Forum experts in KwaZulu-Natal emphasize that investment confidence is critical for South Africa's growth

According to the analysis, South Africa's economy has avoided collapse, but the growth rate has been insufficient to create a sufficient level of well-being. This imbalance represents both a problem and an opportunity for the country.

Distinguishing Between Symptoms and Causes

South Africans often assess the state of the economy by focusing on unemployment, poverty, and inequality. While these factors reflect daily realities, they are consequences of the economic situation, not measures of it. Confusing these symptoms with the root causes can lead to a misunderstanding of both the problem itself and the paths to its solution.

Indicators of Economic Resilience

The Inclusive Society Institute's report presents a more complex picture than extreme optimists or pessimists suggest. South Africa's economy is not experiencing a crash. However, it is also not demonstrating fast enough growth to provide the jobs, incomes, and opportunities that citizens expect. This difference is significant.

Historical data shows that since 1994, real GDP has increased by approximately 85%, reaching over 4.6 trillion rand in constant prices, which refutes the scenario of a collapsing economy. Furthermore, inflation remains under control within a stable monetary system, the financial system functions effectively, and the rand retains its status as one of the most actively traded currencies in emerging markets. These signs indicate high economic resilience in the face of domestic and global shocks.

The Problem of Per Capita Growth

Despite overall stability, many wonder why the economy feels stagnant. The answer lies in the per capita GDP figure, which receives less attention than the overall GDP. While GDP measures the size of the economy, per capita GDP shows what portion of that economy is available to each person.

The period from 1995 to 2014 was characterized by real per capita GDP growth from about 62,000 to nearly 80,000 rand (in constant prices), reflecting a time when economic growth outpaced population growth, improving living standards. However, this momentum was not sustained. During the same period, South Africa's population grew by more than 50%, and moderate economic growth proved insufficient to maintain the rising standard of living for the average citizen.

Over the last decade, real per capita GDP has stagnated and subsequently declined to approximately 75,548 rand in 2023. This means that South Africans are materially better off than three decades ago, but the sustained progress of the first two decades of democracy has largely concluded. This loss of momentum explains why many feel the economy has stopped working for them, even if it hasn't collapsed.

The Concept of 'Per Capita Squeeze'

The central argument of the report is that the economy can grow while people experience stagnation. This happens when economic growth barely keeps pace with population growth. The economy gets bigger, but not enough for every citizen to receive a significantly larger share of its output. Growth is constantly distributed among a growing population, leading economists to call it a 'per capita squeeze.'

An economy growing at about 2% per year cannot absorb new labor market entrants at the required rate. Jobs are created, but not fast enough. New opportunities emerge, but in insufficient numbers. The economy continues to move forward, but unemployment remains painfully high because growth consistently fails to meet labor market needs.

International Context and Conclusions

Modeling by the Institute itself confirms this view: assuming job creation rates remain constant, if South Africa's population grew in line with the average of upper-middle-income countries, the current unemployment rate would be several percentage points lower. Thus, demographics alone would not solve the unemployment crisis, but they do show that the problem is not just a lack of jobs, but that too many people are competing for them because economic growth has failed to outpace population growth.

From this perspective, unemployment is evidence that the economy has not grown fast enough, rather than proof that it has stopped functioning. International data reinforces this conclusion. South Africa does lag behind upper-middle-income economies, but it is not the exceptional case often suggested in public debates. South Africa's economy grew at about 2% per year since 2000, compared to about 3.2% in upper-middle-income countries. This difference, though seemingly modest, represents a significant loss of national income, investment, and employment opportunities over two decades. It is a gap of underperformance, not a systemic economic collapse.

Social Consequences and Outlook

Recognizing this distinction goes beyond an academic exercise. Diagnosing a collapse where there is stagnation leads to incorrect treatments. Conversely, celebrating continued growth risks overlooking the deep social consequences of growth that remains too weak. Preventing a crisis is not the same as achieving prosperity.

This nuance has far-reaching implications beyond economics. Chronic unemployment, stagnant incomes, and limited opportunities not only restrict growth but also erode trust and weaken social cohesion over time, reducing confidence in institutions. No economy, no matter how resilient its macroeconomic foundation, can sustain a high level of exclusion indefinitely without consequences. If South Africa cannot translate economic resilience into broader prosperity, today's social pressures could become tomorrow's economic constraints, hindering investment, weakening confidence, and slowing growth further. Therefore, economic resilience and social cohesion are not competing goals; they mutually reinforce and depend on each other.

One of the report's most important findings is that South Africa's main economic problem is not macroeconomic instability. Inflation is controlled, the financial system is stable, and the external sector continues to adjust. The real constraint lies elsewhere: South Africa has not attracted enough investment, has not grown fast enough, and has not expanded production capacity sufficiently to raise living standards and reduce unemployment to the required extent.

Thus, describing South Africa as a prosperous or failing economy completely misses the point. The country is trapped in a trap of insufficiency. Growth was sufficient to maintain macroeconomic stability, but insufficient to generate the employment, income, and opportunities necessary to sustain growing prosperity. South Africa does not need to save a broken economy; it needs to accelerate a growing one. Only sustainable growth based on investment can create the jobs, incomes, and opportunities needed to transform economic resilience into improved living standards. This is the true economic story of South Africa: not collapse, but insufficient growth.

