Despite considerable success on many economic and social policy fronts over the past 19 years, South Africa faces a number of long-standing economic problems that still reflect at least in part the long-lasting and harmful legacy of apartheid. One is a lack of economic dynamism: convergence towards advanced country per capita income levels has been slower than in most other emerging economies (A). The fastest-growing countries tend to have low per capita income, but even taking into account starting levels South Africa’s growth has been relatively slow (B). Above all, employment remains too low and unemployment excessively high, which exacerbates a range of social problems and tensions. One aspect of this central problem is that educational outcomes are poor on average and extremely uneven, which aggravates the excess supply of unskilled labour as well as worsening income inequality. In addition, the prospects for sustained improvements in well-being are compromised by environmental challenges, notably climate change and water stress. As well articulated in the National Development Plan (NDP) published in August 2012, South Africa needs to achieve rapid, inclusive economic growth while at the same time making the transition to a low-carbon economy and managing effectively the country’s scarce water resources. Tackling the key problems effectively will require continued skilful management of macroeconomic policies, as part of the process of providing helpful framework conditions for economic activity, but above all improved implementation of structural policies, with education being a particularly critical area.