2022 OECD Economic Surveys: South Africa 2022

image of OECD Economic Surveys: South Africa 2022

The COVID-19 crisis has weakened an already fragile economy. South Africa’s growth underperformed during the past decade: GDP per capita was already lower in 2019 than in 2008. Unemployment remains high, at around 35%, and youth unemployment even exceeds 50%. In the meantime, spending pressures are mounting to close the financing gap in health, infrastructure and higher education. To finance those needs while putting public finances on a more sustainable path, which is key to restore confidence, spending efficiency should improve and be accompanied with increased government tax revenues. In addition, the tax system could contribute further to reducing income and wealth inequalities. In the longer term, reviving productivity growth is key to lift living standards. Boosting productivity involves improving transport (road, port and rail) infrastructure, providing more stable electricity generation, fostering the quality of telecommunication networks, broadening access to higher education, as well as improving the business environment more generally.


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Boosting productivity to improve living standards

Productivity growth has been falling for a decade, hindering improvements in living standards. Low productivity reflects, firstly, poor infrastructure in telecommunications and transport. Secondly, the regulatory environment is not always business-friendly and often raises obstacles to firm entry, exit and expansion. Combined with weak competition in important sectors, this has led to lower private investment levels, particularly, business R&D. Finally, the educational and health care systems have been unable to supply adequately skilled workers across the country. To improve productivity, public investment needs to become more effective, notably by strengthening the selection process for large infrastructure projects. A more pro-competitive business environment would let productive firms grow and foster innovation. Widening and reducing inequalities in access to education and health care would reduce skill shortages.



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