By early 2016, financial market participants had become increasingly critical of unsustainable current account deficits and low, unbalanced growth in many emerging economies. In response, adjustments have occurred (or are in process) in a wide range of countries – including Russia, Brazil, Mexico, Colombia, Ghana – gradually guided by policy in some instances and much more abruptly forced by recession in others.
Using a dynamic computable general equilibrium model, the paper provides some direction on the areas of policy reform that could generate strong growth, employment and poverty reduction in South Africa. The core requirements for more rapid and sustained growth are greater saving, investment, more productive use of capital by better skilled workers, reduction in the skill constraint and moderation in unit labour costs. Higher labour productivity growth will in its own right increase the labour intensity of the economy as a whole.