Productivity and long term growth

Going for Growth 2018 - South Africa note


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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

GDP per capita remains at around 30% of the average level of the most advanced OECD countries. Labour productivity remains the main drag on growth compared to the pre-crisis years. Employment is also weighing on growth since the crisis, along with declining participation rates. Inequality and poverty remain particularly high, with entrenched barriers to social mobility difficult to overcome despite increases in social spending.
Removing barriers to competition and lifting regulatory restrictions in many sectors would boost the economy. In particular, more competition in network industries would bring prices down, increase access and stimulate productivity growth and firms’ competitiveness. Also, improving the management and governance of state-owned enterprises and, in addition, strengthening the regulation of these sectors is crucial to lift supply-side bottlenecks. 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.

Going for Growth 2017 recommendations include:

  • Finalise the reform of the wage bargaining system by weakening administrative extension of collective bargaining in sectors covered by bargaining councils. Provide indicative guidelines for wage settlements at a centralised level consistent with inflation targets and sectors’ productivity growth. After the national minimum wage is introduced, ensure regular reviews of the minimum wage are independent and transparent. 
  • Reduce barriers to entrepreneurship by significantly reducing red tape and other administrative burdens on business operations. Reduce also 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 by ruling out state-owned enterprises exemptions from the competition laws. Secure effective separation of generation, transmission and distribution of electricity. Strengthen the independence of network regulators. Unbundle the divisions of the state-owned transport conglomerate Transnet and open access to public infrastructure to private service providers. 
  • Raise efficiency and equity in education by improving teacher training, enhance accountability and increase monitoring of school leadership. Teach English as a second language earlier, 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. 
  • Strengthen active labour market policies to tackle unemployment by expanding placement assistance for young job-seekers and support for young entrepreneurs focused on management training. Establish a public employment service as a one-stop shop for job seekers to lower the cost of job search and hiring costs for employers, which would improve the matching of workers to jobs.

Recent policy actions in these areas include:

  • A national minimum wage has been introduced alongside measures to improve industrial relations.

South Africa: Latest Economic Forecast 

South Africa: Latest Economic Survey


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