An expert argues that the future of South Africa is determined not by material wealth such as mineral resources, entrepreneurial spirit, or strategic location, but by an invisible asset—collective belief.

The Essence of National Capital

Many might consider South Africa's financial institutions, Constitution, or the resilience of its population to be its most valuable national resource. However, there is another asset that cannot be measured on a balance sheet or taxed. This is an invisible force that determines whether the nation will develop or decline. This asset is collective conviction.

The Role of Trust in National Development

The world's most successful nations are not simply those with the strongest economies or the richest natural resources. They are societies where citizens share a common belief in a better future; where people trust each other enough to cooperate, entrepreneurs are confident in opportunities, investors are willing to commit capital, and youth believe in the possibility of improving tomorrow. Nations function based on confidence long before they begin operating on capital.

Social and Psychological Challenges

During Mandela Month celebrations, the question arises whether South Africa's greatest problem is not only economic or political, but also psychological. The doubt emerges: have the residents stopped believing? Recent public discussions concerning crime, unemployment, immigration, and economic inequality point to a country under immense pressure. These issues demand serious political solutions and honest public debate.

Nevertheless, parallel to these legitimate concerns, something more subtle is happening: social cohesion is weakening, public trust is declining, and confidence is fading. When confidence disappears, it becomes harder to build prosperity. This is not merely an opinion, but a conclusion supported by scientific data.

Scientific Basis for the Power of Beliefs

Behavioral scientists have long demonstrated that beliefs shape behavior. People who believe their efforts matter are more likely to persevere, innovate, and invest in the future. Conversely, when people lose hope, they withdraw, become less risk-taking, less entrepreneurial, and less willing to collaborate.

This same principle applies to societies. Economists often speak of investor confidence, but investor confidence is merely a manifestation of a much broader phenomenon: collective conviction. Businesses invest because they believe in market growth. Families raise children because they believe in available opportunities. Entrepreneurs create companies assuming their efforts will be rewarded. Communities cooperate because they believe others will do the same.

The Cycle of Faith and Productivity

Conviction transforms into behavior, behavior into results, and results reinforce conviction. This generates either a virtuous or a destructive cycle. South Africa has experienced both scenarios. There were times when the country believed in itself as a whole, such as during the transition to democracy or at the 1995 Rugby World Cup.

The 2010 FIFA World Cup showed what is possible when government, business, civil society, and ordinary citizens unite around a common goal. Despite widespread skepticism, South Africa hosted one of the most memorable tournaments in FIFA history, presenting to the world a nation capable of extraordinary achievements. For a short time, South Africans remembered what it felt like to have collective belief. This feeling mattered because belief is contagious, just like cynicism.

Constructive Criticism Versus Despair

Today, negativity often dominates the national conversation: social media encourages anger, headlines amplify failures, and political discourse tends to divide rather than unite. Criticism is necessary in any democracy because it ensures accountability, transparency, and active debate. However, there is a crucial difference between constructive criticism and collective despair. No nation achieves prosperity solely through talk.

History demonstrates a strikingly consistent pattern: Germany restored confidence after the war before regaining global competitiveness. Singapore combined visionary leadership with unwavering belief that the island with limited resources could become one of the world's leading economies. South Korea transformed itself from one of the poorest countries in the world into one of the most innovative, cultivating a shared national commitment to education, excellence, and long-term progress.

The Role of Leadership in Creating Belief

The success of these countries was based not only on optimism but on a shared belief embodied in disciplined action. South Africa needs precisely this formula. Belief does not replace economic reforms, nor can it substitute competent governance, sound policy, or ethical leadership. But reforms cannot succeed if the nation ceases to believe in the possibility of improvement.

Therefore, leadership carries a responsibility far greater than merely managing institutions. Leadership creates belief. The greatest legacy is left by leaders who expand people's perceptions of what is possible. Perhaps this was Nelson Mandela's greatest contribution to South Africa. His outstanding achievement was not just the peaceful transition to democracy; he inspired millions of South Africans and millions of people worldwide to believe in the possibility of reconciliation when conflict seemed inevitable, that hope could triumph over fear, and that a shared future was stronger than a divided past. He understood that before people change their behavior, they must first change their beliefs.

The Choice of Every Resident

Perhaps this is the challenge facing every resident of South Africa today. Business leaders must create organizations that people believe in. Politicians must restore trust through honesty and keeping promises. Educators must help youth believe that their potential exceeds their circumstances. Communities must rediscover the value of social cohesion over social division.

And each of us has a choice regarding the stories we tell ourselves and others. Will we strengthen decline, or will we become builders of confidence? South Africa's future will be determined not only by GDP, not only by elections, or not only by global markets. It will also depend on whether we can restore the invisible asset upon which any prosperous society ultimately depends—collective belief. Because when a nation believes in itself, it gains the ability to achieve far more than anyone could have imagined. And perhaps this is the most important investment South Africa can make—not only in its economy, but in its future.