Unlocking South Africa’s economic potential

While much of the developed world is struggling to recover from the debilitating crises of the past few years, sub-Saharan Africa is experiencing an economic renaissance of sorts. According to the January 2013 update of the International Monetary Fund’s World Economic Outlook, sub-Saharan Africa is expected to grow an impressive 5.8% in 2013 and 5.7% in 2014. Only developing countries in Asia are forecast to have a higher growth rate over this period.

South Africa, the region’s largest economy, is not unfamiliar with strong growth. Since 2000, its GDP has climbed an impressive 45.7%, and its inclusion among the BRIC countries in 2010 solidified its status as a major player, both at the regional and global levels. However, in order for the country to continue its transition to a middle-income economy and ultimately reach its full potential, it will have to address a number of pressing social, political and economic issues.

Compared with other countries of similar levels of development, South Africa lags in terms of quality and reliability of its infrastructure. South Africa is in desperate need of improving its electricity and telecommunications infrastructure as it ranks, according to the World Economic Forum’s annual Financial Development Report 2012, in the bottom quartile of 62 countries measured in terms of quality of electricity supply, number of Internet users, broadband Internet subscriptions and telephone subscriptions.

On a positive note, some measures are already being discussed to rectify the situation, including the decision to spend approximately US$ 91 billion on infrastructure projects over the next three years. The projects will include power stations and electricity transmission lines, as well as new rails, ports and dams. New infrastructure projects will not only improve South Africa’s general business environment, but should also help alleviate the country’s unemployment, which currently stands at nearly 25%.

The Financial Development Report 2012 also shows that South Africa ranks last in quality of math and science education and 54th in tertiary enrolment. The government is attempting to tackle this with Action Plan to 2014, which aims to improve the country’s education system by refining the quality of teaching, tracking progress through regular assessments, improving early childhood development and creating a system in which teachers, students and parents are held accountable. Nearly a quarter of the 27 goals espoused in Action Plan to 2014 specifically address the need to improve math and science education in South Africa. The successful implementation of initiatives like this could pay dividends as South Africa’s next generation will have the skillset necessary to compete for quality jobs.

Few would deny that South Africa has tremendous untapped potential. However, the country’s long-term success will depend, in part, on the country’s ability to address the challenges associated with developing sound, reliable infrastructure, as well as an educated and productive workforce. A thriving South Africa will not only benefit the people of South Africa, but also the region as a whole.

Author: Todd Glass is a Project Associate on the Financial Services Industries Team at the World Economic Forum and Co-Author of the Financial Development Report.

Image: A child plays in a school near Malawi’s capital Lilongwe. REUTERS/Antony Njuguna