Without the necessary reforms, South Africa will not be able to reduce unemployment according to a new report by the Bureau for Economic Research.
Image: Itumeleng English / Independent Newspapers.
Without the necessary reforms, South Africa will not be able to reduce unemployment according to a new report by the Bureau for Economic Research.
Image: Itumeleng English / Independent Newspapers.
South Africa will not be able to reduce unemployment without further structural reforms such as relaxing regulations to make doing business easier, according to a new report by the Bureau for Economic Research.
The report by BER economists Helanya Fourie and Claire Bisseker said that in South Africa, only four out of ten working-age adults are employed.
“Faster economic growth is the obvious answer. But without the necessary reforms, growth alone will not reduce unemployment at the scale required. South Africa’s unemployment rate has remained above 20% since the early 1990s, which, for a country that has avoided war or economic collapse, is almost without parallel.”
The report said decades of weak schooling for the majority, and a growth path that increasingly relies on capital and skills, are among the reasons that have left a large share of working-age South Africans locked out of the modern economy. “When conditions improve, it takes time for the effects to trickle down to the least skilled and most marginalised,” the authors write.
The report said faster growth does reduce unemployment. “Between 2001 and 2008, the economy grew by 3%-5% a year, and the official unemployment rate fell from 30,3% to 22,5%. Yet, even at the height of that boom, unemployment never dipped below 22%. Growth helped clear the cyclical joblessness but did not address the deeper structural problem.”
The report said that the BER's own modelling shows that if the economy could grow at 3%, it would create 2,4 million jobs by 2030, compared to 1,4 million jobs if growth remains at around 1%.
“But, with just over eight million people officially unemployed, even 3% growth will not come close to eliminating the employment shortfall. Stats SA’s Quarterly Employment Survey, released last week reveals the shape of the problem.”
The report said that a 15-year view shows a clean split. “Most service sectors began the previous decade strongly and kept adding jobs, while the secondary sectors (chiefly mining and manufacturing) largely flatlined. Some of this is a normal evolution that maturing economies go through, as activity shifts from mines and factories towards services.”
The report added that two things should trouble South Africa. “Mining, which could be an important source of jobs, employed fewer people in the first quarter of 2026 than at the start of 2010, despite firm commodity prices. And even the service sectors that drove job creation before 2020 have added almost nothing since recovering from the COVID-19 pandemic.”
The report noted that manufacturing's long slide is a clear case of what has gone wrong. “Its decline reflects a lethal combination of weak global demand, unreliable municipal services, and escalating input costs due to network infrastructure failures in electricity, ports and rail. These realities, compounded by regulatory hurdles, have eroded confidence and fed a vicious cycle of low investment, low growth and low employment.”
The report said that these trends provide important context for the government's new Industrial Development Strategy. “It names the binding constraints, puts affordable electricity and working ports and rail at the centre, promises to cut red tape through Operation Vulindlela, and even adopts the same 3% growth target. But it also leans on chosen "pathways" and targeted incentives.”
The report added that Operation Vulindlela is slowly clearing many of the economy-wide frictions that hold back investment, which should sharpen the employment response to growth.
“But structural reforms take time, and other fixes can run in parallel. Take the perennial problem of red tape. Regulatory barriers raise compliance costs, can discourage entrepreneurship, and hold firms back from investing, expanding and hiring. Yet much of this can be undone with the stroke of a pen.”
The report said that regulatory reform is fast and almost free, certainly next to the cost of rebuilding ports and railways.
“The OECD's 2025 Economic Survey finds, as it has at almost every survey since the first in 2008, that South Africa's product-market regulation is among the most restrictive in the G20 and the OECD. It singles out the administrative burden on local firms and urges the government to make simplifying licences and permits a national priority.”
The report concluded that stronger job growth depends not only on long-term structural reforms but also on reducing the daily frictions that stifle business and hiring.
“And because South Africa’s starting point is so restrictive, freeing firms to operate could have an outsized effect on growth, efficiency and employment. There is a further reason to act here. Small and informal enterprises should have the capacity to absorb large amounts of labour, yet they carry the heaviest burden of poor infrastructure, red tape and weak service delivery.”
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