IMF Staff Country Reports

This Selected Issues paper examines the impact of reforms addressing shortcomings in governance, business regulation, and labor market on output and employment in South Africa. The analysis quantifies the potential economic gains from narrowing structural gaps in these three areas relative to peer countries. Structural reforms can enhance productivity and investment by promoting competition and efficient resource allocation. Reforms in governance and business regulation are found to boost medium-term output by up to 9 percent. The data indicate that South Africa lags its peers in most aspects of structural reform, particularly in governance, business environment, and labor market regulation. Complementary labor market reforms could further bolster these gains and enhance employment. These findings emphasize the importance of a well-prioritized reform agenda to unlock South Africa’s growth potential and generate broad-based improvements in living standards. Careful communication of reforms and their benefits will be key to maximize support and achieve reform gains.