Tuesday, March 26, 2019

Paths to Employment Expansion in a Minerals Economy

Urban Forum, 12 (3-4), July – December, 2001, Vol 12, issue 3-4, pp. 314 – 335.

It is not surprising that South Africa has not attracted sufficient foreign investment to induce higher growth rates and absorb its substantial labour surplus. It can be characterised as a minerals economy, primarily attracting resource-based investments and government induced opportunities. The minerals rents enabled the government to by-pass the development of labour absorbing sectors in favour of highly capital intensive energy and chemicals industries: now the cost structure is inappropriate for the mass creation of jobs in labour intensive low productivity exports.How can SA shift from its current base as a minerals exporter, attracting capital intensive resource based investments, to a more labour absorbing trajectory? It is argued that SA must use its points of leverage as a minerals economy to shift to this path. The path would entail the promotion of high value exports, with substantial transfers into low productivity non-tradeables.The core of higher productivity investments must be promoted to induce the required growth rates, underpin national income and reduce vulnerability in global markets. These investments are difficult to attract to a minerals economy that has weak clusters, low skill levels and a small domestic and regional market. The high value tradeables would be promoted with a targeted technology policy that enables the re-orientation of existing know-how to higher growth applications, cluster development and international joint ventures. The use of government procurement is an important tool in this regard. The high value industries generate income and foreign exchange to support low productivity, labour intensive non-traded goods. A ‘social contract’ will be required to underpin society’s acceptance of large transfers from high to low productivity sectors.

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