Rainbow at risk: Improving South Africa’s prospects

The document argues that South Africa is stuck in a middle-income trap characterized by sluggish growth, deep inequality, and declining government effectiveness. It suggests a paradigm shift away from a state-led developmental model toward a labour-intensive, low-wage growth path and a knowledge economy built on private sector partnerships and technological innovation.

• South Africa is currently caught in a middle-income trap defined by sluggish growth, deep-rooted inequality, and an unsustainable welfare model. Without significant change, the country risks a long-term low-growth trajectory that could increase the frequency of violent protests and demonstrations, which have been rising since 2010.
• Government effectiveness and corruption control have declined between 1996 and 2014, despite the public sector growing by 28% over a decade. The ruling African National Congress (ANC) is described as being hampered by factionalism, ethical issues, and a lack of vision, with party leadership decisions in December 2017 viewed as critical for the country's future.
• The document argues that South Africa's reliance on a capital-intensive, high-wage-growth strategy and a large, inefficient public sector has created a massive unskilled underclass and hindered growth. The 'developmental state' model is deemed unsustainable due to fiscal constraints and a failure to leverage the private sector's ability to create wealth and jobs.
• To achieve inclusive growth, the authors propose a two-pronged approach: implementing a labour-intensive, low-wage, and less-regulated growth path to reduce unemployment, and forming private sector partnerships to close the skills gap and build a knowledge economy.
• Escaping the middle-income trap requires strengthening domestic technological innovation. The document recommends tripling government spending on research and development from the historical 0.76% to 4% of GDP to match countries like South Korea.
• The brief suggests several structural reforms: reducing the number of 717 state-owned enterprises (which hold assets worth R1 trillion or 27% of GDP), reviewing land reform policies that favour communal tenure, and replacing broad-based black economic empowerment (B-BBEE) with a class-based redress agenda and specific race-based initiatives.
• The authors conclude that the informal sector is not a viable primary engine for job creation because it is less productive than the formal economy and can discourage education. Instead, growth should be driven by improving the business environment for small and medium-sized firms.

APA

Cilliers, J., & Aucoin, C. (2016). Rainbow at risk: Improving South Africa’s prospects. Institute for Security Studies. https://issafrica.s3.amazonaws.com/site/uploads/PolicyBrief83.pdf

Chicago

Cilliers, Jakkie, and Ciara Aucoin. Rainbow at risk: Improving South Africa’s prospects. Institute for Security Studies, 2016. https://issafrica.s3.amazonaws.com/site/uploads/PolicyBrief83.pdf.

Wikipedia

{{cite report |last1=Cilliers |first1=Jakkie |last2=Aucoin |first2=Ciara |title=Rainbow at risk: Improving South Africa’s prospects |publisher=Institute for Security Studies |date=June 2016 |url=https://issafrica.s3.amazonaws.com/site/uploads/PolicyBrief83.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cilliers2016rainbow, author = {Cilliers, Jakkie and Aucoin, Ciara}, title = {{Rainbow at risk: Improving South Africa’s prospects}}, institution = {Institute for Security Studies}, year = {2016}, month = jun, url = {https://issafrica.s3.amazonaws.com/site/uploads/PolicyBrief83.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }