This IEJ paper, delivered by Gilad Isaacs to the Parliament of South Africa on 3rd February 2023, presents a macroeconomic framework that places employment creation and industrial development at the centre of South Africa’s fiscal policy. It argues that macroeconomic, industrial, and labour-market policies must work together to drive inclusive growth, reduce unemployment, and support long-term structural transformation.
A jobs-centred macroeconomic framework
The document challenges conventional macroeconomic policy that prioritises low inflation, balanced budgets, and fiscal restraint without considering employment outcomes. Instead, it proposes a three-part strategy: directly create jobs where possible, address macroeconomic barriers to employment, and promote structural transformation through coordinated industrial and labour policies. The framework seeks to achieve both full employment and sustainable external balances by expanding domestic production and reducing import dependence.
Fiscal policy for growth and productivity
The paper highlights fiscal policy as a tool for stimulating both aggregate demand and long-term productive capacity. It recommends combining public consumption with strategic public investment to crowd in private investment, improve infrastructure, strengthen productivity, and diversify the economy. Productive public investment of around 10–15% of GDP is presented as a benchmark for supporting sustainable development.
Sectoral priorities and public investment
Priority should be given to employment-intensive industries, sectors with strong domestic supply chains, export-oriented industries, and the care economy, including education, healthcare, and social services. The document also recommends expanding public employment programmes, strengthening development finance institutions, investing in science, technology and research, supporting sectoral masterplans, establishing a Just Transition Fund, and improving regional infrastructure and state capacity.
Conclusion
The paper concludes that South Africa requires a transformational approach to fiscal policy that moves beyond economic stabilisation to actively support employment, industrial development, and structural change. By aligning fiscal, industrial, and labour-market policies, the country can promote inclusive growth, strengthen productive capacity, and advance long-term economic justice.