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2017 OECD Economic Surveys: South Africa 2017

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Over the last two decades, South Africa has accomplished enormous social progress by bringing to millions of citizens access to key public services. Nevertheless, growth has trended down markedly recently due to constraints on the supply side. Low growth has led to the stagnation of GDP per capita, and persistent high unemployment and inequalities.

The economy faces many structural challenges while high inflation limits room for monetary policy support  and high public debt constrains public spending. South Africa needs structural reforms that would boost the potential of the economy, in particular, broadening competition, limiting the size and grip of state-owned enterprises on the economy, and improving the quality of the education system.

Greater regional integration could provide new opportunities for growth by expanding market size. South African firms are well placed to benefit from deeper integration. However, lowering tariffs and non-tariffs barriers on trade, developing regional infrastructure and harmonising regulations are needed to foster regional integration.

More entrepreneurs and thriving small businesses would contribute to inclusive growth and job creation. Barriers to entrepreneurship include bureaucratic procedures and licensing, which are also an ongoing burden on small firms. An education system that better equippes students with basic and entrepreneurial skills would grow the pipeline of entrepreneurs. A better evidence base is crucial for more effective financial and non-financial support programmes to boost start-up rates and small firms’ growth.

SPECIAL FEATURES: DEEPENING REGIONAL INTEGRATION; BOOSTING ENTREPRENEURSHIP

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Executive summary

Growth has disappointed in the last few years. Weak consumer demand, persistently falling business investment, policy uncertainty, and the prolonged drought weighed on activity. While power production has improved, important bottlenecks remain in infrastructure and costs of services, which increase the cost of inputs for firms. The economic slowdown has pushed up the unemployment rate and income inequalities remain wide. Reviving economic growth is crucial to increase well-being, job creation and inclusivity. As there is limited room for monetary and fiscal stimulus, bold structural reforms, supported by social partners, are needed to unlock the economy.

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