THE IMPLICATIONS OF GLOBALISATION ON SOUTH AFRICAN GENDER AND ECONOMY: A COMPUTABLE GENERAL EQUILIBRIUM (CGE)ANALYSIS GODBERTHA K.

Transcription

1 THE IMPLICATIONS OF GLOBALISATION ON SOUTH AFRICAN GENDER AND ECONOMY: A COMPUTABLE GENERAL EQUILIBRIUM (CGE)ANALYSIS by GODBERTHA K. KINYONDO Thess submtted n partal fulflment of the requrements for the degree of PhD (ECONOMICS) n the FACULTY OF ECONOMICS AND MANAGEMENT SCIENCES at the UNIVERSITY OF PRETORIA STUDY ADVISOR: Professor. Dr. M. Chtga PRETORIA JULY 2007

2 DEDICATION Ths thess s dedated to the memory of my loved ones: My father: Omuhes Johesaphat Bshashaga Knyondo My brother: The Honourable Sebastan Rukza Knyondo My sster: Chrstna Kokulengya Knyondo My mother-n-law: Harret Peuse My nephew: Rhard Muhelej MAY YOUR DEAR SOULS REST IN PEACE APPRECIATION I am grateful to the Internatonal Food Poly Researh Insttute for provdng aess of ther general model. Ther ourses on eonomy-wde modelng have benefted me enormously n terms of ondutng my study. My speal appreaton goes to Hans Löfgren who was able to spare hs busy tme at the World Bank n Washngton DC to explan the model and ts adjustments to gender ssues. Thanks also go to James Thurlow for respondng to my queres onernng the South Afran soal aountng matrx. I thank my supervsor, Prof. Dr. Margaret Chtga who saw me through the hallenge of my researh. Her feedbak and gudane throughout the researh proess are greatly appreated. I thank, too, Dr. van Lnde of the Statsts department for the assstane n proessng the survey data. I thank Professor Van Heerden for ntrodung me to CGE and hs ablty to teah adult learners. He showed maturty n the way he dreted hs teahngs. My speal thanks go to my famly, Dr. Gene Peuse, my sons Mulokoz and Iman who have supported me both fnanally and emotonally. My husband s onstant enouragement and patene gave me the motvaton to persevere n gettng the model operatonal. I thank my mother, brothers, ssters, frends and Ruta who have enouraged and prayed for me n order to aomplsh ths task. All the thanks, however, goes to my God who gudes and protets me n every way of my lfe. Godbertha K. Knyondo

3 ABSTRACT Usng a Computable General Equlbrum model, ths study analyses the effets of globalsaton on gender and the South Afran eonomy, dsaggregated nto 49 setors. The analyss assesses the effets of three poles: full trade lberalsaton, nreased produtvty, and lberalsaton under Doha Round ommtments. Trade lberalsaton results n ontraton of mport-ompetng, labour-ntensve setors, resultng n job losses. Some losses are offset by nreased employment demand n expandng export-orented and serve setors. All skll types, partularly unsklled women, wtness growth of employment, hene mproved earnngs. Sklled men gan the most and unsklled women the least due to ther ntal lower wages, greater job losses n women-ntensve setors and reloaton to low-payng postons. Eonomy-wde produtvty s expansonary, resultng n nreased employment demand and earnngs of all skll types for men and women, wth sklled men ganng the most. A produtvty rse dreted at only a few setors ontrbutes to job losses for all skll types, but as effent setors expand, nputs are demanded from lnked and serve setors, leadng to overall eonom mprovement hene eonomy-wde job reaton whh offset job losses. If world pres n agrulture nrease under the Doha Round, produton and exports of agrultural ommodtes suh as maze nrease, resultng n employment demand of all skll types for men and women, who reloate from mnng and manufaturng to the proftable agrultural setor. The benefts however wll follow the extent of pre rse due to offsettng domest poly of tarff reduton, oupled wth the abolshed poles of domest support and subsdes. Doha results n a slght mpat at the aggregate level. Globalsaton mproves household welfare, where hgh-nome households gan from ownershp of aptal and sklled labour, whle poor-households gan from employment growth of unsklled labour and redued domest pres enabled by heap mports. Where globalsaton results n nreased employment for women, even unsklled women, who earn far less than ther sklled ounterparts, report greater autonomy and sense of an mproved personal and household deson-makng. Therefore, promotng greater job remuneraton and equty between genders requre approprate eduaton, tranng and olletve-barganng so as to reverse gender setbaks hene enablng full partpaton of all n a globalsed eonomy.

4 TABLE OF CONTENTS CHAPTER 1 INTRODUCTION TO THE STUDY INTRODUCTION THE PROBLEM STATEMENT OBJECTIVES OF THE STUDY SOUTH AFRICAN TRADE REFORMS Introduton Sgnfane of trade reforms South Afra s progress n trade reforms Progress n trade reforms Exports and employment TRADE REFORMS IN RELATION TO AGRICULTURE The Doha Round of multlateral trade negotatons AGRICULTURAL TRADE REFORMS IN SOUTH AFRICA SOUTH AFRICAN AGRICULTURE AND GENDER GLOBALISATION: PRODUCTIVITY AND FOREIGN DIRECT INVESTMENT (FDI) Produtvty Trends of FDI n South Afra ( ) Government nentves to FDI OVERVIEW OF THE SOUTH AFRICAN ECONOMY Growth as measured by GDP MACROECONOMIC POLICIES Fsal poly Monetary poly Interest rates Inflaton Current aount Exhange rate Investment nentves Trade Unons Organsaton of the study CHAPTER 2 SOUTH AFRICA AND GENDER INTRODUCTION Poltal representaton and government leadershp EMPLOYMENT AND REMUNERATION Employment by ndustry Employment by oupaton... 33

