Suggested interventions for South Africa Suggested interventions for South Africa
Balance fiscal concerns and inclusive growth
With a tax-to-GDP ratio of 29.10%, South Africa compared well with OECD countries, but the composition of its tax is quite distinct. According to OECD classifications, personal income and corporate tax contribute 35% and 15%, respectively, substantially higher than the OECD average of 24% and 9%, respectively. However, social security contributions are much lower (Minsat, 2021). There may be room for change here, especially for social security contributions.
Build better skills
Technology and a push for digital efficiency will require a rethink of the skills needed for the economy in the digital era. The South African education system, from basic to tertiary-level education, requires a re-engineering. Dedicated policies are needed to equip the future workforce for digital transformation. South Africa’s social protection system is large and has the capacity to deliver, which is a positive during a pandemic. However, more people should enter the productive economy. Going forward, the policy focus should be on recovering the jobs lost in 2020, and medium-term goals should focus on improving the labour market performance.
Encourage employment
Firms must be supported to enable employment. Entrepreneurship and self-employment, especially among the youth, should be encouraged. The World Bank believes that a Temporary Employer-Employee Relief Scheme (Ters), such as the one introduced during the Covid-19 pandemic, served as a good measure to keep people employed. The Ters benefit provided that the Unemployment Insurance Fund assisted employers, in the form of an allowance, to mitigate the impact on employees of a loss of income during the Covid-19 pandemic.
Foster a green energy transition
A green energy transition promises to deliver socioeconomic benefits to South Africa. The country’s electricity generation continues to be reliant on coal, but efforts are ongoing to diversify the energy mix. The Renewable Energy Independent Power Producer Procurement Programme has contributed to the introduction of clean power since its launch about a decade ago. The country’s National Development Plan envisages the decommissioning of 35 GW of coal-fired power capacity and the supply of at least 20 GW of electricity needed by 2030 from renewables and natural gas. A stable supply of electricity is at the centre of achieving higher economic growth. Opportunities also exist for aligning industrial development and green economy policies.
10
