Driving Inclusive Growth in South Africa: Quick Wins with Competitive Markets and Efficient Institutions

The new World Bank report Driving Inclusive Growth in South Africa: Quick Wins with Competitive Markets and Efficient Institutions offers a positive message for South Africa. It asserts that a robust economic recovery, shared across all sectors of society, can be achieved in the immediate future through the implementation of a series of policy actions in four priority areas. Such recovery, in turn, has the potential to create the millions of jobs that South Africans need to improve their lives, escape poverty and contribute to the economy. 

Current Economic Challenges and Opportunities for Transformation 

Over the past decade, South Africa has struggled to expand its economy, growing by only 0.7 percent per year, which is four times slower than other middle-income countries. As result, real GDP per capita is now around the same level as it was in 2007. Economic opportunities also remained deeply unequal, with two-thirds of South Africans living in poverty and 40 percent of adults, primarily young people and women, either unemployed or discouraged from looking for a job. This figure represents the world’s highest unemployment rate.  

South Africa has a unique opportunity to revitalize its economy. The country’s policymakers recognize that improving the economy is essential for winning public trust. The World Bank’s new study provides in-depth analysis and practical recommendations to assist South African policymakers in addressing obstacles to inclusive growth and, most importantly, take action to pave the way for a brighter future for all citizens.

Policy Actions for Inclusive Growth

To kick off the transformation process and create momentum for reforms, the Drivers of Inclusive Growth report offers pragmatic and specific policy actions tailored for South Africa’s unique context, along four priorities that are expected to drive inclusive growth: 

1. Improving the efficiency of public spending to increase the value for money of government interventions in the economy.
2. Delivering high-quality and affordable infrastructure services to reduce existing constraints on businesses and increase households’ disposable income.
3. Making cities engines of inclusive growth to reduce economic distances and provide opportunities for all.
4. Dynamizing private sector growth to promote innovation and competitiveness that will enhance job creation. 

Expert Insights and Recommendations 
The menu of policy actions proposed in the report reflects inputs from a group of international experts led by Nobel laureate in Economic Sciences Michael Spence, and several representatives of South Africa’s private sector, government, academia, and civil society. One key underlying recommendation is that that South Africa urgently needs more competitive markets and efficient institutions - not necessarily more money and regulations.  

For each priority, a subset of quick wins is selected for their technical feasibility, minimal political constraints, potential for significant impact, and timely implementation. These include coordinating and reducing the fragmentation of social grants and labor programs, scaling up the use of e-procurement across the government, opening power transmission and transport logistics to private operators, making the financing of the passengers’ public transportation agency conditional on results, replacing the complex system of investment incentives and regulations with simple and predictable rules, and allowing the use of mobile phones to transfer money and pay bills without needing a bank account.