South African policymakers are attempting to strike a balance. However, there is no room for balancing modest economic growth with deepening inequality and rising unemployment. Unless the economy is reconfigured to generate significantly more wealth, to sustain businesses, create jobs and finance long-term welfare measures, conditions will continue to deteriorate.
Recent data showing 1.4% growth in South Africa’s economy has been welcomed by some economic commentators. Yet Dr John Edres has cautioned against celebrating this figure. South Africa’s economic growth, he argues, remains far below the level required to meaningfully reduce unemployment.
In 2008, South Africa’s GDP per capita ($13,596) was almost identical to the global GDP per capita ($13,659). However, after the Global Financial Crisis, the global economy resumed growth while South Africa stagnated. Sixteen years later, in 2024, South Africa’s GDP per capita remained virtually unchanged at $13,599, while global GDP per capita had increased by 35.8% to $21,268.
The labour market tells a similar story. The number of unemployed people rose from 4.3 million in 2008 to 8.4 million in 2025. The official unemployment rate increased from 22.8% to 33.2%. More concerning, the rate of discouraged workers increased from 29.5% to 42.9%. These figures reflect how strained and unequal South Africa’s economy has become.
South Africa Economic Growth and the National Development Plan
South Africa can only be considered truly progressive when its economic growth rate consistently exceeds population growth. The National Development Plan (NDP) projects annual growth of 5.4%. According to Terence Corrigan, Project and Publications Manager at the Institute of Race Relations (IRR), even this target is insufficient.
Corrigan argues that South Africa’s economic growth should exceed 7% annually. Using the “rule of 70”, dividing 70 by the growth rate shows how long it takes for an economy to double in size. At 7%, the economy would double in roughly 10 years. At 5.4%, the pace would be much slower.
The IRR maintains that economic growth must be central the public policy. It calls for shifting more state spending toward investment, particularly infrastructure, which it describes as the backbone of economic expansion. According to the institute, empowerment policy must improve the business climate rather than constrain it.
The Development Bank of Southern Africa advocates inclusive financing strategies. However, Corrigan disputes this framing and calls for a fundamental overhaul of the current B-BBEE model. He proposes replacing it with Economic Empowerment for the Disadvantaged (EED), a model focused on socio-economic uplift rather than on race, gender, or age criteria alone.
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The IRR argues that capital should be deployed strategically to address funding gaps for small businesses and emerging entrepreneurs. It also calls for the removal of preferential procurement requirements and for more aggressive efforts to combat corruption. In its view, abolishing B-BBEE and replacing it with EED would ensure that the benefits of South Africa’s economic growth are shared more broadly rather than concentrated among a small elite.
The labour market is another area targeted for reform. According to the IRR, South Africa has priced unskilled workers out of employment through a relatively high national minimum wage. Smaller enterprises struggle to absorb labour costs. The institute argues that the extension of bargaining council agreements to non-parties and the national minimum wage introduced in 2019 should be reconsidered. It also calls for reforms to strike laws, dismissal regulations and retrenchment rules to improve labour market flexibility.
Improving competitiveness is critical in a challenging global environment. Decaying infrastructure, unstable cities, insecurity, skills shortages and policy uncertainty discourage investment. Relatively high labour costs and compliance requirements for empowerment further complicate the investment climate. Critics argue that the Employment Equity Act imposes regulatory pressure that limits expansion.
However, labour deregulation carries risks. Exploitation and widening inequality are real concerns. The IRR counters that “participating in the economy through employment is better than economic participation through unemployment”. Corrigan states, “We advocate getting people into work, however imperfect that may be.” He adds, “We ARE in favour of getting more people into work, however imperfect it may be.”
Efforts to reduce inequality through legislation, the institute argues, have sometimes excluded people from the economy altogether. Social grants, while vital, are threatened by stagnant economic growth in South Africa. The country faces a fiscal impasse and must prioritise economic expansion to sustain social protections.
While critics argue that the IRR’s approach focuses heavily on deregulation without sufficiently addressing the structural drivers of inequality, the institute maintains that skills gaps are among these drivers. It plans to publish a Blueprint for Growth later this year outlining its proposals in greater detail.
No economic reform agenda is without flaws. The IRR’s Blueprint for Growth will likely face scepticism from civil society and stakeholders concerned about social protections. In a pluralistic society, however, competing ideas must be debated openly.
Corrigan suggests that the real obstacle to reform lies in political and economic interests. For the governing ANC, many current policies reflect ideological conviction rather than purely economic calculation.
The question remains whether South Africa can improve its competitiveness without undermining labour rights and social protections. The complexity lies in recognising that rapid South African economic growth may initially produce lower-wage employment rather than high-skilled jobs. Yet without growth, unemployment and fiscal strain will only deepen.
