NEDLAC RELEASES SURVEY OF SOCIAL AND ECONOMIC DEVELOPMENTS

30 May 1996

Nedlac today releases its first annual report on key social and economic developments in South Africa.

According to Nedlac Executive Director Jayendra Naidoo, the work of Nedlac and all its constituents takes place in a rapidly changing environment. "Policy debates at Nedlac must therefore be informed by ongoing analysis of trends in the economy and society. This report contributes to that process by documenting developments at the macroeconomic level as well as in specific areas of concern to Nedlac," he says.

The report brings together important information on South Africa's economic development and on progress towards achieving the goals of reconstruction and development. This information has not previously been available to the public in such a comprehensive and accessible manner.

The report is compiled in three parts:

• The first part looks at the key themes of growth, employment and equity, which are of critical concern to all the Nedlac constituencies.
• The second part provides an overview of developments in the economy over the last decade.
• The third part examines current conditions pertaining to Nedlac's four main areas of work: public finance and monetary policy, trade and industry, labour market, and development.

"The first section of the report highlights the need to address unemployment in our country," says Naidoo. "The high level of unemployment is a crucial factor contributing to extreme inequality in the distribution of income and resources. South Africa's high levels of inequality are also fostered by a range of other factors, including wide wage gaps between the incomes of different groups among the employed, and unequal access to infrastructure and services."

The report shows that the economic upturn saw some job creation but that the rate of employment growth was below the rate of growth in the economy. Overall unemployment continued to grow, with fewer jobs being created than the number of new entrants to the labour market.

The second part of the report indicates that fixed investment has declined significantly as a proportion of GDP. Although there has recently been a strong improvement in private investment, the 1995 level of 16,9% remains below the levels of close to 23% achieved in the mid-1980s. Another important issue is that, in 1995, imports rose faster than exports and the economy became increasingly dependent on inflows of foreign capital. In order to maintain current levels of imports, the rate of export growth, especially of value-added products, will need to be increased. The section goes on to highlight areas of potential growth.

Naidoo points out that the report also highlights some important opportunities. "Capacity utilisation in manufacturing has risen from 78% in 1993 to 84% in 1995. This implies that new capacity is needed for increased volumes of production, and this may help to encourage investment and job creation if producers can secure larger markets for their products. Another important opportunity is that labour productivity has been rising more quickly than wages since 1992. Although this is usual in an economic upturn, it is an important contributor to the lower rate of inflation," he says.

The third part documents important developments in the labour market, trade and industry policy, public finance and monetary policy, and development. The labour market section shows that minimum wage determinations for various industries range from R264 to R617 per month. Minimum rates negotiated at registered industrial councils range between R104 and R366 per week. The trade and industry section shows the levels of Geis payments from 1992 to 1995, and shows that in each year, more than 60% of the total payment went to 10 sectors. The public finance section shows that the contribution of personal income tax to government revenue has risen from 7% of GDP in 1989-90 to over 10% in 1995-96. Direct company taxes have declined from 4% to 2,8% in the same period. The development section provides information on service and infrastructure backlogs and current levels of delivery in electricity, housing, water and sanitation and education.