat
ion,
whi
le S
.A
begu
n to
de-
indu
stria
lize.
W
hy d
id S
outh
Afri
ca d
e-in
dust
rializ
e pr
emat
urel
y?
Mal
aysi
a ha
s a
mor
e ad
vant
ageo
us
geog
raph
ical
loca
tion.
M
alay
sia
gove
rnm
ent
activ
ely
prom
oted
m
anuf
actu
ring.
The
ir go
al w
as to
exp
and
and
dive
rsify
the
indu
stria
l bas
e of
the
econ
omy.
Sou
th A
frica
had
to c
onte
nd w
ith h
eavy
de
fens
e sp
endi
ng a
nd th
e de
vast
atin
g ef
fect
s of
trad
e em
barg
o.
A d
ecre
asin
g no
n-m
iner
al tr
adab
le s
ecto
r.W
eak
expo
rt-or
ient
ed m
anuf
actu
ring
sect
or.
Dec
reas
ing
rela
tive
pric
e an
d pr
ofita
bilit
y in
th
e m
anuf
actu
ring
sect
or.
Wea
k co
mpo
sitio
n of
exp
ort b
aske
t. In
gen
eral
, hig
her w
ages
.A
n in
crea
sing
wag
e in
(inf
orm
al s
ecto
r).
Thre
e im
porta
nt tr
ends
in th
e ec
onom
y im
ply:
1.) t
here
has
bee
n si
gnifi
cant
sub
stitu
tion
tow
ard
skille
d w
orke
rs w
ithin
eac
h ec
onom
ic
activ
ity.
2.) s
igni
fican
t stru
ctur
al c
hang
e aw
ay fr
om m
ost
low
-ski
ll in
tens
ive
parts
of e
cono
my.
3.) N
ow, w
ithin
thos
e tra
dabl
e go
ods,
pro
duct
ion
is m
ore
capi
tal i
nten
sive
.A
ll of
thes
e sh
ifts
in d
eman
d, h
elp
expl
ain
why
un
empl
oym
ent l
evel
s ha
ve in
crea
sed.
1.) D
eclin
e in
the
rela
tive
dem
and
for l
ow s
kill
labo
r.2.
) The
re h
ave
been
acr
oss-
the
boar
d sk
ill up
grad
ing.
3.) T
he tr
adab
le s
ecto
r stil
l rem
ains
the
mos
t lo
w-s
kill
inte
nsiv
e pa
rt of
the
econ
omy.
Form
al e
mpl
oym
ent i
n S
outh
Afri
ca s
tagn
ated
in 1
990s
.S
emi-a
nd lo
w-s
kille
d w
orke
rs o
nly
cont
ribut
e ar
ound
42%
of
thos
e em
ploy
ed.
S.A
. une
mpl
oym
ent r
ate
toda
y is
at 4
0% if
you
incl
ude
disc
oura
ged
wor
kers
, and
30%
with
out.
The
end
of th
e A
parth
eid
era
in 1
994
help
ed p
ick-
up
econ
omic
gro
wth
to a
cer
tain
ext
ent.
With
the
impl
emen
tatio
n of
out
war
d-or
ient
ed G
EA
R (G
row
th,
Em
ploy
men
t and
Red
istri
butio
n) s
trate
gy, h
as s
hift
S.A
. to
war
d gr
eate
r int
egra
tion
into
the
glob
al e
cono
my.
Agr
icul
ture
and
min
ing
jobs
hav
e de
clin
ed a
nd it
has
not
be
en c
ompe
nsat
ed fo
r by
an in
crea
se in
man
ufac
turin
g em
ploy
men
t.
Ther
e ha
s be
en a
dra
mat
ic in
crea
se in
the
empl
oym
ent
shar
e of
priv
ate
non-
trada
bles
at t
he e
xpen
se o
f tra
dabl
e.
Am
ong
expa
ndin
g se
ctor
s: fi
nanc
ial i
nter
med
iatio
n,
insu
ranc
e, re
al e
stat
e an
d bu
sine
ss s
ervi
ces.
In th
e tra
dabl
es s
ecto
r, em
ploy
men
t has
dec
reas
ed b
y 10
per
cent
. S
outh
Afri
ca p
uts
a pr
emiu
m o
n sk
ills
and
hum
an
capi
tal.
How
ever
to a
chie
ve h
ighe
r lev
els
of g
row
th, a
n ex
pans
ion
of lo
w-s
kill
inte
nsiv
e m
anuf
actu
re a
t the
ex
pens
e of
ski
ll-in
tens
ive
non-
trada
bles
is n
eede
d.
Man
ufac
ture
-led
grow
th w
ould
on
bala
nce
redu
ce th
e re
lativ
e de
man
d fo
r ski
lled
wor
kers
.
