Gross Capital Formation and Sectoral Employment Relationship: Evidence from the South African Economy

Thomas Habanabakize, Zandri Dickason-Koekemoer


Unemployment growth is a global economic concern and a serious issue in South Africa. There are numerous strategies in support of job creation. One of these is an improvement of gross capital formation (GCF), which is assumed to enhance economic growth and create employment within various economic sectors. Nonetheless, no study has been conducted to determine the role of gross capital formation on job creation and employment sustainability in South Africa. Consequently, the novelty and core aim of this study are to analyze the impact of GCF on sectoral employment in South Africa. To achieve its objective, the study applied the autoregressive distributed lag (ARDL) model to data from 1995 to 2019. Findings revealed that an increase in GCF assists in creating long-term jobs in the construction and business enterprise sectors and causes employment changes within different economic sectors in the short term. However, the GCF does not create long-term employment in the finance, manufacturing, and mining sectors. More jobs can be created if the government increases its support and subsidies to business enterprises and construction sectors.


Keywords: capital formation, unemployment, sectoral employment, autoregressive distributed lag, South Africa.

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