5 2.2.3 Remuneraton EDUCATION TRADE UNIONS CHAPTER 3 LITERATURE REVIEW INTRODUCTION AGRICULTURE TRADE POLICY (CGE) MODELS The Doha Round Effets of the Doha Round on agrulture: CGE analyss CGE models: Trade poly n eonom setors and gender Partal equlbrum models and trade poly Trade poly and wages Trade poly and sklls FOREIGN DIRECT INVESTMENT (FDI) Importane of produtvty Determnants of total fator produtvty Theoretal framework of FDI Lterature on FDI and produtvty FDI n relaton to wages, sklls and employment SUMMARY CHAPTER 4 DATABASE DEVELOPED FOR THE GENDERED CGE MODEL INTRODUCTION THE SOCIAL ACCOUNTING MATRIX (SAM) THE 2000 SOCIAL ACCOUNTING MATRIX FOR SOUTH AFRICA The ontents of the 2000 South Afran gendered SAM Commodtes demanded by household and government DISAGGREGATION OF AGRICULTURE INTO SUB-SECTORS Data requrements Intermedate nputs Captal and labour data Agrultural mports tarffs and export subsdes Data on elasttes of substtuton n agrulture BALANCING THE SAM RAS Approah to estmatng mro SAM APPENDIX CHAPTER 5 THE SOUTH AFRICA COMPUTABLE GENERAL EQUILIBRIUM (CGE) MODEL INTRODUCTION... 86

6 5.2 THE CGE MODEL STRUCTURE THE STRUCTURE OF THE SOUTH AFRICAN CGE MODEL Modfatons to the standard onventonal South Afran model THE MODEL EQUATIONS Pre equatons Produton and trade blok The nsttuton blok Fator nome earnngs The maroonstrant blok GENERAL MACROECONOMIC BALANCE THE CLOSURE RULES FOR THE GENDERED MODEL Analysng the smulaton results APPENDIX CHAPTER 6 A CGE ANALYSIS: EFFECTS OF TRADE LIBERALISATION ON THE ECONOMY AND GENDER: FACTOR MOBILITY CONSIDERATIONS INTRODUCTION STUDY POLICY SIMULATIONS SIMULATIONS RESULTS: FULL TRADE LIBERALISATION (SIM 1) Government and maroeonom results (SIM 1) General smulaton results (SIM 1) Full tarff reduton: full employment and moble fators (SIM 2) Comparson: Fxed fators vs. full employed and moble fators CONCLUSION APPENDIX 6 (A) APPENDIX 6 (B) CHAPTER 7 THE IMPACT OF A PRODUCTIVITY RISE ON SOUTH AFRICAN GENDER AND ECONOMY INTRODUCTION THE MODEL POLICY SIMULATIONS SIMULATION RESULTS OF ECONOMY-WIDE FACTOR PRODUCTIVITY RISE Maroeonom results: fator produtvty rse eonomy-wde ( SIM 1) Employment hanges due to fator produtvty rse Gender Employment hanges due to eonomy-wde fator produtvty rse Change n wages and fator earnngs due to fator produtvty rse Results of fator produtvty rse n seleted setors (SIM 2) Employment hanges due to fator produtvty rse n seleted setors Gender employment hanges due to fator produtvty rse n seleted setors

7 7.3.8 Wages and fator earnngs hanges due to fator produtvty rse EQUIVALENT VARIATION: FACTOR PRODUCTIVITY RISE (SIM 1 AND SIM 2) Conluson APPENDIX 7 A APPENDIX 7(B) CHAPTER 8 THE DOHA ROUND AND ITS EFFECTS ON AGRICULTURAL SUB SECTORS AND GENDER IN SOUTH AFRICA INTRODUCTION SIMULATIONS: THE IMPLEMENTATION OF THE DOHA ROUND RESULTS AND DISCUSSIONS OF MODEL SIMULATION Results of a jont poly smulaton (tarff reduton and rses n world pres) Fator of produton hanges SINGLE POLICY SIMULATION The effets of tarff reduton on agrultural ommodtes Fators of produton: tarff reduton EFFECTS OF WORLD PRICE OF AGRICULTURE IMPORTS RISE EFFECTS OF WORLD PRICE OF AGRICULTURAL EXPORTS RISE CONCLUSION APPENDIX APPENDIX 8 (B) MACROECONOMIC VARIABLES CHAPTER 9 WOMEN S ECONOMIC WELL-BEING INTRODUCTION BACKGROUND TO THE STUDY THEORETICAL MODEL SURVEY DATA GENERAL CHARACTERISTICS OF SURVEY RESPONDENTS SPECIFIC SURVEY RESULTS Breakdown poston AUTONOMY Deson makng n the household Pereved ontrbuton Pereved self-nterest CONCLUSION APPENDIX CHAPTER 10 SUMMARY AND CONCLUSION v

8 10.1 INTRODUCTION IMPACTS OF FULL TRADE LIBERALISATION: VARYING FACTOR MOBILITY IMPACTS RELATED TO PRODUCTIVITY INCREASE (FDI) IMPACTS RELATED TO THE DOHA ROUND SUGGESTIONS FOR FURTHER RESEARCH REFERENCES v

