Sectors and structural change
Growing agriculture can reduce poverty, create economic opportunities in rural and peri-urban areas, and boost employment, particularly for semi- and unskilled workers. We review several successful joint ventures across South Africa which comprise a range of partnerships between smallholders, commercial farmers, agribusinesses, industry associations and government. Many of these partnerships have generated significant returns and transformational benefits. Well-designed joint ventures can complement existing government initiatives to drive more rapid agrarian transformation and increase production.
While the share of capital increased, labour’s share of total income earned in South Africa fell significantly during the first two decades after 1994. These trends could contribute to a deterioration of income inequality, given that the ownership of capital – and thus the income from capital – is concentrated in fewer individuals than is the case with salaries and wages. This article explores labour’s falling share, with particular reference to the manufacturing and mining sectors.
In developing countries, agricultural growth is generally employment intensive and pro-poor but this sector in South Africa has been subject to a drastic decline in tariffs, pricing, infrastructure and other forms of support. This has not been compensated for by alternative measures such as expenditure aimed at facilitating small-scale agriculture and effective land reform. The result has been poor economic performance and rapidly declining employment in commercial agriculture with little sign of revival in the small-scale sector.
There is a widespread view that countries no longer need to industrialise in order to develop. However, in South Africa manufacturing remains the core driver of GDP growth and direct employment while other sectors – particularly many services sectors – are likely to increase employment on the basis of growing demand flowing from a growing GDP. A nuanced understanding of the direct and indirect linkages through which diversified manufacturing growth can boost economy-wide employment is essential.
Average wages in agriculture have risen substantially in all provinces since the introduction of minimum wages in 2003 - the gap between the actual and the minimum wage has declined significantly. Compliance has been highest in the Western Cape and Gauteng, where average agricultural wages were close to or above the minimum wage even before it was introduced and wages have continued to rise thereafter. Although enforcement appears to have had a limited impact due in part to limited penalties, more effective inspection would be an important way to improve compliance.