South Africa: Find new ways to boost growth and job creation – OECD

24/07/2017 – The South African economy has registered tremendous progress over the past two decades, boosting living standards and lifting millions out of poverty nationwide. Further reforms are now necessary, however, to revive economic growth and ensure that all South Africans can benefit from it, according to a new report from the OECD.

The latest OECD Economic Survey of South Africa says that wide-ranging structural reforms will be needed to put the economy on a new growth trajectory, boost job creation and improve inclusivity.    

The Survey, presented in Pretoria by OECD Secretary-General Angel Gurría and South African Minister of Finance Malusi Gigaba, identifies priority areas for future action, including continuing efforts to maintain macroeconomic stability, improve the business environment and deepen regional integration, all of which are critical for inclusive growth and job creation.  

“South Africa has accomplished many great things in the past two decades, but building stronger and more inclusive growth will require bold action from policymakers,” Mr Gurría said. “Ensuring a better future for all South Africans will require increased access to higher education, a stronger and fairer labour market, deeper participation in regional markets and a regulatory framework that fosters entrepreneurship and allows small businesses to thrive. Many of the necessary reforms will be difficult, but the rewards will be worth the effort.”

Given the limited scope for monetary or fiscal policy action to boost growth, the Survey suggests a range of structural policy reforms. It encourages South Africa to open key sectors, including telecommunications, energy, transport and services, to more competition. It also says that moving forward with the planned introduction of a national minimum wage will reduce in-work poverty and inequality. Wider development of apprenticeship and internship programmes will also increase the inclusion of youth in the labour market, while streamlining the labour dispute system should increase flexibility and lower barriers to job creation.

Skills shortages and mismatches remain key bottlenecks to growth and inclusiveness, and access to higher education remains limited. Establishing a universal student loan scheme contingent on future earnings, with the participation of banks and backed by government guarantees, is a feasible solution, the Survey says. A recent OECD report, Getting Skills Right: South Africa, analyses in further detail skills mismatches and explores potential strategies for addressing them.

Boosting entrepreneurship, which is low in South Africa when compared to other emerging economies, and growing small businesses can also be crucial to economic recovery and job creation, according to the Survey. The government has taken steps to ease requirements for starting a business, but red tape remains a burden. The quality of the education system and lack of work experience contribute to gaps in entrepreneurial skills. There is scope to broaden the sources of finance and ensure that government policies provide both financial and non-financial support for entrepreneurs and small businesses, the Survey says.

The OECD points out that while regional integration offers substantial opportunities for both South Africa and its neighbours, economic integration in the sub-region has not advanced much. Intra-regional trade in the Southern African Development Community (SADC) is only 10% of total trade, compared to about 25% in the ASEAN region or 40% in the European Union. Better implementation of existing SADC protocols and agreements would advance integration, promote trade and create jobs. Reducing non-tariff barriers, by improving customs procedures and simplifying rules of origin, would reduce trade costs in the region. More ambitious and effective infrastructure and investment policies are also needed to improve the inter-connectivity of systems across the region, the Survey says.

During his visit to Pretoria, the OECD Secretary-General is meeting with senior South African government officials, business and labour leaders and representatives of civil society.

An Overview of the Economic Survey, with the main conclusions, is accessible at: http://www.oecd.org/economy/surveys/economic-survey-south-africa.htm.

The recent OECD publication, Getting Skills Right: South Africa, is accessible at: http://www.oecd.org/els/getting-skills-right-south-africa-9789264278745-en.htm.

For further information, journalists can contact OECD Media Officer Lawrence Speer (+33 6 0149 6891) or the OECD Media Division (+33 1 4524 9700).

Note to Editors:

The Paris-based OECD is an international organisation that promotes policies to improve the economic and social well-being of people worldwide. It provides a forum in which governments can work together to share experiences and seek solutions to the economic, social and governance challenges they face.

The OECD’s 35 members are: Austria, Australia, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

Three countries – Colombia, Costa Rica and Lithuania – have been formally invited to become members of the Organisation, and are currently in the process of accession.

South Africa is one of the OECD’s five Key Partners, with Brazil, China, India and Indonesia. Key Partners contribute to the OECD’s work in a sustained and comprehensive manner. A central element of the Key Partners programme is the promotion of direct and active participation in the substantive work of the Organisation. This includes partnerships in OECD Bodies, adherence to OECD instruments and integration into OECD statistical reporting and information systems.

Further information on OECD cooperation with South Africa is available at: http://www.oecd.org/southafrica/south-africa-and-oecd.htm.