How productive is SA?

The National Productivity Statistics covers the period of 1996 – 2005, and provides a comprehensive overview and analysis of the productivity position of the key economic sectors of the South African economy, and offer some explanation on the trends revealed.

The main sectors under spotlight in this study include:

1. the primary sector (agriculture, fishing, forestry, mining and quarrying)
   
2. the secondary sector (manufacturing, electricity and gas)
   
3. the tertiary sector (wholesale, retail trade & accommodation sector; transport, storage and communication sector & finance, real estate and business services sector)
   

Analysis of productivity improvements of key sectors of an economy are vital to understand and assess the impact of labour, capital and multifactor productivity on economic growth, job creation and the standard of living of the South Africans. Sustainable improved productivity in the long-run is associated with high economic growth rates and improved living standards.

Productivity SA highlighted that, over the recent years, the South African economy has undergone significant macroeconomic reform and trade liberalisation. Amongst other significant events, in 1994, South Africa became a democratic society with the change to the new government of national unity, and it's events like these that had important implications for the domestic economy's macroeconomic policy and sectoral policy reforms, which have an impact on different economic sectors.

Subject to contagion

As a small open economy, South Africa is subject to contagion from international influences such as the significant depreciation of the local currency in 1995, 1998 and financial crisis in 2001. However, from 1996 – 2005, dramatic improvements happened when real output grew on average by an annual rate of 3.9% while multifactor productivity grew at an average annual rate of 3.0%. Both labour and capital productivity attained substantial average annual growth rates of 3.6% and 2.6% respectively.

For the private economy as a whole, employment levels were adversely affected in the latter half of the 1990s and declined from 6 034 156 in 1996 to 5 799 423 in 2000. Employment levels, however, made a positive comeback in 2002 and went up to 6 159 135 by 2005, showing a small growth of 1.3% in capital inputs. It appears that the economy as a whole became less capital-intensive due to lower capital investments during this short-run period as illustrated by the annual growth rate of 1.0% in the capital-labour ratio, which declined compared to the 1.8% for the period between 1989-1995.

The economy-wide relationship between output growth and productivity growth has been positive. Improvements in labour productivity contributed largely to improvements in multifactor productivity and output performance.

Summary of the main findings (for the period of 1996 – 2005):

• Growth in Agriculture, forestry and fishing, Mining and quarrying, Manufacturing, Wholesale and retail trade, etc has largely been assisted by growth in multifactor productivity.

• Growth in mining and quarrying, construction, manufacturing, transport, storage and accommodation services has been strengthened by growth in labour productivity.

• Growths in electricity, gas and water as well as finance, real estate and business services have been largely supported by growth in multifactor productivity.

• Substantial job losses were experienced in construction, mining and quarrying, manufacturing and agriculture, fishing and forestry. This may be due to the substantial structural reforms that took place in these sectors.

• Within manufacturing at the sub-sectoral levels there seem to be no clear relationship between output growth and multifactor productivity growth.

• Motor vehicles, parts and accessories, basic iron and steel, basic precious and non-ferrous metals and wood products were the four fastest growing manufacturing sub-sectors in terms of output growth.

• The worst output performers within manufacturing were footwear, printing and publishing, clothing and other transport equipment and textiles. In these instance poor output growth has been associated with low productivity growth.

• The tertiary (services) sector, which include transport, storage and communication; finance, insurance, real estate and business services; and wholesale and retail trade, catering and accommodation, were the strongest performing sectors in the economy. However, growth in only the transport, storage and communication sector has been underpinned by multifactor productivity growth. Growth in finance, insurance, real estate and business services has been mainly facilitated by growth in additional labour inputs, while growth in wholesale and retail trade, catering and accommodation services occurred as a result of a balanced combination of labour and capital inputs that resulted in productivity improvements and consequently output growth.

• Employment growth occurred in finance, insurance, real estate and business services and wholesale and retail trade, catering and accommodation services. This is not surprising since these two sectors were ranked amongst the top three performers in the economy. By contrast, employment growth declined in transport, storage and communication sector despite the sector's strong output performances.