9 LIST OF TABLES Table 1.1 The 1996 and 2000 average mport-weghted tarffs... 7 Table 1.2 Tarffs as of July 2000 and Marh, Table 1.3 Export performane Table 1.4 Domest support reduton: Aggregate measure of support (AMS) Table 1.5 Produtvty n South Afran setors Table 1.6 Setor Produtvty between men and women workers (value added) Table 1.7 Maroeonom ndators for South Afra ( ) Table 2.1 Perentage workers (Employees and self-employed): by man ndustry and gender: all setors Table 2.2 Oupatons of men and women n varous setors Table 2.3 Remuneraton of Men and Women n 51 dfferent Setors of South Afra Table 2.4 Offal unemployment rate Table 4.1Shemat gendered soal aountng matrx (SAM) Table 4.2 Summary of data Soures used to onstrut the 2000 SAM Table 4.3 Trade: Import and export shares year Table 4.4 Consumpton of ommodtes and serves: household and government Table 4.5 Produton struture (year 2000) Table 4.6 Desrpton of the SAM men and women labour ategores Table 4.7 Shares of fators (aptal, men and women workers) aross setors Table 4.8 Fator shares wthn setor Table 4.9 Perentage share of aptal Table 4.10 Share of domest nsttuton (HH) n nome of fator (F) Table 4.11 Trade elasttes Table 4.12 Import and export elasttes and possble world pre rse due to Doha Round Table 4.13 Summary of data soures used to onstrut the gendered SAMs Table 4.14 SAM atvty and ommodty desrptons Table 4.15 Household ategores n SA SAM from (SA SAM 2000) Table 4.16 South Afra s tarff phase-down under the WTO Table 5.1 Sets, varables and parameters of the CGE model Table 5.2 Parameters appearng n model equatons Table 5.3 Exogenous model varables Table 5.4 Model endogenous varables Table 6.1 Perentage hange fators: all fators full employed and moble (SIM 2) Table 6.2 Perentage hange pres and output: all fators full employed and moble (SIM 2) Table 6.3 Perentage hange output and pres: SIM 1 fxed aptal, sklled: moble& full employed; unsklled and sem-sklled labour moble but unemployed Table 6.4 Perentage hange fators : aptal fxed and full employed, sklled labour moble and full employed, unsklled and sem-sklled labour moble wth unemployment (SIM 1) Table 6.5 Perentage hanges (maroeonom varables) Table 7.1 (a): Employment hanges due to eonomy-wde produtvty rse Table 7.2 Quantty and pre hanges due to eonomy-wde produtvty rse (SIM ) Table 7.3 Perentage hange fators of produton (aptal and labour) seleted setors Table 7.4 Quantty and pre hanges seleted setors Table 8.1 Perentage hanges quantty and pre followng tarff reduton Table 8.2 Fator of produton (labour: men and women) Table 8.3 Perentage hange pres and quanttes (ombnaton of poles) wth fxed aptal; sklled labour full employed and moble whle unsklled and sem-sklled labour moble and unemployed Table 8.4 Perentage hange of employment (ombnaton poles): fxed aptal; moble, fully employed Table 8.5 Perentage hange quanttes and pres due to tarff ut: fxed aptal;moble sklled men and women Table 8.6 Perentage hange employment due tarff ut, fxed aptal; sklled labour moble, fully employed; other labour moble and unemployed Table 8.7 Perentage hanges (maroeonom varables) Table 9.1 Knshp and general haratersts Table 9.2 Employment haratersts for workng women Table 9.3 Workng women and ownershp of assets Table 9.4 Measurement of workng women s autonomy Table 9.5 Loaton related to workng women s resdene Table 9.6 Desons made by workng women related to employment and hldren Table 9.7 Deson made by workng women as eonom authorty n the household v

10 Table 9.8 Eonom authorty n the household Table 9.9 Contrbuton to household dutes Table 9.10 Contrbuton n nome Table 9.11 Pereved self-nterest Table 9.12 Opnons onernng women s self-nterest Table 9.13 Sgnfany levels : marred and sngle workng women LIST OF FIGURES Fgure 1-1 Export performane Fgure 1-2 Annual perentage growth of labour fore Fgure 1-3 Annual perentage growth dfferent skll types of labour Fgure 1-4 Sklled Men and Women (2003) Fgure 1-5 Low sklled men and women (2003) Fgure 1-6 Import and Export of Agrultural Setor ( ) Fgure 1-7 Value-added share by men and women n South Afran agrulture Fgure 1-8 Foregn dret nvestment, net nflows (% of GDP), Fgure 1-9 Investment (stok) Fgure 1-10 South Afran eonom growth: GDP growth ( ) Fgure 1-11 Perentage ontrbuton of setors to GDP n the year Fgure 2-1 Employment of men and women n 51 setors Fgure 2-2 Remuneraton of men and women n 51 dfferent setors of South Afra Fgure 2-3 offal unemployment 1995 and 1999 rates dsaggregated by eduaton level and gender Fgure 2-4 Unversty enrolment: lassfaton of eduatonal ategory Fgure 2-5 Offal unemployment rate by eduaton level and gender: 1995 and Fgure 5-1 Varous levels wthn the produton proess Fgure 6-1 Perentage fator earnngs men and women after tarff ut Fgure 6-2 Equvalent varaton (EV): fxed aptal (SIM 1) Fgure 6-3 Perentage hange produton after tarff reduton Fgure 6-4 Perentage hange wages and nome earnngs of men and women workers Fgure 6-5 Perentage hange employment unsklled men and women (SIM 1) Fgure 6-6 Perentage hange men and women employment Fgure 7-1 Perentage hange labour demand: eonomy-wde produtvty rse Fgure 7-2 Perentage hange employment by sklls and gender: eonomy-wde produtvty rse Fgure 7-3 Perentage hange fator nome: eonomy-wde produtvty rse Fgure 7-4 Perentage hange employment due to seleted produtvty rse Fgure 7-5 Perentage hange unsklled gender: produtvty rse seleted setors Fgure 7-6 Perentage hange earnngs: Produtvty rse seleted setors Fgure 7-7 Perentage hange equvalent varaton (SIM 1 and SIM 2) Fgure 8-1 Changes n employment men and women: Doha Round mplementaton Fgure 8-2 Perentage hange nomes for men and women after pre rses Fgure 8-3 Equvalent varaton : Perentage hange after Doha Round poly smulaton Fgure 8-4 Perentage hange n the unsklled men and women due to tarff ut Fgure 8-5 Perentage hange earnng tarff reduton seleted agrultural setors Fgure 8-6 Results of equvalent varaton: tarff reduton Fgure 8-7 Equvalent varaton (tarff ut, world pre of mport and export rse v

11 ABBREVIATIONS AMS AsgSA CGE CES CET CPI EU EV FDI GATT GDP GEAR IDC IFPRI IES ILO ISCO88 LFS OHS R&D RDP SADC SAM URA WTO TIPS Aggregate Measure of Support Aelerated and Shared Growth Intatve for South Afra Computable General Equlbrum Constant Elastty of Substtuton Constant Elastty of Transformaton Consumer Pre Index European Communty Equvalent Varaton Foregn Dret Investment General Agreement on Tarffs and Trade Gross Domest Produt Growth, Employment and Redstrbuton Industral Development Corporaton Internatonal Food Poly Researh Insttute Inome Expendture Survey Internatonal Labour Organsaton Internatonal Standard Code Labour Fore Survey Otober Household Survey Researh and Development Reonstruton and Development Programme Southern Afran Development Communty Soal Aountng Matrx Uruguay Round of Agrultural Trade World Trade Organsaton Trade and Industry Poly Soety v

