Could this be the latest South African economic buzzword? Structural transformation, that is. The United Nations Human Settlements Programme (UN-Habitat) defines it thus: “The transition of an economy from low productivity and labour-intensive economic activities to higher productivity and skill-intensive activities.
”It adds: “Structural transformation is also characterised by the movement of the workforce from labour-intensive activities to skill-intensive ones. The movement of labour is severely affected by the existence of opportunities in skill-intensive sectors because, even if these opportunities exist, labour might only move to a new sector if it is properly trained to be absorbed by the sector. The existing labourforce would therefore require training before moving to the new sector.”
The United Nations Conference on Trade and Development reminds us in The Structural Transformation Process: Trends, Theory, and Empirical Findings that “the quest for economic development is among the primary objectives of nations [and] improving people’s wellbeing and socioeconomic conditions is therefore one of the crucial challenges facing policymakers today”.
On September 21, Finance Minister Enoch Gondongwana delivered the keynote address at the launch of the book Structural Transformation in South Africa: The Challenges of Inclusive Industrial Development in a Middle-Income Country. He said the current state of the South African economy is unsustainable, pointing to real gross domestic product per capita declining since 2015, productivity growth having been slow and appearing to be slowing further, and the unemployment rate having increased to a record high of 34.4%. What he did not explain is that South Africa’s unemployment rate is the highest on a global list of 82 countries monitored by Bloomberg. Nor did the Minister add that, according to the expanded definition, which includes people who are available for work but not looking for a job, the rate is 44.4%.
Part of South Africa’s policy response – and this is where structural transformation comes in – places emphasis on fundamentally transforming the structure of the economy, moving from low-growth and low-labour-absorbing sectors to high-growth, high-productivity and greater-labour-absorption sectors.
The other part must be how South Africa upgrades to higher-value-added activities within sectors. If the country achieves this objective, South Africa apparently stands a great chance of catapulting its economy on to a path of inclusive growth, sustainability and global competitiveness.
The chapters of the book will apparently strengthen South Africa’s response: 1. Framing structural transformation in South Africa and beyond; 2. Structural change in South Africa: A sectoral historical perspective; 3. Metals, machinery, and mining equipment industries in South Africa: The relationship between power, governance, and technological capabilities; 4. Leveraging linkages for developing plastic products: An assessment of backward input linkages from polymers and forward output linkages to the automotive industry; 5. Government policy in multinational-dominated global value chains: Structural transformation within the South African automotive industry; 6. The industrialisation of freshness and structural transformation in South African fruit exports; 7. Sustainability and green capital accumulation: Lessons from the South African wine value chain; 8. Structural transformation, economic power, and inequality in South Africa; 9. Black economic empowerment, barriers to entry, and economic transformation in South Africa; 10. Profitability without investment: How financialisation undermines structural transformation in South Africa; 11. The middle-income trap and premature deindustrialisation in South Africa; 12. Digitalisation, industrialisation, and skills development: Opportunities and challenges for middle-income countries; 13. Global value chains, ‘in-out-in’ industrialisation, and the global patterns of sectoral value addition; 14. The political economy of structural transformation: Political settlements and industrial policy in South Africa; and 15. Towards a new industrial policy for structural transformation.
The Minister concluded by citing government’s belief that structural transformation should be placed at the heart of the economic development agenda.
I can but offer an unattributable quote: “Keep statistics away from your dreams.”