TWO DECADES AFTER the adoption of a globally admired constitution, the image of the South African rainbow nation is rapidly fading. Since 2009 violent crime, labour and service- delivery-related protests have increased, as have the frequency and intensity of student riots and, most recently, demonstrations demanding the resignation of President Jacob Zuma. Deteriorating social stability combined with ongoing governance challenges and a structural economic crisis paint a concerning picture. The rainbow at risk In a 2015 paper that set out alternative scenarios until 2035, the Institute for Security Studies (ISS) noted that: There has been much progress in South Africa but the big question is, how long will its patience with high unemployment, high inequality and poor service delivery last? Much more decisive steps are needed to change the country’s current mediocre growth prospects. 1 The situation is not dissimilar to that in 1996 when the Nelson Mandela/Thabo Mbeki administration eventually adopted the Growth, Employment and Redistribution policy Summary South Africa needs to build an inclusive economy where broad-based economic growth creates productive jobs for the unemployed; increases productivity and earnings for the employed; and leads to sustained poverty alleviation. South Africa must simultaneously invest in partnerships with the private sector to establish a knowledge economy, close the skills gap currently constraining development and create an enabling environment for growth, investment and innovation. Drawing on two associated ISS papers, Economics, governance and instability in South Africa and South African scenarios 2024, this policy brief presents a set of recommendations to extricate South Africa from its middle-income trap and set it on a high-road Mandela Magic growth path. POLICY BRIEF 83 | JUNE 2016 1 South Africa needs a labour- intensive, low-wage and less regulated growth path. 2 Government needs to continue but carefully manage its expansive social support programmes. 3 Government must strengthen South Africa’s domestic technological innovation capacity. Partnering with the private sector can close the skills gap currently constraining development and, among others, increased investment in research and development. 4 Focus is needed on small- and medium-sized business, the reduction of red tape, better access to low-cost finance, more business-friendly market regulations and a more flexible labour market. 5 Broad-based black economic empowerment ought to be replaced in favour of more specific race-based initiatives. Key recommendations Rainbow at risk Jakkie Cilliers and Ciara Aucoin Improving South Africa’s prospects