12 CHAPTER 1 INTRODUCTION TO THE STUDY 1.1 INTRODUCTION The ssue of globalsaton and ts effets on gender has rased a great deal of nterest n both domest and nternatonal arenas. Globalsaton s generally understood as resultng n greater eonom nterdependene among ountres through nternatonal trade, aptal flows and nternatonal produton. Globalsaton, as used n ths study, refers to the expanson of foregn trade and foregn physal aptal nvestment. The purpose of ths study s to analyse how globalsaton poles affets the employment, wages, nomes, and welfare for South Afran men and women workers. In the 1990s, South Afra embarked on a poly of rapd trade lberalsaton to nvgorate ts eonomy that had stagnated durng the turbulent aparthed era of the 1980s. Ths onvenently ourred durng a deade when many of the restrtve measures were beng removed from nternatonal trade (Roberts 2000; Kus 2002). The trade reforms ntated by South Afra durng the 1990s paved the way for the ountry s subsequent mpressve eonom performane (see seton 1.6 for a desrpton of the eonomy). Despte eonom growth, South Afra stll faes sgnfant eonom hallenges. Foremost among them s the fat that nearly 26% of ts tzens are unemployed, varyng from almost 0% unemployment rate for hghly sklled labour to more than 40% for unsklled and semsklled workers (LFS 2006). Therefore, employment reaton, n partular for the unsklled labour, s one of the most pressng eonom objetves of the South Afran Government. The unemployment rate affets more women than men n South Afra (LFS ). For example, n 2006, the unemployment rate of women stood at 32%, whle that of men was 26%. A 2002 study n South Afra, Women and Men, found unemployment to be hghest among urban women at 35.7% (Budlender 2002). Women often lak produtve resoures suh as land, aptal and sklls, puttng them at a dsadvantage ompared wth men n seekng employment or beomng self-employed. Obstales faed by women are not solated to South Afra eonomy. A omparatve study by Floro (1999) n the Phlppnes and Zamba found globalsaton to have provded job market opportuntes for the Phlppnes women, but t had negatve mpat to Zamban women due to ther lak of sklls and resoures to start ther own busnesses. As Haddad, Rhter and Smth (1995) note, beause soetal norms defne dfferent roles for men and women, globalsaton nevtably has a gender dmenson. 1

13 Studes ndate both postve and negatve outomes assoated wth eonom globalsaton. For example, postve effets nlude nreased employment opportuntes for women n setors that have grown n response to expandng global trade. The ut-flower and apparel ndustres are examples of the femnsaton 1 of eonom atvty stmulated by globalsaton, leadng n some nstanes to the reaton of permanent employment for women (ILO 1999). On the other hand, globalsaton has also resulted n less seure subontratng n manufaturng and the nformalsaton of women s work, often nvolvng poor workng envronments and low-pad jobs. In addton, n some nstanes, new tehnologes that lead to effeny have led to the transfer of work from women to men (Standng, 1989, 1999; Valoda 2000; Arteona & Cunnngham 2002). On mplementng the Eonom Strutural Adjustment Programs (ESAPs), whh resulted n job losses, MGowan (1994) found that women wth pad jobs n the formal setor suffered more job losses when ompared wth the retrenhment of men under. In addton, mport-ompetng setors that realse nreased mports tend to employ a sgnfant number of women, whh has a negatve employment mplaton for women workers. Standng and Grown (1999) and Elson and Cagatay (2000) argue that the nreased overall demand for women labour may or may not result n hgher wages for women relatve to men. In addton, they ontend that hgher wages and more employment opportuntes for women mprove ther welfare only f women an ontrol ther earnngs. In most nstanes, earnngs for women are ontrolled by the men n the households. Ths vew s supported by Chambers (2000) who argues that, despte the nrease n women labour partpaton rates, many workng women do not ontrol ther earned nome, therefore, reman eonomally dsempowered. Some gender atvsts have reommended haltng trade reforms untl there s a better understandng of ts effet on men and women (Mohau 2001). Other gender atvsts are ampagnng for the establshment of women s ommttees or manstreamng gender nto the Trade Poly Revew Mehansm of the World Trade Organsaton (WTO), whh governs 1 The onentraton of women employed n ertan oupatons or eonom setors 2

14 global trade. Many gender advoates ontend that globalsaton needs to be managed arefully so as to ensure that hgher eonom growth mproves the welfare of all members of a soety. 1.2 THE PROBLEM STATEMENT How does globalsaton affet eonomes lke those of South Afra and, more spefally, how does globalsaton mpat on employment, wages, earnng, welfare and well-beng n suh eonomes from a gender perspetve? Multlateral organsatons suh as the World Trade Organsaton, Internatonal Monetary Fund and the World Bank, and governments of Western ountres are promotng foregn nvestment and lberalsaton of trade as the soluton to advane the eonomes of developng natons. However, n ountres lke South Afra, women, who omprse 52% of the total populaton, fae dfferent nequaltes than ther ounterparts n Western soetes and ndeed ther men ounterparts n South Afra. Many researhers ontend that globalsaton has gender-dfferentated mpats. Studes show that: ) both sexes are negatvely mpated, but women more so; ) women are negatvely mpated whle men are not or are postvely mpated; and ) women are postvely mpated whle men are not or less so. Overall, studes tend to show that globalsaton more adversely affets women. Globalsaton has gender-dsrmnatng effets beause of gender-dfferentated ntal ondtons faed by women n developng eonomes. Women struggle n the fae of many nequaltes suh as lak of aess to eduaton, healthare, food and eonom resoures. Women are not able to aess redt beause they lak ollateral, and they often are dened rghts to own or nhert produtve land-based assets. Furthermore, many women are stll held bak by ultural belefs and tradtonal prates of the soety whh favours men over women. In non-farm endeavours, women fnd t dffult to take advantage of new employment opportuntes that nvolve advaned tehnologal sklls. Ths s based on low skll levels possessed by most women. Gender eonomsts have shown that globalsaton poles have dfferng mpats on men and women (Fontana and Wood 2000, Fontana 2001). Fontana, Jokes and Maska (1998) ontend 3

