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Overview
Productivity acts as a catalyst for economic growth and development, enabling countries to produce more with the same resources. It plays a crucial role in bolstering employment opportunities, leading to better wages and improved economic conditions. High productivity also prepares economies to better absorb unforeseen/unplanned events and recover from economic downturns.
For South Africa, a more productive economy could also mean higher incomes that directly elevate people's standards of living and quality of life. 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.
Traditional productivity measures ignore many of the assets that determine an economy’s productive capacity. These traditional measurements do not, for example, include: environmental impacts, erosion of trust, or the weakening of equity that a production process may generate. Furthermore, traditional productivity measurements provide only a retroactive view of productivity, lacking the forward-looking perspective needed to inform policy making.
PwC’s new Productivity Potential Index (PPI) adopts a ‘multiple capitals’ approach to defining, modelling, and measuring productivity. It firstly encompasses the traditional inputs of human, physical, innovative and other intangible capital that underpin traditional productivity measures. The PPI also incorporates additional pillars for social, natural and institutional capital. By encompassing all these capital bases, the PPI draws on a wide range of economic research and offers insights across the full spectrum of productivity policy.
There are key differences in the primary drivers of productivity across different types of economies. In advanced economies, inequality is the most important predictor, followed by physical and human capital. In turn, physical capital, life expectancy, institutional quality, and internet access are the most important predictors in developing economies. PwC’s estimates show that around 40% of South Africa’s productivity is determined by human capital, logistics and institutions.
These three factors – currently amongst the country’s biggest economic challenges – are explored in this report. We also consider what the public sector can do to fix this, what the private sector can do to support the public sector, and what private companies can do to help themselves.
In this edition:
Productivity Potential Index (PPI): A new way of measuring countries’ productive competitiveness.
Human capital, logistics and institutions are some of the largest contributors to South Africa’s productivity.
PwC’s new Productivity Potential Index tool measures productivity by taking into account various factors relevant to long-term sustainability. Mainstream productivity analysis describes only the past and today’s decision-makers need economic indicators that can shape the future. As South Africa heads towards its seventh democratic national election, understanding the levers that impact national productivity is critical for would-be policymakers in the next Parliament if they are to achieve their economic development objectives.
Key elements of this report include:
- PwC’s Productivity Potential Index (PPI): A new way of looking at productivity.
- Multiple capital pillars: Unpacking South Africa’s productivity drivers.
- Labour and human capital: Educational systems need industry-supported curricula and teaching methods.
- Infrastructure and physical capital: New models for port management create opportunities for private sector investment.
- Public institutions: Quality governance increases service delivery and reduces corruption.
- How PwC assists our clients with workforce upskilling, supply chain optimisation and safeguards against corruption.
Register to download:
South Africa Economic Outlook | March 2024
PwC's Annual Tax and Economic update 2023/2024
Reflect on your business in the context of the current tax and economic landscape, presented by PwC, and consider necessary action.
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Contact us
PwC Africa ESG Platform Leader, Strategy& and Chief Economist, Strategy& South Africa
Tel: +27 (0) 82 708 2330