Edu
catio
n po
licy
Tech
nolo
gy p
olic
yE
mpl
oym
ent p
olic
yS
ocia
l Sec
urity
pol
icy
Labo
r Mar
ket p
olic
yW
hat d
o yo
u gu
ys th
ink?
So
far,
how
do
you
thin
k th
is re
late
s to
Sou
th
Afri
ca’s
und
erpe
rform
ance
?W
hy d
id re
lativ
e pr
ofita
bilit
y in
man
ufac
turin
g de
clin
e in
the
1990
s?W
hat d
o yo
u th
ink?
This
cou
ld e
xpla
in S
.A. c
once
rn w
ith “s
kill
shor
tage
.”C
ould
als
o ex
plai
n w
hy S
.A. h
as u
nder
perfo
rmed
in
trada
ble
sect
or, m
anuf
actu
ring
in p
artic
ular
. La
ck o
f job
cre
atio
n be
caus
e la
bor c
osts
are
too
high
. U
nit l
abor
cos
ts in
man
ufac
turin
g (la
bor c
ost p
er u
nit
of o
utpu
t) ca
ptur
e a
key
unde
rlyin
g de
term
inan
t of
co
mpe
titiv
enes
s in
an
impo
rtant
sub
set o
f tra
ded
good
s. L
abor
cos
ts a
re le
ss s
ubje
ct to
exc
hang
e-ra
te
effe
cts
than
trad
ed-g
oods
pric
es (S
teph
en G
olub
’s
“Sou
th A
frica
n R
eal E
xcha
nge
Rat
es a
nd
Man
ufac
turin
g C
ompe
titiv
enes
s,”p
. 17)
S.A
. cou
ld a
void
hig
h ra
tes
of u
nem
ploy
men
t if u
tiliz
es y
oung
, un
skill
ed jo
b se
eker
s an
d di
rect
them
into
the
info
rmal
sec
tor.
It se
ems
they
are
tryi
ng th
is m
etho
d bu
t stil
l rem
ain
way
bel
ow
Afri
ca, L
atin
Am
eric
a, a
nd A
sia.
W
hy?
May
be th
e so
cial
gra
nts
have
wor
ked
in th
e op
posi
te d
irect
ion-
decr
easi
ng in
cent
ives
to w
ork
and
setti
ng h
ighe
r res
erva
tion
wag
e le
vels
In a
dditi
on, m
any
hous
ehol
ds v
iew
ed p
aid
empl
oym
ent a
nd s
ocia
l gr
ants
issu
ed b
y ne
w d
emoc
ratic
gov
ernm
ent,
as c
lose
su
bstit
utes
. O
r per
haps
the
hist
ory
of th
e A
parth
eid
regi
me
has
left
its
lega
cy…
The
lega
cy o
f the
Apa
rthei
d re
gim
e w
as to
co
nfin
e bl
acks
who
did
not
alre
ady
have
a
job
to s
epar
ate
tow
nshi
ps a
nd p
reve
nt
unem
ploy
men
t to
mig
rate
into
the
urba
n ar
eas.
C
ould
it b
e po
ssib
le th
at th
is h
isto
ry d
elay
ed
the
crea
tion
of s
ocia
l and
oth
er n
etw
orks
ne
eded
to m
aint
ain
larg
e-sc
ale
info
rmal
ity.
Labo
r Uni
ons
mem
bers
hips
am
ong
Afri
can
mal
e w
orke
rs in
199
3 ar
e 14
5 pe
rcen
t hig
her
than
com
para
ble
nonu
nion
wor
kers
.In
equa
lity
in w
age
rate
s is
am
ong
the
high
est
in th
e w
orld
for S
outh
Afri
ca, w
ith A
frica
n an
d w
hite
wor
kers
rece
ivin
g w
ages
that
diff
er b
y a
fact
or o
f fiv
e.
Sou
th A
frica
’s e
cono
my
is n
ow m
ore
open
to
inte
rnat
iona
l tra
de, a
nd th
us th
e m
anuf
actu
ring
sect
or fa
ces
high
er
com
petit
ion
in im
ports
.R
odrik
(200
6) b
elie
ves
incr
ease
s in
impo
rt co
mpe
titio
n is
one
of t
he re
ason
s be
hind
the
decl
ine
in m
anuf
actu
ring’
s re
lativ
e pr
ices
.W
hat d
o yo
u th
ink?
Cap
ital d
eepe
ning
. The
sub
stitu
tion
of c
apita
l fo
r lab
or h
as b
een
parti
cula
rly m
arke
d in
tra
dabl
e ac
tiviti
es (i
nclu
ding
man
ufac
turin
g).
Now
eac
h w
orke
r has
hig
her l
evel
s of
tota
l fa
ctor
pro
duct
ivity
.
