Suggested interventions for South Africa

Suggested interventions for South Africa

Balance fiscal concerns and inclusive growth

Build better skills 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.

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.

Encourage employment 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.

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.

Suggested interventions for South Africa

Suggested interventions for South Africa – continued

Harness digital transformation Although digital transformation can lead to the demise of certain jobs or entire companies and brands, it will also result in the birth of many new ones and is considered a necessary disruption that will leave South Africa in a better position than before.

Increased digitisation and automation will displace 3.30-million jobs by 2030, but digital technologies could also create 1.20-million direct jobs in new information and communications technology (ICT) occupations, and another 3.30-million indirect jobs (McKinsey & Company, 2019).

To ensure the greatest benefit from digital transformation, emphasis should be on building a regional digital economy, led by South Africa. Many of the Southern African Development Community’s ICT strategies, plans, models, guidelines, and frameworks are only partially implemented and require reinvigoration.

Digital transformation is also enabling the booming of the so-called Gig economy – a labour market comprising short-term jobs – that will require additional labour regulations. Social safety nets will be important to ensure that these workers have access to health and social protection benefits.

Improve access to digital opportunities Challenges relating to inclusive access to data remain to be resolved and auction of spectrum needed to unlock investment in much-needed 5G infrastructure has been deadlocked for some time with current efforts at the start of 2021 being engulfed in court challenges. One area of progress has been the implementation of recommendations made by the Competition Commission, following its inquiry into the data services market, to curb data prices. However, the telecommunications industry continues to be dominated by two large firms and competition should be encouraged.

Invest in infrastructure The World Bank believes public expenditure is imbalanced. Spending on South Africa’s social protection system has been strong, compared with its peers, but capital spending on infrastructure has declined since its peak in the lead up to the hosting of the 2010 FIFA World Cup.

Given the current macroeconomic situation, there needs to be a discussion about the quality and composition of spending. Smarter investments on infrastructure are required, including through increased use of public–private partnerships.