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South Africa Growth in incomes and labour productivity has stagnated since the crisis. GDP per capita remains around 75% below the average of the upper half of OECD countries. Weak labour utilisation and total factor productivity have both weighed on growth since the crisis. Inequality and poverty have remained very high and poor environmental quality negatively affects health outcomes. Greenhouse gas emissions per capita are below the OECD average, but population exposure to air pollution is high. Progress on the priority to finalise the reform of the wage bargaining system has been made, as the national minimum wage became effective in January 2019. Although strengthening active labour market policies to tackle unemployment remains important, this priority has been dropped as investment in infrastructure and broadening access to markets are more pressing in order to support job creation and growth. Removing barriers to competition and lifting regulatory restrictions in many sectors would boost growth. In particular, more competition in network industries would bring down prices, increase the accessibility of services, stimulate downstream firms’ competitiveness and raise productivity growth. Improving the management and governance of state owned enterprises and strengthening the regulation of network sectors is crucial to lift supply side bottlenecks. Improving infrastructure and reducing intra-regional trade barriers would facilitate the flow of goods and people, increase market access and support economic growth and well-being. Reducing red tape and barriers to entrepreneurship would bolster employment and productivity growth. Improving equity and quality of education would boost human capital accumulation and reduce the high levels of inequality. Growth performance, inequality and environment indicators: South Africa Average annual growth rates (%) GDP per capita Labour utilisation of which: Labour force participation rate
A. Growth
Employment rate1 Employment coefficient2 Labour productivity of which: Capital deepening Total factor productivity Dependency ratio
2012-18 -0.2 0.3 0.9 -0.5 0.0 -0.8 0.1 -0.9 0.2
Level
Annual variation (percentage points)
-50
2014 63 (31.7)*
2010-14 -0.1 (0)*
-60
2.4 (7.6)*
0 (0)*
2015 10.2 (12.3)* 0.8 (0.3)* 1.1
Average of levels 2010-2012-2015 10.6 (12.8)* 0.9 (0.4)* 1.2
GHG emissions per capita4 (tonnes of CO2 equivalent) GHG emissions per unit of GDP4 (kg of CO2 equivalent per USD) Share in global GHG emissions4 (%) * OECD simple average (weighted average for emissions data)
Gap to the upper half of OECD countries5
Per cent 0 -10 -20 -30 -40
B. Inequality and environment
Gini coefficient3 Share of national disposable income held by the poorest 20%
C. The large gaps in GDP per capita and productivity are not narrowing
2002-08 3.2 0.9 -0.1 1.0 0.0 1.9 -0.1 2.0 0.4
-70 -80 -90
GDP per capita
GDP per hour worked
Source: Panel A: OECD, Economic Outlook Database; Panel B: OECD, Income Distribution and National Accounts Databases and World Bank, World Development Indicators (WDI) Database; International Energy Agency (IEA), Energy Database; Panel C: OECD, National Accounts and Productivity Databases StatLink 2 https://doi.org/10.1787/888933955351 ECONOMIC POLICY REFORMS 2019: GOING FOR GROWTH Š OECD 2019
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Policy indicators: South Africa A. Graduation rate in upper secondary education is very low
B. The quality of transport infrastructure is perceived as low
2016¹
%
Index from 1 (extremely underdeveloped) to 7 (most extensive and efficient), 2017
7
90
6
80
5
70
4 60
3
50 40
2
SOUTH AFRICA
Advanced economies
Emerging economies
SOUTH AFRICA
Advanced economies
Emerging economies
1
Source: Panel A: OECD, Education at a Glance Database; Panel B: World Economic Forum, Global Competitiveness Index Historical Dataset. StatLink 2 https://doi.org/10.1787/888933956225
Beyond GDP per capita: South Africa A. Inequality is very high
Gini coefficient, 2016 or last available year¹ SOUTH AFRICA, 63.0
SVK, 24.1 Advanced economies median, 29.7
Emerging economies median, 46.2
B. Exposure to fine particulate matter is high Percentage of population exposed to PM2.5, 20172
% SOUTH AFRICA Advanced economies
< 10 μg/m³ 10-35 μg/m³
Emerging economies
> 35 μg/m³
World 0
10
20
30
40
50
60
70
80
90
100