15 that the mpat of globalsaton depends on the ntal eonom ondtons and ndustral omposton of a ountry when t lberalses ts trade and enters the global eonomy. Ths study, therefore, frst establshes the urrent eonom ondtons of the South Afran eonomy by dsaggregatng t nto 49 setors and then further dsaggregatng these setors by labour type (.e. unsklled, sem-sklled, sklled) and by gender. It then rases the followng researh questons: Under a senaro of full trade lberalsaton, what would the effet be on employment, wages, and nome earnngs for men and women? Under a senaro of nreased produtvty emanatng from nreased foregn dret nvestment, what would the effet be on employment and wages for men and women? If the Doha Round of agrultural poles were to be mplemented, what would the effet be on employment and wages for men and women? Under all of the above senaros, what would the mpat be at household level n terms of welfare and, more spefally, on the well-beng of women who enter an eonomy as t expands and/or ontrats wth globalsaton? 1.3 OBJECTIVES OF THE STUDY The objetves of the thess are to unover the gender dmensons of the proess and urrent trends n men and women s status and wellbeng as a result of the varous dmensons of eonom globalsaton, espeally n South Afra. More spefally, ths study wll (1) determne the employment mpats of globalsaton poles on dfferent sklls types (sklled, sem-sklled and unsklled) by gender n dfferent setors, (2) observe hanges n wages between dfferent sklls levels of men and women n varous setors, (3) asertan varous household welfare effets resultng from globalsaton poly reforms, and (4) analyse the well-beng of workng women at household level emanatng from ther partpaton n the labour fore. Furthermore, the study wll dentfy the setors of the eonomy whh have experened ontraton or an nflux of women workers as a result of globalsaton poles. Beause the hanges aused by globalsaton poles may affet all or varous setors of the eonomy through setoral nterlnkage, a omputable general equlbrum (CGE) model s adapted for ths study n order to smulate the mpat of seleted globalsaton poles. Three smulatons are onduted: (1) a smulaton of full trade lberalsaton under dfferent fator 4

16 moblty assumptons, (2) a smulaton of fator produtvty nrease, resultng from globalsaton, spefally as t relates to foregn dret nvestment (FDI), among all eonom setors and among only a few seleted setors that have realsed nrease n FDI and those that employ or have potental to employ women, and (3) a smulaton of world pre nreases to assess possble effets of the Doha Round. 1.4 SOUTH AFRICAN TRADE REFORMS Introduton Ths seton revews the lterature on trade reforms, desrbes ther mplementaton n South Afra, and the progress thereafter. The hapter then looks at the effet of trade reforms n relaton to mports, exports and employment. The general eonom outlook of the ountry s outlned, and the hapter ends wth a bref analyss of the ountry s maroeonom stuaton Sgnfane of trade reforms Trade lberalsaton s expeted to produe greater effeny through the realloaton of resoures to more produtve atvtes. O Rourke and Wllamson (2000) fnd trade to ndue effeny by restruturng of resoures among eonom atvtes and to nfluene aspets suh as sale of output and the dstrbuton of nome. Edwards (1998) fnds that South Afra s trade openness ontrbutes to produtvty through tehnologal hange whh has the effets of promotng growth. Roberts (2000:609) observes nreased dffuson of tehnology, knowledge and nreased nvestment brought about by globalsaton. In addton, he fnds that trade ontrbutes to alloatve effeny, spealsaton and nreased exports. As a result of nreased exports, the ountry wtnesses nreased demand for manufatured goods, greater domest produton and hene nreased employment. Pretorus (2002) equates nreased trade wth the mprovement n absolute lvng standards or the mprovement n the qualty of lfe. It s alleged that ountres wth more open and outward-orented eonomes outperform those wth restrtve trade and nvestment regmes (OECD 1998). For developng ountres as a whole, lberalsaton has led to trade nreasng by 8.3% and eonom growth by 5.5% (Gondwe 2001). Masson (2001) fnds dramat nreases n per apta nome that have aompaned the expanson of trade by ountres suh as Korea, Chna and Ghana. 5

17 He onludes, based on overwhelmng evdene, that openness to nternatonal trade s an answer to fast eonom growth and development, a vew shared by neolassal eonomsts. In summary, globalsaton through nreased trade and FDI leads to mproved produtvty, nreased output, exports, employment, and mproved household welfare. Yet, due to the multfaeted nature of globalsaton, ts spef mpat n South Afra s open to debate; there are no lear-ut lnks between globalsaton, employment and growth (TIPS 2002) South Afra s progress n trade reforms Sne the early 1990s, trade lberalsaton n South Afra has progressed substantally. The government has nsttuted a wde range of poly reforms to stmulate a more ompettve, open, and market-orented eonom system. The government has ompled wth the WTO oblgatons, engaged n onsultatons onernng a Southern Afran Development Communty (SADC) free trade area, ompleted a free trade agreement wth the European Unon (EU), and played an nstrumental role n launhng the Doha Round. Trade reforms, however, started as early as the 1970s when South Afra embarked on reforms n order to ounter the ant-export bas 2 of mport proteton, whh nvolved the use of quanttatve restrtons (Tskata 1999). The quanttatve restrtons (QR) replaed poles of equvalent tarffs and other dutes. In the 1980s, the ountry promoted exports through ustoms duty drawbaks and duty exemptons. Durng the 1990s, these were replaed by the general export nentve sheme (GEIS) 3, whh enouraged the ant-export bas on the output sde, rather than on the nput sde, through mport lberalsaton. For example, from 1993 to 1996, the ant-export bas shfted from 1.19 to 1.32 for the eonomy, whle shftng from 1.27 to 1.45 for manufaturng (Lews 2001). The government ratonalsaton programme onssted manly of (a) a reduton n the number of tarff lnes from over 100 to sx tarff ategores at rates of 0%, 5%, 10%, 15%, 20% and 30%, (b) a onverson of the tarff regme for ndustral produts, and () a onverson of all quanttatve restrtons on agrultural mports to bound ad-valorem tarff rates. The average- 2 The promoton of trade by elmnatng obstales to trade. 3 An eonomy-wde pakage, based on value added & loal ontent wth nentves to promote export. 6

