Investigating the drivers of firm-level employment in South Africa: The role of capital investment, exports and R&D

by Karmen Naidoo

A central challenge for South Africa is job creation, which is affected by both domestic and global economic factors. This study investigates two related research questions. First, how is firm-level employment growth associated with changes in capital investment, relative factor utilization and demand? Second, what is the impact of export orientation and R&D investment on firm-level employment growth? In the first section of the study, the focus is to understand some of the key correlates of firm employment growth that primarily relate to domestic factors. The second section extends this analysis to include the role of trade and innovation. Whilst increasing the level of investment is bound to be an important feature of South Africa’s economic policy, this study considers that relative changes in investment in different types of firm capabilities may yield different employment outcomes. In addition, there may be important linkages to consider between an export-oriented policy approach and innovation policy. Through linking the knowledge generated by this study to the institutional setting around incentivizing innovation in South Africa, policy recommendations will be derived.