Developing an Inclusive South Africa

PRETORIA, May 14, 2018 –  Tackling the root causes of poverty, inequality, and unemployment through coordinated reforms could help South Africa make further progress toward its Vision 2030 in the National Development Plan, according to the new World Bank Group Systematic Country Diagnostic (SCD) for the country.

Prepared in close consultation with national authorities and other stakeholders, the SCD, An Incomplete Transition: Overcoming the Legacy of Exclusion in South Africa, looks at the interplay between history, social, economic, financial, fiscal and environmental issues, and their impact on poverty and inequality. The SCD also identifies challenges and opportunities to accelerate progress toward reducing poverty and boosting shared prosperity, the core tenets of the World Bank Group’s mission.

Many of the challenges identified, such as insufficient skills for employment, are linked to South Africa’s long history of exclusion.

“The Government of South Africa has done much to address its most pressing development challenges, the triple challenge of high unemployment, poverty and inequality, but much still remains to be done,” said Paul Noumba Um, World Bank Country Director for South Africa. “As the World Bank we stand ready to support South Africa in its efforts to tackle the triple challenge.”

The SCD places special emphasis to the need for large-scale job creation. The diagnostic says that while South Africa underwent a successful and peaceful political transition in 1994, too many South African remain excluded from participating in the economy, rendering the transition incomplete. The persistent legacy of exclusion makes it difficult to build the post-apartheid social contract, the diagnostic says, resulting in contestation over resources and undermining investment and economic growth as well as financial, fiscal, and external sustainability. In addition, climate change poses shocks that further undermine the country’s its sustainability, according to the SCD.

The diagnostic identifies five binding constraints that reflect the root causes in tackling poverty and inequality in the country, and recommendations:

1. Insufficient skills: The SCD recommends focusing on children and young adults as the most critical. Policy options expected to have the most impact include strengthening nutrition and early years development, training school teachers, expanding affordable university access to poor students, reforming the Technical and Vocational Education and Training (TVET) system, and active labor market policies.
   
2. Skewed distribution of land and productive assets and weak property rights, is the second binding constraint. The SCD suggests reforms that can strengthen the asset base of the poor, while also increasing property security for investors.
   
3. Low competition and low integration in global and regional value chains. Reform of transport-related state-owned enterprises, including greater private sector participation; attracting foreign direct investment, linking small-medium enterprises (SMEs) with lead firms to connect them with international value chains, are among suggested policies.
   
4. Limited or expensive connectivity and under-serviced historically disadvantaged settlements: Policy options include fostering strategic densification of cities and diversifications of land use, as well as expanding basic services in underserviced settlements. Other interventions are better integrated transport planning and land use, as well as strengthening regulatory framework in support of competition in the minibus taxi sector.
   
5. Climate shocks: Disruptions to the economy and jobs as South Africa transitions to a low-carbon economy will need to be mitigated carefully, the diagnostic suggests. Climate change also puts further pressure on the country’s scarce water resources which require long-term planning and strategic adaptation.