Measuring job creation impact by development finance institutions: the case of the IDC’s automotive unit in South Africa

Chadyiwa, Tinotonga (2017-03)

Thesis (MDF)--Stellenbosch University, 2017.

Thesis

ENGLISH SUMMARY : The current research measured the impact of the Industrial Development Corporation on job creation in South Africa’s automotive sector and established the extent to which the Industrial Development Corporation contributed to fostering job creation in the sector (using a multiple regression method applied to monthly data spanning form January 1999 to December 2015, obtained from the Industrial Development Corporation database). The results of the study revealed that Development Finance Institutions in general, and the Industrial Development Corporation specifically, have an impact on job creation as measured by two proxies: the return on the number of jobs created and the return on employment. The unit root test results also validated that the variables were stationary, at least at their first difference, despite relatively fewer variables which were stationary in their levels. Descriptive statistics confirmed that variables have negatively skewed non-normal distributions. The results further confirmed that sales of the bus segment of the South African automotive industry had a negative and statistically significant impact on job creation, at a one percent level of significance. This is suggestive of the existence of sales-volume-induced displacement effects in the Heavy commercial vehicle segment of the South African automotive sector. On the contrary, the results of the study revealed that the return on Heavy commercial vehicle sales had a positive and statistically significant impact on job creation, at ten percent level of significance. Moreover, the research findings showed that the Industrial Development Corporation financing in the automotive sector has a positive statistically significant impact on the return on employment; hence, job creation at a one percent level of significance. This implied that that the Industrial Development Corporation's financing activities significantly fostered job creation in the South African Automotive sector. Trade-off between the return on Light commercial vehicles sales, Medium commercial vehicles sales, Passenger vehicle sales and job creation were also uncovered and substantiated the alluded to existence of displacement effects in the automotive sector. The study further affirmed that firm size does not matter on job creation but what matters most is whether or not the firm accessed the Industrial Development Corporation's credit facility. Finally the F-test and the Durbin Watson test results validated that the model provided a good fit to the data and the autocorrelation functions, partial autocorrelation functions, Ljung box Q-statistics and White’s heteroscedasticity test results also validated the absence of autocorrelation and heteroscedasticity over the sample period. Jointly, the results validated the research endeavor and provided necessary and sufficient evidence to reject the null hypothesis that Industrial Development Corporation financing activities have no impact on job creation in favor of the alternative that the Industrial Development Corporation's activities had a significant impact on job creation in the South African automotive sector.

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