Going for Growth 2016: South Africa

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‌South Africa needs to address a wide range of structural bottlenecks in order to achieve strong medium-term growth. The most binding bottlenecks include severe shortages in public infrastructure, in particular for electricity, and low educational attainment, leading to persistently high unemployment, particularly among youth. Various institutional barriers to formal employment need to be addressed, including the settlement structure, overly confrontational wage bargaining, high non-wage hiring costs, stringent regulatory entry barriers and administrative burden that impede entrepreneurship and job creation.

1. Compared to the simple average of the 17 OECD countries with highest GDP per capita in 2013 based on 2013 purchasing power parities (PPPs).

Source: OECD, National Accounts Database; World Bank, World Development Indicators (WDI) (Database); ILO (International Labour Organisation), Key Indicators of the Labour Market.

Previous Going for Growth recommendations include:

Raising efficiency and equity in education by improving teacher training, by enhancing accountability and monitoring of school leadership and by expanding vocational education and training.
Strengthening active labour market policies to tackle youth unemployment by expanding placement assistance for young job-seekers and support for young entrepreneurs focused on management training.
Reforming minimum wages and wage bargaining systems by weakening the administrative extension of collective bargaining in sectors covered by bargaining councils and by introducing age-differentiation of minimum wages, preferably with a simplified link to training.
Enhancing competition in network industries by ruling out granting state-owned enterprises exemptions from the competition laws and strengthening the independence of network regulators.
Reducing barriers to entrepreneurship notably by significantly reducing red tape and other administrative burdens on business operations.

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Recent policy actions in these areas include:

To reduce the barriers to entrepreneurship, turnover taxes for micro businesses were lowered and tax credits for the venture capital scheme increased.

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, narrowing current account imbalances and reducing income inequality). In the case of South Africa, a more equitable and efficient education system would help to reduce high youth unemployment, inequality and social exclusion. Likewise, strengthening active labour market policies would contribute to tackling youth unemployment and to reducing inequality.

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