South Africans left behind

South Africans have been left out of much of the economic progress over the past three decades, with the country’s GDP per capita barely rising in comparison to its peers. 

This has been due to the country’s sluggish economic growth, averaging an annual rate of only 0.7% over the past decade. 

With an average population growth rate of 1.3% per year, South Africans have, on average, gotten poorer in the past decade. 

In comparison, the country’s emerging market peers have grown at around 5% per annum over the period, with their populations becoming significantly wealthier. 

This was revealed by the Organization for Economic Cooperation and Development (OECD) in its latest report on South Africa’s economy. 

Released on 5 June, the report details South Africa’s economic struggles and potential reforms the country can implement to revive the local economy. 

The OECD report showed that South Africa’s economic growth has significantly lagged that of the average for the organisation. 

While the average OECD country’s growth is 1.7% per annum, South Africa has only managed an average annual growth rate of 0.3%. 

This has resulted in the country’s population barely becoming poorer over the period and significantly less well off than the average OECD citizen. 

South Africa’s GDP per capita at the end of 2023 was $15,200 on a purchasing power parity basis, while the OECD average was $59,000.

Since 1994, South Africa’s GDP per capita has barely grown from just over $10,000 to $15,200. In contrast, the average OECD member saw its GDP per capita skyrocket from around $30,000 to $59,000. 

The OECD explained that a major driver of this is that a large share of the South African population stacks up at zero, with unemployment averaging 32.5% in 2024. This is sharply up from the average of 25% from 2010 to 2015. 

South Africa’s lack of economic growth has also translated into one of the highest levels of wealth and income inequality in the world. 

The graph below shows just how wide the gap has become between the average South African and that of the OECD over the past three decades. 

South Africa missing out

While emerging markets have grown strongly over the past decade, South Africa has largely missed out due to increased political corruption, policy uncertainty, and the collapse of important state-owned enterprises. 

The OECD’s report stated that insufficient access to electricity and logistics bottlenecks have been one of the main reasons behind stagnant living standards in recent years. 

This has been coupled with limited public and private investment in the country as the economy stagnated and uncertainty soared. 

South Africa’s economic stagnation coincided with the era of state capture, characterised by government corruption under former President Jacob Zuma. 

Soaring corruption has resulted in the cost of doing business increasing and prevented private investors from investing capital in the country. 

These factors resulted in South Africa missing out on the rapid growth of its fellow emerging markets since 2015. 

A recent study by Investec Wealth & Investment International showed that South Africa’s economy is 37% smaller than it would have been if it just matched its emerging market peers and maintained 4.5% economic growth since 2010. 

In rand terms, this lack of growth has resulted in South Africa having a GDP of only R7.5 trillion in 2024, instead of a potential R12 trillion. 

This has severe implications for the country, with living standards stagnating, unemployment rising, and discontent on the rise. 

One of the largest impacts of this missed economic growth is the foregone revenue collected through enhanced tax receipts, which would greatly ease the current fiscal crisis the state is in. 

Investec estimated that the stronger economic growth could have resulted in around R800 billion more in tax revenue for the state in 2024 alone. 

This would have eliminated the South Africa’s fiscal deficit and enabled the governemnt to invest in infrastructure and improve the lives of South Africans. 

It would have also enabled the state to pay down some of its substantial debt burden, which is expected to peak at 77% of GDP this year.