Capital Intensity in South African Manufacturing and Unemployment, 1972-1990

Abstract

This paper explores the changing structure of investment and employment in South Africa's manufacturing sector during 1972-1990. It considers the hypotheses that poor employment performance and high levels of capital intensity have arisen as a consequence of the overexpansion of capital-intensive sectors and distorted factor prices. In the main, these hypotheses are rejected. Instead it is argued that poor employment performance arises largely from political factors which have dulled the private sector's investment in labor-intensive sectors, have stifled the development of the informal sector, have held back productivity growth in manufacturing, and have reduce the inflow of foreign direct investment. Although the paper is not primarily focused on the emerging policy agenda in the postapartheid era, the data contained in this analysis would not appear to support the beliefs either that wages should be reduced or that the state should refrain from actively affecting allocative decisions. © 1995.