Great news for jobs in South Africa – with a catch

 ·28 Oct 2024

Research by PwC estimates that the best-case scenario under phase two of Government Business Partnership could create 470,000 jobs next year. However, it warns that there are still major obstacles, and reformers need to be implemented immediately.

The recent launch of Phase 2 of the Government Business Partnership in South Africa underscores the country’s drive to harness both public and private resources to tackle systemic economic challenges.

Launched in October 2024 under the Government of National Unity (GNU), this phase is a continuation of efforts to stabilise and energise the economy by focusing on core areas—energy, logistics, and crime—seen as critical levers to accelerate economic growth.

Despite the promising estimates, the projected creation of 470,000 jobs remains a best-case scenario that hinges on the successful implementation of several reforms, many of which face considerable challenges.

The Government Business Partnership is a collaborative platform that brings together public and private sectors to address economic and social issues that neither could effectively tackle alone.

By combining public resources and infrastructure with private sector efficiency and innovation, the partnership seeks to drive targeted economic reforms that could foster productivity, investment, and ultimately, job creation.

Phase 2 of the Government Business Partnership continues the work initiated in the first phase, focusing on priority interventions aimed at overcoming some of the nation’s most pressing economic bottlenecks.

This phase places particular emphasis on the electricity supply, logistical improvements, water infrastructure, and crime reduction—areas identified as having the potential to accelerate economic growth and significantly reduce the unemployment rate, currently at 33.5%.

The Bureau for Economic Research (BER) published research earlier this month, dubbed “Masibe nempumelelo—let us be successful,” outlining the economic impact of these reforms if they are implemented swiftly.

Key Interventions in Phase 2

According to BER’s October report, achieving these goals will require robust investments in physical infrastructure and efficiency improvements in critical sectors. The partnership has identified the following priority areas for immediate investment:

  1. Energy Sector Revitalization: South Africa’s Energy Availability Factor (EAF) is currently at 63%. The goal is to raise this to 75% by next year, supported by a total of R23.3 billion in energy investments. Such improvements could stabilise the energy supply, enabling industries to operate without the frequent disruptions currently stifling productivity.

  • Logistics and Transport: Railways and ports are vital for South Africa’s trade-dependent economy. Phase 2 targets R4.7 billion in investments in these sectors, including private sector concessions. Improvements in logistics efficiency could reduce transportation costs, cut down on delays, and make South African goods more competitive in global markets.

  • Water and Sanitation: Reliable access to water is crucial for both households and industries. The partnership aims to allocate R2.3 billion for water and sanitation infrastructure upgrades, with contributions from private organizations like the Lebalelo Water User Association. Enhanced water infrastructure can attract new businesses and support sustainable community growth.

  • Crime Reduction: Crime rates directly impact business confidence and consumer activity. By prioritizing anti-crime measures, the partnership aims to create a safer environment that will encourage investment and consumer spending.

Best-case scenario

If these interventions are implemented successfully, PwC estimates that South Africa’s economy could grow by 3.3% in 2025.

This growth would stimulate real fixed investment spending, projected to increase by 7.8%, creating approximately 470,000 jobs.

These developments could bring down the unemployment rate to 31.4%, marking a substantial improvement from current levels.

However, achieving these outcomes is far from certain. While the interventions outlined are theoretically feasible, several obstacles could hinder their execution.

For instance, private sector involvement in logistics, a critical component of this strategy, recently faced a setback when a contract to outsource operations at Durban Container Terminal Pier 2 was put on hold by the Durban High Court.

This delay illustrates the potential legal and administrative hurdles that could slow or stall these initiatives.

The partnership’s success will also depend on significant administrative improvements, particularly at the municipal level, as inefficient local government services can undermine even well-funded national initiatives.

Additionally, international factors could also impede the plan’s progress.

South Africa is currently under close scrutiny by the Financial Action Task Force (FATF), with the country on its “grey list” due to concerns over money laundering and terrorism financing.

To inspire investor confidence, South Africa must demonstrate compliance with international financial standards, adding another layer of complexity to the partnership’s agenda.

While Phase 2 of the Government Business Partnership represents an ambitious vision for South Africa’s short-term economic recovery, the nation must also adopt policies that support sustainable, long-term growth.

According to PwC’s research, reforms in the energy sector, a commitment to workforce development, and encouragement of private sector investment could lift South Africa’s growth potential to above 4% annually over the next decade.

To reach this target, the partnership must maintain momentum and address core issues systematically.

Phase 2 of the Government Business Partnership embodies the aspiration for a more robust, inclusive South African economy, but its success depends on overcoming substantial challenges.

If these can be navigated, the partnership’s ambitious goal of 470,000 new jobs may be realized, offering hope to millions in search of better economic prospects.


Read: Discovery’s double blow warning to certain businesses in South Africa

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