Identifying weaknesses
S
outh Africa has severe and deep-seated structural weaknesses. The unemployment rate has risen to 32.50% (narrow definition) in the fourth quarter of 2020 – the highest in at least 13 years (Stats SA, 2021b). Per capita growth has been declining since its
peak of 2014 to a level last seen in 2005 (Stats SA, 2021c). South Africa is also one of the most unequal countries in the world, reporting a per capita expenditure Gini coefficient of 0.65 in 2015. The top 10% of the population spend nearly eight times more than the bottom 40% (Stats SA, 2020). The Covid-19 pandemic exacerbated existing shortcomings, exposing the economy’s major weaknesses, including, among others, stagnant growth, inequality, rising national debt and severe electricity challenges. Despite substantial social spending, government outcomes remain poor – whether that be in education, health, or social grants. Several participants mentioned South Africa’s unsustainable debt situation, which will require higher growth to address it. More foreign investment will be needed for economic growth and to restore fiscal soundness. Observations were made about policy formulation, implementation and communication across different sectors, such as improving education outcomes, dealing with land reform, and restructuring State-owned enterprises, including power utility Eskom. The country is also only just beginning to address a decade of State capture, run-down and repurposed State capacity, and related institutional weaknesses.
Policy uncertainty Policy certainty is critical to driving investment in any economy. South Africa is ultimately competing for global investment, but uncertainty is undermining its drive to attract investors and thereby its prospects for growth. Concerns have been raised about policy certainty in energy, mining, and land reform. Investors are uncertain that laws will not change, and this makes the investment climate uncompetitive. Policy implementation paralysis, especially related to the NDP, policy communication and policy discord are hampering progress.
Policy implementation paralysis . . . policy communication and policy discord are hampering progress.
The NDP, which serves as an overarching policy blueprint for the country and aims to eradicate poverty, inequality, and unemployment by 2030, was effectively shelved under the previous administration. While widely regarded as a well-written document, the NDP is considered too broad and the time in which reform is expected too long. Although strong in certain areas, particularly its broad economic plan, the NDP lacks specifics when it comes to
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