World Bank: 2% growth won’t ease SA’s poverty, unemployment

The World Bank cautions that a 2% GDP growth rate in South Africa is insufficient to significantly reduce poverty and unemployment.

In its latest economic update, which also includes a section on South Africa’s basic education system, the lender says it expects South Africa’s GDP to rise by 1.8% in 2025 and gradually increase to 2% by 2027.

However, such a “scenario” is not good enough to improve South Africa’s socioeconomic indicators — unemployment and poverty.

According to the World Bank, a 1% increase in GDP growth is expected to generate only 30 000 to 50 000 jobs due to South Africa’s low employment elasticity to GDP growth.

(South Africa’s unemployment rate in the third quarter of 2024 was 32.1%.)

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No dent in poverty, unemployment

Poverty and unemployment rates are projected to remain high throughout the projection period, says Satu Kahkonen, World Bank country director for South Africa.

She cautions that it would take about 60 years for South Africa to become a high-income country if the economy continued to grow at only 2%. In an ideal scenario, GDP should grow by 5% to 6%. These growth rates were achieved for a short period from 2005 to 2007 under former president Thabo Mbeki.

But at the time, South Africa benefitted from an “exceptionally favourable” external environment, and a similar growth rate would be hard to replicate given current fiscal constraints, the World Bank notes.

According to the lender, the growth outlook for 2025 can be achieved provided there is continued political stability and sustained improvement in energy generation and logistics.

It adds that South Africa’s main risks to growth are domestic, more so than geopolitical uncertainties.

“Despite successful transitions reducing political risk ahead of the May 2024 elections, the coalition remains fragile … South Africa’s political economy complexity could support or disrupt the pace of reforms.”

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SA’s learning crisis

Kahkonen says stepped-up reforms are needed if South Africa wants faster economic growth.

“But it is important to note that in all options strengthening human capital through improved education is a core component.”

South Africa, which spends around 4.3% of GDP on basic education, has lagged behind other upper-middle-income countries relative to education spending.

Despite post-apartheid progress, 80% of Grade 4 learners couldn’t read properly in 2021, an international assessment showed. Interventions such as uncoordinated small reading programmes fail to scale, while the pro-poor funding mechanism in the education system is also not meeting targets.

In addition, education budgets shrink, while the system must expand for 1.2 million more learners by 2030.

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Inefficiencies of public spending in education

One of the areas where reform is needed is to improve the efficiency of spending on education and to increase accountability, the World Bank notes.

A significant source of inefficient spending is that teachers are not held accountable for learners’ progress.

“Bureaucratic accountability remains underdeveloped in South Africa despite the introduction of the Quality Management System [for school-based educators in 2021], which does not hold teachers sufficiently accountable for addressing the individual needs of their learners as there are few consequences for underperformance.”

Professional accountability is also lacking due to resistance to developing teacher professional standards, the lender notes.

Siviwe Gwarube, Minister of Basic Education, says she pays heed to the World Bank’s warning about increasing financial constraints.

“We are aware of these pressures on provincial departments as they start the new year.

“Every cent needs to be spent in ways to maximise the benefit to learners.”

Also commenting on the report, Phumzile Mlambo-Ngcuka, former SA deputy president and convenor of the Reading Panel 2030 (an initiative aimed at improving South African children’s ability to read for meaning), notes that there needs to be a bigger focus on standardising teacher training.

“Every foundational phase teacher who graduates should have the same standardised training at a level that is relevant for the schooling system,” she notes.

This article was republished from Moneyweb. Read the original here.