Enterprising Cape: Building an inclusive and vibrant economy

This policy brief by the Institute for Security Studies analyzes the economic development of the Western Cape, focusing on its struggle with the 'middle-income trap.' Using the International Futures (IFs) forecasting model, the document compares a Base Case scenario with three alternative policy paths—Inclusive Economy, Vibrant Economy, and Enterprising Cape—to determine how the province can achieve high-income status and reduce social inequality by 2040.

• The Western Cape is currently caught in a 'middle-income trap,' characterized by stagnant economic growth and an inability to transition to a high-income economy. Its GDP per capita grew at an average rate of only 2.6% between 2001 and 2011, failing to meet the 3.5% growth threshold required to escape the trap in a timely fashion.
• Under the Base Case scenario, where no significant policy changes are made, the Western Cape is not expected to reach high-income status until approximately 2040, and it would not achieve a GDP per capita equivalent to 2014 high-income levels until the mid-2050s.
• The 'Enterprising Cape' scenario, which combines interventions for both social inclusivity and economic vibrancy, provides the most significant gains. By 2040, this comprehensive approach would result in a GDP per capita 24% higher and a UN Human Development Index (HDI) 3.6 points (4.3%) higher than the Base Case, with high-income status achieved by the mid-2030s.
• The province faces a significant mismatch between sectoral GDP contribution and labor force share. The tertiary sector contributes 74% of GDP but employs only 67% of the labor force, while the primary and secondary sectors contribute 26% of GDP but employ 33% of the workforce.
• Unemployment in the Western Cape remains high and volatile, particularly among youth. As of 2014, 23.5% of the labor force was unemployed, with youth unemployment reaching 50% for those aged 15 to 24 and 27% for those aged 25 to 34.
• Severe income inequality persists in the province. According to 2011 Census data, the poorest 22% of the population (the first income decile) earn only 4.7% of the total income, while the richest decile (less than 1% of the population) earns 13.7% of the total income.
• The education system suffers from high failure and attrition rates. In 2013, the primary school survival rate was 78%, and in secondary school, nearly one in five learners failed both grade 9 and grade 10.
• A critical 'skills gap' exists, particularly in science, engineering, and technical fields. Only 5% of the population over 15 had a bachelor's degree or higher by 2010, and the tertiary education completion rate in 2011 was 18%, significantly lower than the 42% seen in high-income countries.
• Government red tape is a major barrier to business growth. In the Cape Town metro area, 73.4% of surveyed businesses cited red tape as a moderate or major constraint.
• Infrastructure reliability and access remain challenges outside the Cape Town metro. In 2013, 7% of households lacked electricity, 5% had no toilet facility or used bucket toilets, and 1% had no access to clean water.

APA

Margolese-Malin, E., Moyer, J. D., Rafa, M., & Irfan, M. (n.d.). Enterprising Cape: Building an inclusive and vibrant economy. Institute for Security Studies. https://issafrica.s3.amazonaws.com/site/uploads/PolBrief-FuturesCape-3.pdf

Chicago

Margolese-Malin, Eli, Jonathan D Moyer, Mickey Rafa, and Mohammod Irfan. Enterprising Cape: Building an inclusive and vibrant economy. Institute for Security Studies, n.d. https://issafrica.s3.amazonaws.com/site/uploads/PolBrief-FuturesCape-3.pdf.

Wikipedia

{{cite report |last1=Margolese-Malin |first1=Eli |last2=Moyer |first2=Jonathan D |last3=Rafa |first3=Mickey |last4=Irfan |first4=Mohammod |title=Enterprising Cape: Building an inclusive and vibrant economy |publisher=Institute for Security Studies |url=https://issafrica.s3.amazonaws.com/site/uploads/PolBrief-FuturesCape-3.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{margolesemalinndenterprising, author = {Margolese-Malin, Eli and Moyer, Jonathan D and Rafa, Mickey and Irfan, Mohammod}, title = {{Enterprising Cape: Building an inclusive and vibrant economy}}, institution = {Institute for Security Studies}, url = {https://issafrica.s3.amazonaws.com/site/uploads/PolBrief-FuturesCape-3.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }