The Institute for Security Studies launched its Prospects 2043 report on Tuesday, with strong leadership seen as key to long-term stability in South Africa. (Photo by Per-Anders Pettersson/Getty Images)
Despite a barrage of strategic plans and policy frameworks aimed at driving South Africa’s economic growth and reducing unemployment and inequality, the government still struggles to translate intent into measurable action.
This is according to the Institute for Security Studies (ISS), which on Tuesday released the key findings of its long-term Prospects 2043 Report, which was launched at the same time.
From employment policies to industry-specific reforms, the country is at an impasse — its leadership and governing institutions lacking the capacity and accountability needed to implement meaningful change that will benefit citizens.
But there has been “rekindled hope” that the government of national unity could be a positive force in steering the country on a path of growth and accountability.
The study outlines a “business as usual” scenario for the country and eight sectoral scenarios with critical reforms.
“The report quantifies what is possible if the coalition government can indeed unite behind pro-growth strategies and effectively deliver on the urgent growth reforms needed in our country,” said Alize le Roux, senior researcher at the ISS’s African Futures and Innovation unit.
“Drawing on extensive data modelling, the report demonstrates the tangible benefits of coordinated implementation, policy implementation, and not just the formulation thereof.”
South Africa needs accountable and competent leadership grounded in evidence-based policies to foster sustainable growth, according to the report.
But even with optimistic projections, including a combined scenario where employment might improve by 11% compared with the current path/business-as-usual scenario forecast for 2043, deep-rooted inequality and unemployment are likely to persist for at least the next generation.
“Our forecast is that South Africa will grow at a rate of about 2.4% by 2043, in the current path,” said the ISS’s Jakkie Cilliers. But with the combined scenarios, “we will get to about 4.6% GDP growth”.
“The National Development Plan, finalised in 2012, set a growth target of 5.4%, average growth. We have never come close to that,” said Cilliers.
The report said the key to reducing inequality and joblessness lay in stimulating rapid economic growth, particularly through more labour-intensive sectors.
To achieve this, the government should foster a more flexible labour market, support a dynamic informal economy and build strong partnerships with the private sector to unlock domestic and foreign investment.
Regarding a more flexible labour market, Cilliers said: “It is often considered an ideological issue, but it is simple economics.”
But excessive market power — concentrated ownership and control — along with inadequate regulations against anti-competitive trade practices, continued to hinder broader economic participation, the report said.
Moreover, economic reforms would only succeed if anchored in a stable macroeconomic environment. This meant keeping inflation low and ensuring sustainable public finances.
Business confidence remains fragile, with South Africa’s poor credit risk ratings from the major agencies Standard & Poor’s, Moody’s, and Fitch being major deterrents to foreign direct investment.
Addressing this required improvements in state-owned enterprises and clarity around the network industries that remain overburdened by corruption and mismanagement.
South Africa must pursue export-led growth, particularly within Africa, said Cilliers, adding that the African Continental Free Trade Area offered an unparalleled opportunity to expand economic reach.
Reducing high investment costs, improving cross-border trading infrastructure, and joining the Pan-African Payment and Settlement System could allow South African companies to trade more efficiently across the continent, the report said.
But the government must also address barriers to market access, including antiquated tariffs and poorly maintained infrastructure.
Cilliers said shifting from race-based politics to class-based policies that prioritise the needs of the poor, unemployed and previously disadvantaged was the only way forward.
Without a concerted effort to foster national coherence and accountability, the country risked losing another generation to poverty, unemployment and inequality.
According to the report, South Africa would also not achieve prosperity without first restoring the rule of law and ensuring public safety. Professionalising the police force, improving coordination among security agencies and restoring the independence of the judiciary were critical steps toward creating a safe and stable environment for economic growth.
Among the various sectors analysed for their potential to generate jobs, manufacturing emerged as a frontrunner, particularly light manufacturing.
Cilliers said that Professor Anthony Black, a proponent of this approach, has argued that South Africa has the necessary ingredients to revitalise its manufacturing base, including a large pool of semi-skilled labour and developed infrastructure.
But the country needs to shift incentives toward employment rather than capital investment, reform labour regulations, and experiment with special economic zones for light manufacturing. If successful, this could provide a major boost to employment and reduce extreme inequality.
Education and healthcare are other areas where reform is critical for long-term growth. The effects of HIV/Aids and a poorly functioning education system weigh heavily on the country’s development prospects, said the report.
The Centre for Development and Enterprise, a policy research and advocacy think tank, has outlined comprehensive reforms for education, including tackling corruption in the education sector, raising teacher performance and improving accountability through the reinstatement of Annual National Assessment tests.
But without decisive action to address the dominance of the South African Democratic Teachers Union and corruption in educational institutions, the country’s human capital will continue to stagnate.
South Africa’s healthcare system is equally critical to economic growth, according to the report. While the country has explored universal health coverage for years, the singular focus on National Health Insurance has led to the neglect of broader health system reforms.
This includes addressing financing, governance and workforce issues. The ongoing deterioration of healthcare services has compounded the problems South Africa faces, further limiting its ability to achieve meaningful long-term growth.
The report said agriculture offered significant potential for labour-intensive growth, especially in agro-processing. Climate change posed risks, particularly in the Western Cape, but the Eastern Cape presented untapped opportunities.
To harness this potential, South Africa needs a consolidated fund to finance rural development, climate-smart agricultural practices and reforms to transition away from subsistence farming. But a politically sensitive land reform issue looms over the sector, with calls for individual land ownership to replace communal land systems in the former homelands.
Tourism, contributing 8.2% to GDP in 2023, represents a major growth area for South Africa. The country is already a popular international destination, but stringent visa policies, safety concerns and little investment in infrastructure limit its potential.
The government of national unity has set an ambitious target to increase tourist arrivals to 15 million by 2030, but achieving this goal will require significant policy changes and investment.
The informal economy is another crucial element in South Africa’s fight against unemployment, according to the report. Expanding informal activities by amending municipal by-laws, improving market access and reforming regulations to support small-scale enterprises could create millions of jobs.
There are already calls to prioritise these reforms to address the exclusion of informal enterprises from the economy.
South Africa’s energy future lies in transitioning from coal to renewable sources, the report noted. The current reliance on coal, which accounted for 95% of energy production in 2023, will gradually decrease, but the path to decarbonisation is complex.
Implementing carbon taxes, encouraging green investments and preparing for the European Union’s Carbon Border Adjustment Mechanism are all steps toward building a sustainable energy future.