Does South Africa Have the Potential and Capacity to Grow at 7 Per Cent?: A Labour Market Perspective

output has been inadequate to create sufficient job opportunities to cure the unemployment
problem. The period of economic sanctions and disinvestment, resulting in the outflow of
skilled labour and other consequences, has further worsened the situation.

The obtained results for potential output revealed the essence of the impediments on the South
African economy - the South African potential to grow has been hampered quite severely. This
is due to the sizeable constraint posed by labour market disequilibrium.

It follows that there are many facets related to the functioning of the labour market that need the
attention of policy-makers. Macro-economic stability, i.e. a situation where all the real and
financial markets in the economy are simultaneously moving towards equilibrium, will create a
climate conducive to high and sustainable economic growth (of say, 7 per cent). Presently, the
major problem in South Africa is that the labour market is in disequilibrium. This situation calls
for an appropriate combination and co-ordination of economic policy.

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