Between 1985 and 1995 the South African economy was characterised by low rates of economic growth, with an annual average growth rate of 1,2%. The economy contracted in the years 1982, 1983, 1985 and 1990 to 1992. However, the transition to democracy brought a significant upturn in the economy, with positive growth rates recorded between 1993 and 1995. GDP grew by 3,3% in 1995, and a similar growth rate is expected in 1996. However, with annual population growth at around 2,4% over the last 10 years, real per capita output is still considerably lower than it was five years ago, and is 17,3% below its 1981 peak.

Figure 1 illustrates the growth of GDP (at factor cost) and the contribution of different sectors to growth. It shows that the performance of the primary sector of the economy (mining and agriculture) has fluctuated widely. Real output in the primary sector has declined on average over the last five years, partly as a result of the prolonged drought and of low profitability in mining. The secondary sector (industry, energy and construction) declined significantly during the economic contraction of the early 1990s but has performed well in recent years, partly as a result of greater capacity utilisation. The consistent expansion of output in the tertiary sector (services) in recent years reflects the growing importance of domestic consumption and of services in driving the economy.

Figure 2 shows the contribution of various sectors to GDP in 1995. The manufacturing sector contributed the largest portion at 23%, followed by trade (15%), finance (15%), general government (14%), and mining (9%).

Various analysts have expressed concern that the recent upturn in growth is largely a cyclical phenomenon, and that levels of investment are still too low to sustain higher levels of growth over a long period. The SARB, for example, has noted that recent growth trends are "more or less in line with the average rate of increase in real production in the economic recovery of 1986-89, but much lower than in the economic upswings of the early 1980s and the late 1970s" (SARB, 1995). One of the important factors in the recent upturn is an increase in the level of capacity utilisation in manufacturing, which is illustrated in Figure 3. The current high level of capacity utilisation suggests that continued growth in manufacturing will need to be accompanied by investments in new capacity. This will require higher levels of private investment.

Recent rates of economic growth have produced only small numbers of new jobs. Given the number of new entrants to the labour market, this has meant an overall increase in the rate of unemployment. Growth in GDP and non-agricultural employment is illustrated in Figure 4 , which shows that there was a dramatic contraction of employment in the early 1990s. Between 1990 and 1993, the equivalent of 6,5% of total employment was lost in the non-agricultural sector. Although economic growth turned positive in 1993, employment growth only picked up in 1995 and then at a much lower rate than GDP. It is for this reason that the economic growth of the last few years has been termed "jobless growth".

According to Central Statistical Services (CSS), by 1995, 56% of the economically active population (EAP) was employed in the formal sector. An additional 11% were employed in the informal sector, while 33% were unemployed. Over the last 10 years, the largest employment losses have occurred in the mining industry, where employment fell from a 1987 peak of over 750 000 to less than 600 000 in 1995. There were also significant losses in state enterprises, with 122 000 jobs lost in Transnet alone between 1984 and 1994. General government and manufacturing are still the largest employers, although employment in manufacturing has shrunk substantially since 1988, while general government has grown. This is illustrated in Figure 5 .

In the manufacturing sector there has been an overall decline in employment, from a high of over 1,5 million in 1988 to just over 1,4 million in 1995. The largest losses in manufacturing employment between 1990 and 1995 were experienced in the food, textiles, other non-metallic minerals, iron and steel, and metal-products sectors. This is illustrated in Figure 6 .

There were, however, employment gains in some subsectors of manufacturing, including clothing, printing and publishing, plastics, electrical machinery, and furniture. This is illustrated in Figure 7 .

It should be noted, however, that there has been some controversy about employment numbers in the clothing and textiles sector. The figures from the CSS show a strong increase in employment in clothing, but a sharp decrease in textiles. The Southern African Clothing and Textile Workers' Union (Sactwu) has argued that there have been large employment losses in clothing, textiles and footwear as a whole, and that these have been concentrated in clothing. According to Sactwu's research, 17 700 jobs were lost as a result of retrenchment in the clothing, textiles and footwear industries between September 1995 and February 1996. Of these, 10 862 were lost in clothing, 2 130 in textiles and 4 702 in leather. It should be noted that the CSS figures reflect the situation up to June 1995 only, whereas the Sactwu figures are from September 1995. It should also be noted that the Sactwu figures are retrenchment numbers and do not reflect possible gains in the sector.

Across the economy as a whole, unemployment is skewed by race, province and gender. In 1994, 50,2% of African women and 33,6% of African men were unemployed, compared with 9,2% of white men and 4,5% of white women. Meanwhile, the rural rate of unemployment at 39,7% contrasts with rates of 25,6% and 21,3% in urban and metropolitan areas respectively. The picture by province is also skewed. Figure 8 shows that unemployment is highest in the Northern Province, the Eastern Cape, the North-West and Mpumalanga. This partly reflects the legacy of the homeland system which concentrated large numbers of people in areas where there was very little prospect of employment.

A key requirement of economic and employment growth in South Africa is a reduction in the level of inequality. South Africa is characterised by an extremely high level of inequality, largely as a consequence of the type of economic development experienced under apartheid. In global terms, the degree of income inequality in South Africa is among the highest in the world. Although there is considerable inequality within each racial group, much of the overall pattern is due to the low incomes of Africans. Judged by its Gini coefficient, which measures the degree of inequality (with a Gini coefficient of 0 signifying absolute equality and 1 indicating absolute concentration), the degree of income inequality in South Africa at 0,61 is only marginally better than that of Brazil, with a Gini coefficient of 0,63. Inequality and social indicators are shown in Table 1.

There are also high levels of inequality by gender and province. According to the CSS 1994 October Household Survey, more than half of all African households survived on R726 or less per month in 1994, compared to 32% of coloured, 21% of Indian and 12% of white households. These trends are confirmed by the results of the study "Key Indicators of Poverty in South Africa", prepared by the World Bank for the RDP office. According to this study, Africans in the bottom 20% of all households earn as little as R281 per month from regular and casual labour. This is shown in Table 2.

Gender inequalities in income are also stark, with some 59% of female-headed households living on average incomes of below R727 per month, in contrast to 35% of male-headed households. This is illustrated in Figure 9 .

High unemployment rates are clearly one of the most important causes of inequality. But unemployment is not the only factor. Another important issue is the wage gap-the disparity between the earnings of various groups among those who are employed. A 1995 study by the Community Agency for Social Enquiry (Case) compared the incomes of different race groups in enterprises of various sizes. They found that in the manufacturing sector average monthly income differed widely according to race in small, medium and large enterprises. This is illustrated in Table 3.

Table 3 shows that in the manufacturing sector there is a consistent disparity between the earnings of different race groups, no matter what size the enterprise. As firm size increases, however, earnings tend to rise for all race groups, and the wage gap between the races grows. The racial wage gap reflects, among other things, the different position of the race groups within production, and differences in skill levels and/or formal qualifications.

This analysis of the wage gap within production relies on a racial breakdown. It would be preferable to analyse the share of wages and salaries according to occupational groups (direct production workers, clerical workers, supervisors, managers, et cetera). However, at present there are no reliable statistics which allow such a breakdown. Further research may be needed here.

We have seen that although the South African economy has begun to grow after a period of decline, rates of unemployment and inequality remain high. This implies that economic policy needs to aim not only for much higher rates of economic growth, but also for a type of growth that increases the demand for labour and that reduces the gap in earnings among those who are employed.

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Table 1:

Income inequality and comparative social indicators

Table 2:

Average household total monthly wage by race and expenditure (Rand)

Table 3:

Average monthly income by number of people employed in manufacturing enterprises