Trad
able
act
iviti
es h
ave
cons
ider
ably
hig
her
capi
tal p
er w
orke
r tha
n no
n-tra
dabl
e ac
tiviti
es.
1.) A
ppar
ent f
all i
n re
lativ
e pr
ice
of th
e m
anuf
actu
ring
sect
or.
2.) I
nter
natio
nal t
rade
ope
nnes
s ha
s in
crea
sed
impo
rt co
mpe
titio
n an
d ex
port-
orie
nted
co
mpe
titio
n.
3.) W
age
pres
sure
s ha
ve in
crea
sed
sinc
e 19
90s.
The
big
ques
tion
is, w
hat a
re p
ossi
ble
way
s to
add
ress
the
unem
ploy
men
t iss
ue?
Bot
h M
acro
and
Mic
ro p
olic
ies
are
clea
rly n
eede
d.
Mac
ro le
vel:
a co
mbi
natio
n of
mon
etar
y an
d fis
cal p
olic
y th
at
will
allo
w S
.A. R
eser
ve B
ank
to w
ork
on im
prov
ing
equi
libriu
m e
xcha
nge
rate
.Th
e su
cces
s of
Sou
th A
frica
’s e
xpor
t-led
gro
wth
stra
tegy
an
d sh
ift to
war
ds m
anuf
actu
ring
expo
rts a
way
from
prim
ary
prod
ucts
is d
epen
dent
on
mai
ntai
ning
a c
ompe
titiv
e re
al
exch
ange
rate
as
wel
l as
on th
e gr
owth
of t
he w
orld
ec
onom
y.
Man
ufac
ture
d ex
ports
and
impo
rts a
re s
trong
ly in
fluen
ced
by c
ost c
ompe
titiv
enes
s, th
eref
ore
wor
king
to
impr
ove
the
leve
rs p
rice,
cos
t and
pro
duct
ivity
will
boo
st g
row
th.
Enc
oura
ge p
rivat
e in
vest
men
t and
ent
repr
eneu
rshi
p in
new
are
as w
here
Sou
th A
frica
can
dev
elop
co
mpa
rativ
e ad
vant
age.
M
icro
fron
t: S
.A. n
eed
mor
e co
here
nt a
nd b
ette
r co
ordi
nate
d in
dust
rial p
olic
ies.
To e
nsur
e th
e ab
ove
stra
tegy
will
beco
me
a su
cces
s:
(1) g
reat
er d
isci
plin
e in
targ
etin
g po
licy
inte
rven
tion
on p
roba
ble
(2) i
mpr
ove
inst
itutio
nal s
truct
ure
to e
nsur
e (a
.) po
litic
al le
ader
ship
and
coo
rdin
atio
n at
the
top,
and
(b
) stra
tegi
c co
llabo
ratio
n at
the
botto
m w
ith
busi
ness
es a
nd s
take
hold
ers.
Ris
ing
high
em
ploy
men
t cou
ld h
ave
been
av
oide
d by
a s
ubse
quen
t dec
line
in re
al
wag
es fo
r low
-ski
lled
wor
kers
.H
owev
er, t
he a
bove
resp
onse
wou
ld h
ave
been
pol
itica
lly im
poss
ible
giv
en th
at S
outh
A
frica
was
und
ergo
ing
a de
moc
ratic
tra
nsfo
rmat
ion.
The
num
ber o
f peo
ple
in p
over
ty in
Sou
th A
frica
is
roug
hly
23.8
milli
on. O
f whi
ch, 1
1.8
live
in
hous
ehol
ds th
at re
ceiv
e no
soc
ial a
ssis
tanc
e (2
002
data
).Th
is tr
ansl
ates
to o
ver h
alf o
f the
pop
ulat
ion
in
Sou
th A
frica
live
in p
over
ty. A
n av
erag
e of
R14
4 pe
r per
son
per m
onth
. (P
over
ty b
ench
mar
k is
$1
a d
ay.)
Pov
erty
hea
vily
con
cent
rate
d am
ong
its e
thni
c gr
oup
with
61%
Afri
can,
38%
of m
ixed
race
, 5%
of
Indi
ans
and
1% w
hite
s.
Con
sequ
ently
, pov
erty
and
inco
me
ineq
ualit
y po
se th
e bi
gges
t thr
eat t
o S
outh
Afri
ca’s
yo
ung
dem
ocra
cy.
Sou
th A
frica
has
a la
rge
perc
enta
ge o
f its
pop
ulat
ion
infe
cted
with
AID
S:
31%
of p
regn
ant w
omen
are
HIV
pos
itive
20%
of a
dults
1.1
milli
on o
rpha
ns fr
om A
IDS
The
impa
ct o
f AID
’s a
nd H
IV o
n th
e po
pula
tion
are
impo
rtant
fac
tors
to c
onsi
der w
hen
addr
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