to increase employment, particularly in the unskilled labour segment. This increase in
employment levels is of great importance given South Africa’s labour market problems.
However, the concern is that this increase in employment levels might only be a short term
phenomenon. South Africa’s long term structural unemployment will not be solved by the
hosting of a mega-event such as the World Cup, but it will definitely ease the problem in the
short term. Alternative means such as the improvement in education and overall factor
productivity remain the only true measures of addressing the unemployment issue. Inflation
will tend to decrease due to the higher levels of productivity caused by the various shocks.
The price level of goods and services (p3tot), and nominal wages (p1lab_iop) both decrease
with 0.60 percent. The decline in the general level of prices is due to the increase in
productivity, and the fact that real wages is held constant in this model closure, forces
nominal wages to decline with the same amount. The increase in total exports is directly
attributable to the increase in international competitiveness (p0realdev) of locally produced
goods and services. Lower costs of domestic goods would as theory predicts, lead to an
increase in demand from foreign countries and therefore an increase in total domestic
exports.
When examining the changes to real GDP from the expenditure side through the
contGDPexp variable, the contribution of each sector to the GDP can be isolated. The results
are shown in the table below.
Table 1.2 Contribution to changes in GDP from the expenditure side
|
ContGDPexp |
scenario 1 |
scenario 2 |
scenario 3 |
|
Consumption |
0.10 |
0.14 |
0.22 |
|
Investment |
0.17 |
0.08 |
0.24 |
|
Government |
“Ô |
“Ô |
^δ |
|
Stocks |
^0 |
^0 |
^0 |
|
Exports |
0.34 |
0.36 |
0.69 |
|
Imports |
-0.10 |
0.07 |
-0.17 |
The increase in investment of 0.24 percent in scenario 3 percent is simply due to the shock
applied to the capital stock of both the construction and transport industries, and would
otherwise have been zero given the nature of the short run closure3. Consumption increases
due to the relative decline in prices and higher employment levels. Government and stocks
are both exogenous in the closure and changes in these variables are therefore zero. Due to
the relatively lower domestic prices, as indicated by the p3tot variable in Table 1.1, the
foreign demand for local exports has increased with 0.69 percent overall. The demand for
imports has also decreased due to the now relatively cheaper domestic goods. The net effect
3 The variables x1cap(“constr”) and x1cap(“transser”) in the UPGEM model were each shocked with 10 percent.