18 weghted mport dutes were also to be redued from 34% to 17% for onsumpton goods, from 8% to 4% for ntermedate goods, and from 11% to 5% for aptal goods (Cassm, Onyango & Van Seventer 2002) Progress n trade reforms As shown n Table 1.1 below, South Afra underwent a dramat reduton n tarffs on agrultural produts, from 9.23% n 1996 to 1.4% n Manufaturng progress, omparatvely, was somehow slow, shown by a fall of only 2.8% from 1996 to Table 1.1 The 1996 and 2000 average mport-weghted tarffs Category 1996 Appled rates (%) 2000 Appled rates (%) Agrultural produts Industral produts Average Soure: Van Seventer (2001) and TIPS (2002). Table 1.2 ompares the 2000 and 2001 shedules to show hanges that ourred. The number of unque ad-valorem tarffs over 40% dropped by 11, whh onsttutes a 17.5% delne, and tarffs between 30 and 40% dropped by 19. The number of zero-rated lnes remaned more or less onstant. South Afra, whh at one tme had 47 tarff bands, has had to make sgnfant hanges to move towards omplane wth the WTO agreement of sx tarff bands. South Afra redued ts mport-weghted average tarff rate from more than 20% n 1994 to 7% n However, broad ategores of goods suh as proessed foods, motor vehles and omponents, tobao, rubber produts and lothng and textles stll have tarff peaks (Lews 2001). TIPS (2002), argues that an ant-export bas stll exsts and notes the exstene of a hgh effetve rate of proteton (EPR) on motor vehle and parts, textles, leather, footwear and lothng. By the year 2000, there were tarff lnes, as opposed to less than as requred under the WTO ommtment. Fedderke and Vaze (2001) observe that 50% of South Afra s gross domest produt (GDP) s produed n setors where EPR rose between and , whle 15% omes from setors where EPR has fallen. 7

19 Nonetheless, the ountry has made a ommendable progress from the tarff lnes that exsted n Table 1.2 Tarffs as of July 2000 and Marh, 2001 Ad valorem & other tarffs No. of HS8 lnes % of No. of lnes No. of HS8 lnes % of No. of lnes July 2000 July 2000 Marh 2001 Marh 2001 tarff > 40% % < tarff < 40% % < tarff< 30% % < tarff < 20% % < tarff < 15% % < tarff < 10% % < tarff < 5% % Other tarff Total lnes Soure: Van Seventer 2001, TIPS Exports and employment Table 1.3 shows an nrease n both mport and export demand sne Kus (2002) notes small nreases n exports wth oeffents of 0.8 for manufaturng and 0.5 for agrultural exports and 0.5 for total exports. In addton, he fnds trade lberalsaton to have postvely affeted setors wth low proteton rates. For example, he fnds the mneral proessng setor to have had nreased ts exports, more than setors wth hgh proteton rates suh as fnane, nsurane, agrulture, gold and uranum. Kus reommends more openness for the South Afran eonomy n order to rase eonom effeny. Table 1.3 Export performane Perentage growth Exports Imports As a perentage of GDP Trade balane Exports Imports Soure: SARB Quarterly Bulletn (2002) 8

20 Perentage Growth EXPORT AND IMPORT OF GOODS AND SERVICES AS PERCENTAGE OF GDP ( ) Years Exports of goods and serves (% of GDP) Imports of goods and serves (% of GDP) Fgure 1-1 Export performane Soure: World Bank (2006) TIPS (2002) and Fedderke and Vaze (2001) support Kus s ontenton that trade lberalsaton has led to the dversfaton of South Afran exports away from prmary produts suh as mnng, whh have been delnng. For example, as a perentage of GDP, gold exports have delned as follows: 33% (1990), 31.2% (1993), 23.5% (1996) and 16.3% (1999). Exports of prmary produts as a perentage of GDP have also delned as follows: 24.5% (1990), 25.4% (1993), 21.5% (1996), and 20.4% (1999) (Quanteh database 2004). In ontrast, exports of materal-ntensve produts rose from 6.1% (1990), 5.7% (1993), 7.1% (1996) to 7.9% (1999) as a perentage of GDP, and the export rate for manufatured produts also nreased as follows: 9.2% (1990), 14.4% (1993) 19.9% (1996) and 23.6% (1999). Fgure 1.1 shows tme seres data ndatng that trade openness had a strong mpat on South Afra s nternatonal trade wth both exports and mports growng substantally. The openness oeffent value, the mport penetraton oeffent value and the share of the ountry n mports and exports, all grew. Despte the growth of exports n many setors, eonom growth overall has been low (TIPS 2002; Edwards 2002). South Afra s stll a prmary manufaturng and export ountry. However, the ountry s learly movng towards the produton of other manufatured goods and serves suh as nformaton tehnology (IT). For the detaled setoral omposton and relatve mportane of trade flows, see Chapter 4. South Afra s the world s largest produer and exporter of gold and platnum, and exports a sgnfant amount of oal. In 2000, platnum replaed gold as South Afra s largest foregn exhange earner. The value-added proessng of mnerals to produe ferroalloys, stanless steels, and smlar produts s a major ndustry and an mportant growth area. 9

