Contracting Out of Service Activities and the Effects on Sectoral Employment Patterns in South Africa

This paper develops a methodology and uses household and labour survey data to analyse the extent of intersectoral outsourcing of the employment of specific labour-intensive activities in South Africa from 1997-2007. It is shown that the relatively high growth in services employment is driven by an expansion of employment of cleaners and security guards and an outsourcing-type reallocation of these activities from manufacturing and the public sector towards private services. These activities have limited scope for cumulative productivity increases. The analysis has implications for understanding changes in the sectoral structure of middle income economies.