Offshoring (and inshoring) within South African manufacturing firms: An analysis of the labour market effects

By Marianne Matthee, Carli Bezuidenhout, Anmar Pretorius, & Derick Blaauw

Recently, a vast body of literature has emerged on the labour consequences of off- and inshoring. Until now, due to the lack of suitable data, this topic could not be explored for South Africa. However, the newly available matched employer-employee data allows for a focus on both firm- and worker-level dynamics. The proposed research question is: “What are the labour market impacts (i.e. wages and employment levels) of offshoring (and inshoring) within South African manufacturing firms?” The SARS tax administrative data on firm-level (CIT) will be matched to the employee-level data (IRP5 certificates). This will be linked to the customs transaction data to measure offshoring and inshoring. The method will be twofold. Firstly, descriptive statistics of the manufacturing sectors’ firms and workers as well as their trading, offshoring and inshoring activities will be provided. Secondly, following Hummels et al. (2014), firm characteristics (e.g. employment and output) will be regressed on explanatory variables including offshoring and inshoring dummies. Worker-level regressions will illustrate the impact of changes in firms’ importing and exporting activities on workers. The results, interpreted within fragmented production networks, will provide insights to assist policymakers in attaining inclusive growth targets, specifically employment creation, as envisaged in the NDP and Industrial Policy Action Plan.