21 The ountry s dverse manufaturng ndustry makes t a world leader n several spealsed setors suh as ralway rollng stok, synthet fuels, and mnng equpment and mahnery. In 2003, the tertary setor (serves) represented 65% of the GDP, followed by the seondary setor (ndustry) at 24% and the prmary setor (agrulture and mnng) at 11%. Prmary agrulture aounts for about 4% of the gross domest produt. Major export rops nlude trus and deduous fruts, orn, wheat, dary produts, sugarane, tobao, wne, and wool. South Afra s agrultural produton, muh of t under modern rrgaton shemes, s hghly produtve and makes the ountry a net exporter of food. South Afra s major export markets nlude the European Unon (EU.), Unted Kngdom (UK), Unted States of Amera (USA), Germany, Italy, Japan, East Asa, and sub-saharan Afra. In 2003, exports were worth US $36.3 bllon, amountng to 28.2% of GDP, up from 11.5% n the prevous deade whle mports amounted to US $34 bllon. Major mports omprse mahnery, transport equpment, hemals, petroleum produts, textles, and sentf nstruments, prmarly suppled by Germany, the USA. Japan, UK and Italy (see fgure 1.1 above for the mport and export trend n South Afra). South Afra ontnues to pursue both regonal and nternatonal trade partners. In 1999, t suessfully ompleted the negotaton of a EU-South Afra free trade agreement (FTA), whh beame operatonal n January Under ths agreement, the phasng n of South Afran aess to EU markets was set to our over a 10 years perod, whle the reduton of South Afran tarffs on EU produts was set to take plae over a perod of 12 years. The ountry reeves the benefts arung from the USA s Afran Growth and Opportunty At (AGOA), a USA trade agreement wth some Afran ountres that qualfes plenty of Afran produts for export to the USA. South Afra s a member of an oldest ustom unon; the Southern Afran Customs Unon (SACU). Under SACU, revenues olleted n the member ountres (Botswana, Lesotho, Namba and Swazland) ommon ustom area are shared among themselves aordng to an agreed revenue sharng formula. In August 1996, South Afra sgned a regonal trade protool agreement wth the Southern Afran Development Corporaton (SADC). Under the agreement, the government ntends to provde duty-free treatment for 85% of SADC trade by 2008 and 100% by South Afran trade wth other Sub-Saharan Afran ountres, partularly those n the Eastern and Southern Afra regons, has nreased substantally. In late 2005, the ountry sgned a memorandum of understandng wth the government of 10

22 Tanzana relatng to trade, eonom, sentf, tehnal and ultural ooperaton. In addton, South Afra has developed blateral trade agreements wth other Afran ountres. South Afra aounts for 71% of the SADC s GDP. Lews (2001), questons the feasblty of satsfyng the onfltng oblgatons and potental tensons among the varyng trade related nsttutons and ther varous members. The dstrbuton of employment among the four major setors n South Afra nludes 12% for both agrulture and mnng, 28% for manufaturng and 60% for serves. A fundamental dfferene between the South Afran eonomy and that of most other developed eonomes les n the mportane of prmary ndustres. In South Afra, the prmary ndustres reman both rural and mostly n mnng when ompared wth that of developed ountres. In the 1990s, jobs n the prmary setor delned by 3.5% (TIPS 2002; Pretorus 2002). From , employment n the manufaturng setor delned by 11.2%. However, from , employment for the hgher-sklled workers nreased by 8.2% and by 7.2% for sem-sklled workers (Edwards 2002). Jenkns (2001) reports that between 1994 and 2001 there was a growng bas towards more sklled labour aused by the hangng pattern of trade n South Afra. Fgure 1.2 below shows that jobs have been delnng over the years startng from the year Fgures 1.3 ndates how job losses have mostly affeted unsklled labour whle sklled and hghly sklled labour demand has been rsng sgnfantly. Fgure 1.4 shows an nreased demand of sklled men and women for the year 2003 when ompared wth the demand for unsklled men and women labour (fgure 1.5); sklled men gan the most. Annual perentage growth labour fore ( ) 5 Perentage Growth Years Labourfore Fgure 1-2 Annual perentage growth of labour fore Soure: World Bank (2006) 11

23 Perentage hange from base year level hgh sklled sklled un & semsklled Fgure 1-3 Annual perentage growth dfferent skll types of labour Soure: Own alulaton from Quanteh database Sklled Men and Women (2003) Perentage Agr Apparel Text Food&Bev&Tob Mnng Utltes Manufaturng Leather and footwear Others Medal Governent Busness serves Fnala serves Communaton Transport Hotel Trade Construton Industres 2003 HSklMan 2003 HSklWm Fgure 1-4 Sklled Men and Women (2003) Low Sklled Men and Women (2003) Perentage Agr Mnng Food&Bev&Tob Text Apparel Leather and footwear Manufaturng Utltes Hotel Trade Construton Industres Transport Communaton Fnala serves Busness serves Governent Medal Others 2003 Low SkMn 2003 Low SkWn Fgure 1-5 Low sklled men and women (2003) Soure: Own alulaton from Labour fore survey (2003) 12

24 1.5 TRADE REFORMS IN RELATION TO AGRICULTURE The Doha Round of multlateral trade negotatons Agrultural support poles suh as subsdes to farmers by the Organsaton of Eonom Co-operaton and Development (OECD) have negatve effets on less-developed ountres agrulture. Subsdes allow the EU and USA to sell rops at artfally low pres, reatng unfar ompetton aganst farmers n the less-developed ountres (LDCs) n both ther domest and nternatonal markets. For example, the Unted Kngdom (UK) sells eah ton of wheat and sugar on the nternatonal market at an average of 40% and 60%, respetvely, below the ost of produton. These dstortons beneft the OECD farmers who obtan hgher pres, estmated at 31% above the world pres (AtonAd 2002). If urrent dstortons on otton 4 were removed, Afran produers would nrease ther gross revenue by about 19% (AtonAd 2002). Cheap food mports beneft onsumers n LDCs n the short term. However, t undermnes the sustanable lvelhoods of loal men and women farmers and farm workers. As loal men and women farmers stop produng rops that annot ompete wth heaper mports, there s an nreased dependene on food mports and dereased natonal food seurty. In addton, food mports ontrbutes to a shft n onsumpton patterns away from loally produed foods, worsenng the stuaton for loal farmers. 1.6 AGRICULTURAL TRADE REFORMS IN SOUTH AFRICA After jonng the WTO n 1995, South Afra sgned the agreement that elmnated ts old eonom system, whh was based on mport substtuton, hgh tarffs and subsdes, antompettve behavour, and extensve government nterventon n the eonomy (TIPS 2002). Agrulture, together wth other setors, were subjeted to rapd trade lberalsaton poles (Krsten 2000; TIPS 2002). The marketng boards whh were responsble for the quota system and settng of pres were dsmantled. In 1995, the government establshed the agrultural market dvson of the South Afran Futures Exhange where rops suh as maze, wheat and sunflower seed urrently trade. The government has also mplemented the 4 Cotton produton n South Afra aounts for about 2% of the total agrultural produton. 13

