According to a new study conducted by the Bureau for Economic Research (BER), South Africa will be unable to reduce its unemployment rate without implementing necessary structural transformations.
Employment Challenge in the Country
BER economists, Helanya Fury and Claire Bissaker, noted that only a quarter of the working-age adult population in South Africa is employed. They emphasized that while faster economic growth is an obvious solution, growth alone will not resolve the unemployment problem on the required scale unless corresponding reforms are introduced.
South Africa's unemployment rate has exceeded 20% since the early 1990s, which, according to the authors, is almost unprecedented for a country that has avoided wars or economic collapse. Decades of poor education for the majority of the population and an economic model increasingly dependent on capital and skills are among the reasons that have excluded a significant portion of the working-age population from the modern economy.
Growth Limitations and Sectoral Dynamics
The report showed that accelerating growth does contribute to reducing unemployment. For instance, between 2001 and 2008, the economy grew at 3–5% annually, and the official unemployment rate fell from 30.3% to 22.5%. Nevertheless, even during this boom period, unemployment never dropped below 22%, as growth helped address cyclical issues but did not solve deep structural problems.
BER modeling demonstrates that with economic growth of 3%, 2.4 million jobs will be created by 2030, compared to 1.4 million if growth rates remain around 1%. However, considering that over eight million people are officially unemployed, even 3% growth will not fully eliminate the job deficit. Data from the Stats SA Labour Force Survey, published last week, reveals the picture of this problem.
Trends in Industry and Services
A 15-year analysis revealed a clear division: most service sectors demonstrated strong growth in the previous decade and continued to create jobs, while secondary sectors, mainly mining and manufacturing, remained virtually static. The authors note that part of this is a natural evolution of mature economies, where activity shifts from factories and mines towards the service sector.
The report also drew attention to two worrying aspects for South Africa. Firstly, the mining industry, which could be a major source of employment, hired fewer people in the first quarter of 2026 than it did in early 2010, despite stable commodity prices. Secondly, even the service sectors that stimulated job creation until 2020 have added virtually no new jobs since the recovery from the COVID-19 pandemic.
Reasons for Production Decline
The slowdown in production is viewed as a prime example of systemic problems. Its decline is due to a combination of weak global demand, unreliable municipal services, and rising raw material costs due to disruptions in electricity grid infrastructure, ports, and railways. These factors, exacerbated by regulatory barriers, have undermined confidence and triggered a vicious cycle of low investment activity, low growth, and low employment.
Recommendations and the Role of Reforms
These trends provide important context for the government's new Industrial Development Strategy. The strategy identifies key constraints, places accessible electricity and functioning ports and railways at the center of attention, promises to reduce bureaucracy through the 'Vulindlela' operation, and adopts the same 3% growth target. However, it also relies on chosen 'paths' and targeted incentives.
BER added that the 'Vulindlela' operation is gradually removing many economic obstacles hindering investment, which should strengthen the employment response to growth. It is emphasized, however, that structural reforms take time, and other measures can be implemented in parallel. Among these measures is the persistent issue of bureaucracy: regulatory hurdles increase compliance costs, can stifle entrepreneurship, and prevent companies from investing, expanding, and hiring staff. Much of these problems can be resolved with simple administrative action.
The report references the OECD's 2025 Economic Outlook, which notes that product market regulation in South Africa is one of the most restrictive among G20 and OECD countries. The organization calls on the government to make simplifying licenses and permits a national priority, pointing to the administrative burden on local firms.
In conclusion, the study concludes that stronger employment growth depends not only on long-term structural changes but also on reducing the daily obstacles that impede business and hiring. Since South Africa's starting point is very constrained, freeing up companies to operate can have a significant impact on growth, efficiency, and employment. Furthermore, small and informal enterprises, which should have the potential to absorb a large amount of labor, bear the greatest burden of poor infrastructure, bureaucracy, and weak service provision.
