South African productivity disaster

[Nat Quinn]

South African productivity disaster

South Africa’s productivity has remained flat for the past 15 years, at just over R200,000 of GDP created per employed worker.

Financial services firm PwC revealed this in its South Africa Economic Outlook for March 2024, where it outlined the country’s ailing productivity.

Productivity is vital for any economy as it allows countries to produce more goods and services with the same or less resources.

PwC said it plays a crucial role in bolstering employment opportunities, leading to better wages and improved economic conditions for individuals at the household level and across the nation.

The typical measure used to analyse a country’s productivity is its real GDP per employed worker, which evaluates workers’ output.

South Africa’s productivity, according to this metric, has shown no net gain between 2015 and 2023, with only marginal gains since 2008.

From 2008 to 2023, the GDP output per employed worker has hovered around R200,000 per year with some peaks and troughs.

PwC said it is vital for the government to understand how South Africa’s productivity can be enhanced, as one of the easiest ways to improve the performance of an economy is to ease the flow of goods, people, capital, and ideas.

The firm outlined six key drivers of productivity in South Africa, with varying degrees of importance. This is shown in the graphic below.

PwC said it is important to boost productivity as it is a catalyst for economic development. It promotes employment, encourages innovation, and supports the sustainable and equitable growth of societies.

However, research by the World Bank ranked South Africa 80th out of 170 countries for productivity growth in 2015-2021.

During this period, the rate of local productivity growth – as measured by GDP per employed person – was only two-thirds of the pace seen globally.

“Productivity matters because it supports innovation and resource optimisation. This, in turn, spurs economic growth and increases global competitiveness, making the country more attractive to investors,” PwC South Africa chief economist Lullu Krugel said.

The economic gains from a more competitive economy include higher tax revenues and increased exports in support of smaller fiscal and current account deficits.

“High productivity also prepares economies to absorb shocks better and recover from economic downturns.,” she said.

“For South Africa, a more productive economy could also mean higher salaries and wages that directly elevate the standards of living and quality of life.”

However, the country’s productivity has effectively flatlined over the past 15 years due to issues such as load-shedding and relatively new logistics inefficiencies.

South Africa’s productivity, as measured according to real GDP per employed worker, is shown below.

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