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The Impact of Structural Change on the South African Economy: Evidence from the Structural Change Indices

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Accelerated Land Reform, Mining, Growth, Unemployment and Inequality in South Africa

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Abstract

Does structural change cause growth? Evidence shows that structural change causes growth. Sector output growth responses exceed those of the structural change indices. Structural change overwhelmingly leads to output growth compared to the other way around. We establish very weak evidence that sector output growth causes and speeds up structural change. The “structural change” component has been growth reducing for the South African economy indicating that the direction of labour flows is negatively correlated with labour productivity growth in individual sectors. The implications for the aggregate economy have been such that displaced labour ends up in activities with lower productivity, informality and unemployment. Hence the economy-wide growth suffers and may even turn negative.

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Notes

  1. 1.

    Labour productivity growth in an economy can be achieved (i) within economic sectors through capital accumulation, technological change or reduction of resource misallocation across firms and (ii) labour mobility across sectors, from low-productivity sectors to high-productivity sectors thus increasing overall labour productivity in the economy.

  2. 2.

    See evidence in part four of the book on the role of the mining sector contribution to exports earnings, investment, output and employment growth.

  3. 3.

    The role of the agricultural sector in aggregate growth and employment is explored in later chapters of this book.

  4. 4.

    The NAV is also referred to as the Michaely index (Michaely 1962) or Stoikov index (Stoikov 1966).

  5. 5.

    The Henderson filter which is a centred filter whose lag coefficients are selected to minimise the sum of squared third differences of the lag coefficients for the class of symmetric lag polynomials which pass third order polynomials through without change.

  6. 6.

    The results for the real gross value-added are shown in Fig. 9.8.

  7. 7.

    We explore the agricultural sector employment dynamics, the role of land reform and redistribution as forms of policy interventions to address the structural issues in the agricultural sector in further detail in later chapters.

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Author information

Authors and Affiliations

  1. South African Reserve Bank, Pretoria, South Africa

    Nombulelo Gumata & Eliphas Ndou

  2. Wits Plus, University of the Witwatersrand, Johannesburg, South Africa

    Eliphas Ndou

  3. School of Economic and Business Sciences, Johannesburg, South Africa

    Eliphas Ndou

Authors
  1. Nombulelo Gumata
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  2. Eliphas Ndou
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Appendix

Appendix

Fig. 9.8
figure 8

Real gross value added structural change indices. (Source: Authors’ calculations)

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Fig. 9.9
figure 9

Sector labour productivity growth rates. (Note: EG&W = electricity, gas and water; WRC&A = Wholesale and retail trade, catering and accommodation sectors; TS&C = Transport, storage and communication sector; and FIRE&B = finance, insurance, real estate and business service sectors. Source: Productivity SA and authors’ calculations)

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Fig. 9.10
figure 10

Sector shares of employment. (Source: South African Reserve Bank, BFAP 2011 and authors’ calculations)

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Gumata, N., Ndou, E. (2019). The Impact of Structural Change on the South African Economy: Evidence from the Structural Change Indices. In: Accelerated Land Reform, Mining, Growth, Unemployment and Inequality in South Africa. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-30884-1_9

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  • DOI: https://doi.org/10.1007/978-3-030-30884-1_9

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  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-030-30883-4

  • Online ISBN: 978-3-030-30884-1

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