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South Africa’s Growth Paradox

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  • Mdu Biyase
  • Lumengo Bonga-Bonga

Abstract

South Africa has achieved a lot since 1994, when ANC-led government took office. The Performance of the economy since 1994, as measured by the growth rate, has been encouraging with an average growth rate of approximately 2.8% per annum. The inflation rate has been recently under control at between 3% and 6% per annum, the inflation target set by the South African Reserve Bank (SARB). Despite this success problems of unemployment and poverty are still very much with us and have not yet begun to diminish unambiguously. Poverty is around 45% to 50% while broad unemployment rate is somewhere around 26% to 40%. This paper attempts to reexamine the debate on whether SA is experiencing jobless or job creating growth in the context of Okun’s law. Making use of the Structural Vector Autoregressive (SVAR) technique to characterize the dynamics of employment in response to output shocks, this study concludes that while an increase in output increases total employment in general; nevertheless there are some sectors (such as primary and secondary sectors) where the impact of output shocks has been negligible.

Suggested Citation

  • Mdu Biyase & Lumengo Bonga-Bonga, 2007. "South Africa’s Growth Paradox," DEGIT Conference Papers c012_043, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c012_043
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    File URL: http://degit.sam.sdu.dk/papers/degit_12/C012_043.pdf
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    References listed on IDEAS

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    1. Elsabé Loots, 1998. "Job Creation and Economic Growth," South African Journal of Economics, Economic Society of South Africa, vol. 66(3), pages 155-163, September.
    2. Richard B. Freeman & William M. Rodgers, 2005. "The weak jobs recovery: whatever happened to "the great American jobs machine"?," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 3-18.
    3. D. Mahadea, 2003. "Employment And Growth In South Africa: Hope Or Despair?," South African Journal of Economics, Economic Society of South Africa, vol. 71(1), pages 21-48, March.
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