Executive Summary
South Africa, despite its progress in development, faces persistent challenges including poverty, inequality, and unemployment. These issues have been exacerbated by structural challenges and weak growth, particularly highlighted by the COVID-19 pandemic. Key indicators show unemployment reaching a record high of 34.9% in 2021 and remaining at 32.6% in 2023. Inequality and poverty levels remain high, with the Gini coefficient estimated at 0.63 and poverty headcount ratios at 40.0% and 55.5% for lower- and upper-bound poverty lines, respectively.
The country's commitment to addressing these challenges is seen through initiatives like the National Development Plan (NDP) and the United Nations Sustainable Development Goals (SDGs). The Economic Reconstruction and Recovery Plan (ERRP) serves as the main government policy framework aimed at tackling the triple development challenges via economic growth, investment, and redistribution.
To navigate this, South Africa piloted the SDG Push Framework—a tool developed by the United Nations Development Programme (UNDP) in collaboration with government counterparts. This framework encompasses scoping phases, acceleration dialogues, economic modeling, sustainable financing, and acceleration pathways to identify development gaps, challenges, and drivers.
Through this pilot, a combination of policy scenarios was tested to accelerate skills formation, promote growth in services and industry sectors, and implement poverty-alleviating social grants. Two scenarios were considered for social grants: unconditional and conditional, assuming external funding for additional expenditure.
A baseline scenario assuming a business-as-usual approach projected insufficient growth rates to meet key SDG targets related to poverty, inequality, economic growth, and unemployment reduction. The BAU scenario could exacerbate unemployment, particularly among those with low and middle education skill categories.
Economic modeling revealed that targeted interventions could boost economic growth from 4.5% in 2023 to 7.0% by 2030, expanding GDP by 55.6%. This approach significantly reduces the unemployment rate, dropping from 41.8% in 2023 to 28.3% by 2030. However, income inequality remains high, while poverty shows only marginal declines.
Expanding social protection for the currently excluded population is crucial, aiming to stimulate economic growth while reducing poverty. Social grant scenarios, particularly conditional ones financed by SDG Stimulus, showed the greatest potential for achieving poverty and inequality-oriented SDGs by 2030.
The SDG Push scenarios combined could assist South Africa in achieving key SDGs aligned with its goal of addressing the triple development challenges of unemployment, inequality, and poverty.
In conclusion, the economic modeling underscores the limitations of solely addressing supply and demand sides of the national skills mismatch issue. While measures can propel the economy towards high growth and employment paths, they fail to sufficiently tackle inequality and poverty. A conditional social grant package under the SDG Stimulus is essential for addressing these issues effectively. A combination of policies, including skills acceleration, growth in targeted sectors, and social grants, is required to effectively address South Africa's challenges of high unemployment, poverty, and inequality.
