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Remarks by Angel Gurría, OECD Secretary-General during his official visit to South Africa, on 19 July 2010 when launching the OECD Economic Survey of South Africa.
South Africa needs to boost growth through making better use of its resource endowments. Despite a strong macroeconomic policy framework, job creation and productivity growth remain too low to underpin sustained rapid GDP per capita growth. The overarching challenge for South Africa is to boost its trend growth rate and create jobs.
Growth has resumed, and is likely to strengthen this year and next. The economy turned around in the second half of 2009. House prices are picking up and leading indicators signalling growing strength, external conditions have become more favourable. Furthermore, the economy is being boosted by the staging of the World Cup. Growth is expected to accelerate in 2010 and exceed potential in 2011.
South Africa needs to improve its environmental performance. South Africa tends to score relatively poorly on broad indices of environmental conditions, especially in the area of greenhouse gas emissions. The need for progress on tackling climate change has been recognised by the government, but little concrete action has yet been.
Low employment remains the overriding policy challenge. South Africa has an extreme and persistent low employment problem, which interacts with other economic and social problems such as inadequate education, poor health outcomes and crime. As in other countries, vulnerable groups are most affected by unemployment, and in South Africa the problem is most extreme for black youth.
Youth unemployment rate, 2008 1.
1. Persons aged 15-24 years, 2007 data for Brazil.
Source: OECD, Labour Force Statistics Database; ILO, Laborstat Database; and Statistics South Africa, Quarterly Labour Force Survey.
Just as the causes are complex, the solution needs to be multi dimensional. A range of supply and demand side factors contributed to the strong rise in unemployment in the decade from the early 1990s and its persistence since then. Possibly the single most important factor has been mediocre trend growth, combined with the relatively low labour intensity of growth. A range of policy responses will be required to achieve the rapid sustained growth in employment is needed.
Structural reforms are needed to improve the functioning of labour markets. Cost competitiveness has been jeopardized by insider dominated wage bargaining. One promising direction to endow outsiders with more voice might be to increase the degree of co ordination in wage bargaining. OECD experience suggests that high levels of co ordination are associated with better employment outcomes. Government involvement in the process could help to make the trade offs between wages, employment and unemployment clearer to social partners. Weakening the legal extension of sectoral bargains would likely also help with wage moderation. Further important measures to raise employment over the long term include improved basic education, reduced spatial mismatches between jobseekers and jobs, and better access to credit for small enterprises Increasing the scope for competition by making product market regulations less cumbersome is a promising option to boost entrepreneurship and innovation.
How to obtain this publication
The complete edition of the Economic Survey of South Africa is available from:
For further information please contact the South Africa Desk at the OECD Economics Department at firstname.lastname@example.org.
The OECD Secretariat's report was prepared by Geoff Barnard, and Tatiana Lysenko under the supervision of Andreas Wörgötter. Research assistance was provided by Corinne Chanteloup.
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