Source: Panel A: OECD, Income Distribution Database, World Bank, World Development Indicators Database and China National Bureau of Statistics; Panel B: OECD, Environment Database. Note: For the explanation of the sets of indicators above, please go to the metadata annex at the end of this chapter. StatLink 2 https://doi.org/10.1787/888933957099 ECONOMIC POLICY REFORMS 2019: GOING FOR GROWTH © OECD 2019
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South Africa: Going for Growth 2019 priorities Reduce barriers to entrepreneurship. Encouraging entrepreneurship would bolster employment and productivity growth. •
Actions taken: The Small Business and Innovation Fund to support entrepreneurs from the idea and pre-start-up phases all the way to the growth stage will begin to operate in FY2019/20. Insolvency laws are being reviewed and updated to reduce limitations to future access to credit for anyone who previously had been declared insolvent
•
Recommendations: Significantly reduce red tape. Reduce the severity of bankruptcy rules, in particular severance payments, to facilitate second chances for entrepreneurs. Undertake regulatory impact assessments systematically for all new legislation and review existing legislation with a view to reducing regulatory burden.
Enhance competition in network industries. More competition in network industries would bring prices down, increase access and stimulate productivity growth and firms’ competitiveness. •
Actions taken: The Competition Act has been amended in 2018 to give South African competition authorities extended powers to investigate market concentration and impose structural remedies. The STER Bill, which seeks to consolidate economic regulation and policy of the transport sector within a single framework through establishing the Single Transport Economic Regulator (STER) and the Transport Economic Council, has been released for public comment.
•
Recommendations: Rule out granting state-owned enterprises exemptions from the competition law. Secure effective separation of generation, transmission and distribution of electricity. Strengthen the independence of network regulators. Unbundle the division of the state-owned transport conglomerate Transnet and open access to public infrastructure to private service providers.
Raise quality and equity in education. Improving equity and quality of education would boost human capital accumulation and reduce the high levels of inequality. •
Actions taken: Starting in 2018, free tertiary education will be phased in over the next three years for qualifying first-year students from low-income households.
•
Recommendations: Improve teacher training, enhance accountability and increase monitoring of school leadership. Teach English as a second language earlier in the curriculum, while maintaining mother-tongue instruction for longer. Upgrade infrastructure. Gradually phase out school fees in the public primary school system. Expand vocational education and training.
*Reduce trade barriers to broaden economic opportunities. Improving intra-regional trade to access larger markets, more jobs and more trade opportunities, would boost productivity from better resource allocation. •
Recommendations: Reduce non-tariffs barriers on intra-regional trade. Reduce non-tariffs barriers on intra-regional trade. Harmonise where possible documents for licences, price control measures and technical barriers to trade (technical norms). Lead the harmonisation of competition rules among South African Development Community (SADC) countries and increase co-operation between competition authorities.
* New policy priorities identified in Going for Growth 2019 (with respect to Going for Growth 2017). No action can be reported for new priorities.
ECONOMIC POLICY REFORMS 2019: GOING FOR GROWTH © OECD 2019
| 163 *Improve transport infrastructure to boost growth. A better infrastructure environment that allows for better flow of goods and people would support economic growth. â&#x20AC;˘
Recommendations: Provide special economic zones with better infrastructure and develop their linkages with local economies. Create a regional fund for infrastructure and increase private sector participation in infrastructure projects. Also promote competition in infrastructure-related services across the country to deepen regional integration.
* New policy priorities identified in Going for Growth 2019 (with respect to Going for Growth 2017). No action can be reported for new priorities. ECONOMIC POLICY REFORMS 2019: GOING FOR GROWTH Š OECD 2019