Decent employment through inclusive economic growth

NATIONAL DEVELOPMENT PLAN OUTCOME 4

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In 2030, South Africa’s economy is inclusive and dynamic. The fruits of growth are shared fairly. The economy has close to full employment, equips people with the skills they need, ensures the ownership of production is more diverse and able to grow rapidly, and provides resources to pay for investment in human and physical capital.

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Economy and employment – Downloads

Find out more about the National Development Plan.

National Development Plan – full text
National Development Plan – Chapter 3: Economy and employment
Medium-Term Strategic Framework 2014 to 2019 – Outcome 4: Decent employment through inclusive economic growth
Framework of the New Economic Growth Path
New Growth Path booklet
Industrial Policy Action Plan
Summary of the National Infrastructure Plan
Infographic: Economy and employment

Economy and employment – The vision

The National Development Plan’s vision is that, in 2030, long-term accelerated economic growth has reduced unemployment and inequality and helped create a more inclusive society. This is in part due to diligent work in carrying out growth plans such as the New Growth Path, the Industrial Policy Action Plan and the National Infrastructure Plan.

By 2030:

• The unemployment rate should fall from 24.9% in 2012 to 6% in 2030. This will require an additional 11-million jobs. Total employment should rise from 13-million to 24-million.
• The proportion of adults working should increase from 41% to 61%.
• The proportion of adults in rural areas working should rise from 29% to 40%.
• The labour force participation rate should rise from 54% to 65%.
• Gross domestic product (GDP) should increase by 2.7 times in real terms, requiring average annual GDP growth of 5.4% over the period. GDP per capita should increase from about from about R50 000 per person in 2010 to R110 000 per person in 2030 in constant prices.
• The proportion of national income earned by the bottom 40% should rise from about 6% today to 10% in 2030.
• Broadened ownership of assets to historically disadvantaged groups:
– Exports in volume terms should grow by 6% a year to 2030. Non-traditional exports should grow by 10% a year.
– National savings should rise from 16% of GDP to 25%.
– The level of gross fixed capital formation should rise from 17% to 30%, with public sector fixed investment rising to 10% of GDP by 2030.
– Public employment programmes should reach 2-million people.

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Economy and employment – The challenges

Since 1994, the South African economy has grown at the average for middle-income economies, after a period of extremely slow growth from 1976 to 1984.

Job creation has picked up, so that the share of working age adults with employment stabilised at just over 40% after falling from the late 1970s through 1994.

Still, the global norm is around 60%, and jobs growth has not been strong enough to raise the level of employment qualitatively from the low levels inherited in 1994. Investment rose from 13% of GDP in 1994 to around 20% in 2012.

While exports climbed from 15% of GDP to 18%, imports also increased funded largely by short-run capital inflows into equity and bonds. The result has been a relatively large trade deficit, especially from the mid-2000s.

Despite these gains, extraordinarily high levels of inequality, poverty and unemployment persist. These carry severe risks: workplace conflict, policy contestation, crime, corruption and social unrest.

South Africa has also failed to reap a demographic dividend by harnessing the potential of a proportionately large cohort of working-age youth.

Achieving significantly higher growth is necessary, although not sufficient, to address these core socioeconomic challenges. The NDP targets growth at over 5%.

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Economy and employment – Action required

To pave the way for accelerated economic progress, South Africa must make tough decisions involving both compromises and trade-offs. These decisions are broadly captured in the NDP, with specific proposals in the New Growth Path, Industrial Policy Action Plan and National Infrastructure Plan.

But many economic factors lie outside the control of the government – some originate outside the country altogether. Nonetheless, it is important to develop consistent, efficient and effective strategies to support growth with job creation and equity.

Specific action includes:

• Reduce the cost of living for poor households and costs of doing business through microeconomic reforms.
• Develop proposals for an acceptable minimum standard of living and proposals on how to achieve this over time.
• Remove the most pressing constraints on growth, investment and job creation, including energy generation and distribution, urban planning etc.
• Position South Africa to attract offshore business services, and build on the advantage provided by its telecommunications, banking and retail firms operating in other countries.
• Increase the benefit to the country of our mineral resources by giving clear certainty over property rights (the right to mine); increasing rail, water and energy infrastructure; and structuring a taxation regime that is fair, equitable and predictable and that recognises the non-renewable nature of mineral resources.
• Broaden the expanded public works programme to cover 2-million fulltime equivalent jobs by 2020.
• Offer a tax incentive to employers to reduce the initial cost of hiring young labour market entrants. Facilitate agreement between employers and unions on entry-level wages.
• Give a subsidy to the placement sector to identify, prepare and place matric graduates into jobs.
• Business and labour to develop their own proposals to reduce youth unemployment.
• Adopt a more open immigration approach to expand supply of high-level skills.
• Adopt an approach to handling probationary periods that reflects the intention of probation.
• Simplify dismissal procedures for nonperformance or misconduct, especially for smaller firms.
• Strengthen dispute resolutions mechanisms in the labour market with a view to reducing tension and violence.

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Economy and employment – Key medium-term goals for 2019

South Africa’s Medium Term Strategic Framework (2014 to 2019) identifies the following sub-outcomes to ensure decent employment through inclusive economic growth.

• Productive investment is effectively crowded in through the infrastructure build programme.
• The productive sectors account for a growing share of production and employment.
• The elimination of unnecessary regulatory burdens and lower price increases for key inputs and wage goods fosters business confidence, reduces costs for working people and producers, and sustains investment and economic growth.
• Workers’ education and skills increasingly meet economic needs.
• Spatial imbalances in economic opportunities are addressed through expanded employment in agriculture, the build programme and densification in the metros.
• Macroeconomic conditions support employment-creating growth.
• Workplace conflict is reduced and collaboration between government, organised business and organised labour improves.
• Economic opportunities for historically excluded and vulnerable groups are expanded and the growth and development in small business and cooperatives is improved markedly.
• Public employment schemes provide relief for the unemployed and build community solidarity and agency.
• Investment in research, development and innovation supports inclusive growth by enhancing productivity of existing and emerging enterprises and supporting the development of new industries.

Economy and employment – Key medium-term targets for 2019

South Africa’s Medium Term Strategic Framework (2014 to 2019) identifies the following targets to ensure decent employment through inclusive economic growth.

04 economy targetsGRAPHIC: MARY ALEXANDER

 Researched, edited and compiled by Mary Alexander
Updated December 2015