25 non-tarff provsons of the WTO agreement n agrulture, suh as the removal of domest support and domest subsdes (see Table 1.4). Table 1.4 Domest support reduton: Aggregate measure of support (AMS 5 ) Domest Support Reduton Crops Green Box 6 2, , , , , , , ,355.7 AMS Commtment 2, , , , , ,950.8 Current AMS Wheat , Sugar Tobao Cotton Maze Tea Perentage total agrultural produton Soure: WTO notfatons ( ), DOA, Internatonal Trade Unt (2005) Table 1.4 shows a rapd reduton of the domest support and the ountry s ommtment to redue dstortons n agrulture as measured by the urrent aggregate measure of support (AMS). In 1995, the rate of non-produt-spef domest support was 1.60% of the total value of agrultural produton. By 1999, the level had delned to 0.02%. It reahed 0.0% n The maze pre support was phased out n 1997, followed by the wthdrawal of wheat and tobao pre support n In 1999, the otton setor was granted an admnstered pre below the external referene pre due to ts use as a raw materal for the ountry s textle and garment ndustres. The sugar setor retaned pre support untl 2001, beause of ts proessed output nature (WTO notfatons ). The General Export Inentve Sheme (GEIS) was abolshed n 1997, and the ountry hanged agrultural assstane to Green Box, as requred by the WTO. By 1998, 72% of agrultural 5 AMS s the measure of subsdy that s not allowed by the World Trade Organsaton (WTO). AMS measures the total expendture on domest support, nludng the value of market pre support through admnstered pres provded by the poles not exempt under the Agreement. 6 These poles were onsdered to have the smallest potental effets on produton and trade. Green means that ountres ould go ahead wth these poles, that s, they are exempted from support reduton exempton (example, researh, nfrastrutures, et.). 14

26 goods reeved tarffs of less than 15%, whle 38% reeved a 0% tarff (WTO 1998). In 2005, agrultural produts subjeted to hgh tarff dutes were meat and dary produts. Important rops suh as sugar, maze and wheat have varable dutes that are drven by hanges n world pres. For example, the wheat setor reeves proteton that makes up the dfferene between the external referene pre and the South Afran-appled admnstered referene pre. Poultry s proteton aganst lower nternatonal pres nvolves a 27% flat rate on frozen hken parts. South Afra ranks seond n the world n antdumpng ntatons n terms of US dollar of mports (Van Zyl 2001), although none have ever nvolved agrulture. The sgnfant lberalsaton of South Afra s agrultural trade poly has produed an effent setor. Both exports and mports of agrultural ommodtes, food, tobao and beverages have nreased rapdly as seen n Fgure 1.6 below. However, small farmers and most farm workers have not benefted sgnfantly from trade lberalsaton of agrultural poles sne the early 1990s (Van Zyl, Vnk & Krsten 2000). Agrultural export and mports ( ) Value (rands) Agr Import Years Agr Export Fgure 1-6 Import and Export of Agrultural Setor ( ) Soure: The Department of Agrulture (Internatonal Trade Dvson) 1.7 SOUTH AFRICAN AGRICULTURE AND GENDER The South Afran agrultural setor s a dual system onsstng of ommeral and subsstene agrulture. The ommeral setor s hghly aptalsed and s nreasngly beng ntegrated nto the world markets. The setor onssts of whte farmers who own 87% of the total arable land. The subsstene setor omprses 2.4 mllon blak households who farm the other 13% of the arable land. The blak farmers, who lak resoures 15

27 and tehnology produe manly for ther household onsumpton (Krsten et al. 2000). The dret ontrbuton of the prmary agrultural setor to the eonomy s about 4% of the GDP. However, agrultural exports omprse 7-10% of total South Afran export revenue. The largest export groups are sugarane, fresh grapes, trus, netarnes, wne and deduous frut. Other mportant exports nlude maze, meat, wheat, avoados, plums, blak tea, groundnuts, pneapples, tobao, wool, otton, and dary produts (Agrultural Census 2002; Van Zyl, Vnk & Krsten 2000). Although formal agrulture s low-payng t provdes employment for about 1 mllon farm workers. Men oupy 82% of the permanent postons (e.g. farm managers and foremen), whle women oupy 18% of suh postons. On the other hand, women hold 54% of asual jobs n agrulture (Agrultural Census 2002). The rural survey of June 1997 shows that households of the 2.4 mllon households n the subsstene setor, are engaged n subsstene farmng, of whh are women-headed and are men-headed. The hgh woman to men rato n subsstene farmng s onsstent wth fndngs n other LDCs. For example, women omprse 70-80% of agrultural produers and proessors n rural areas n most sub-saharan ountres (FAOSTAT 2006). Value added share of men and women Value added Sklledwomen Sklledmen Semsklledwm Semsklledmen UnsklledWomen UnsklledMen Seres1 Fgure 1-7 Value-added share by men and women n South Afran agrulture Soure: Own alulaton based on the 2000 gendered Soal Aountng Matr (SAM) Fgure 1.7 shows that South Afra women have lower value added shares n agrulture than men for all sklls types. However, ths does not nlude value-added on agrulture produed for home onsumpton, beause t was not nluded n the 2000 South Afran Soal Aountng Matrx (SAM). The household value-added produton not aptured by the 2000 South Afran SAM s for the households that own lvestok,