The following is the text of the address I delivered this morning at an event in Bloemfontein co-hosted by the Centre for Gender and Africa Studies at the University of the Free State and the Institute of Race Relations.
[IRR CEO Dr John Endres with Professor Hussein Solomon of the Centre for Gender and Africa Studies at the University of the Free State. Image supplied.]
Today I’m going to speak to you about taking the brakes off South Africa’s economy.
By the end of this talk, you will be able to name exactly what is suppressing South Africa’s investment rate, and you will have a concrete reform agenda to argue for.
The world invests, on average, about 26% of its income back into itself every year: factories, machines, roads, ports, power lines, fibre cable. Other middle-income countries, the peer group South Africa belongs to, invest even more: above 30%.
By contrast, South Africa invests under 15%.
Think of an economy as a farm. Every year a farmer can eat the grain in his store, or he can plant some of it. If he plants it, he gets a harvest. If he eats it all, there is no harvest. South Africa has been eating its seed corn for the better part of a decade.
The gap between 15% and 30% is the difference between what South Africa is and what South Africa can be.
It is the difference, measured in millions, between the jobs that exist and the jobs that should exist.
Right here in South Africa, specific, identifiable policies have created that gap – and are sustaining it.
Fixed investment as the right measure
I want to dig a little deeper into fixed investment because it is the single most important number you need to know to understand South Africa’s economic underperformance.
The technical name for fixed investment is gross fixed capital formation, or GFCF for short. It refers to the share of national income that goes into building productive capacity: the factories, the machines, the ports, the roads, the energy infrastructure that makes it possible to produce goods and services, to employ people to produce them, and to move products to customers.
South Africa’s gross fixed capital formation stood at 14.9% of GDP in 2023. In 2024 it fell to 14.5%. In 2025 it dropped further, to 13.7%.[1]
The government’s own National Development Plan sets a target of 30%. But the last time it managed to break above 20%, and the only time in the last 30+ years, was in 2008, when it was 21.6%. Fixed investment in South Africa is falling woefully short of where it needs to be, and has for a long time.
Investment drives everything else.
An economy can tick over without it, running down existing equipment, trading goods, managing operations set up years ago.
But without new investment there is no expansion. There is no growth in productive capacity, no growth in jobs, and no growth in the tax base that funds schools, hospitals, and grants.
Growth is the only lasting feeding scheme.
The human cost
South Africa’s low investment and low growth has a human toll.
Youth unemployment in South Africa was 57% in the fourth quarter of 2025. Almost 45% of all South Africans between 15 and 34 are not in employment, education, or training.
In IRR polling going back over a decade, South Africans consistently name unemployment as the most pressing problem facing the country, ahead of crime and corruption or water and electricity.
No jobs means no income, no hope, no dignity. These are the consequences of decisions made since 1994. They can be reversed.
Four impediments
South Africa’s fixed investment rate should not be 14%. The country has a skilled workforce, sophisticated financial markets, strong universities, and a functioning legal system. Its natural resources are abundant.
The answer to why investment is so low is that specific policies are driving capital away or making investment impossible. Four examples are in the news right now, and each illustrates a different mechanism by which the government is suppressing the investment rate.
BEE and employment equity
Black Economic Empowerment was introduced to broaden economic participation after apartheid. Three decades on, the evidence of what it has achieved is not flattering.
BEE as currently structured imposes three compliance obligations on every significant business in the country.
- Employment equity sets racial hiring targets.
- Preferential procurement requires buying from B-BBEE-compliant suppliers.
- Ownership requirements mandate meaningful black ownership of firms.
Each element carries costs. For instance, based on research by IRR Legal, we estimate that race-based procurement inflates state tender prices by around R150 billion a year. That is enough money to build a tarred road from Cape Town to Beijing – every year.
Contrary to common belief, employment equity does not disadvantage white men alone. It harms people from every government-defined group: black, white, coloured and Indian men and women.
For example, according to research by IRR Legal, out of 180,000 employees in the South African Police Service, around 40,000 are in positions where they face barriers to promotion because of their race and gender. Of those 40,000, most are black men.
In boardrooms across South Africa and abroad, BEE consistently registers as a deterrent to investment. The IRR’s business contacts say so privately, though rarely in public. They fear political retribution.
Instead of speaking out and attracting unfavourable attention, it is easier for them to declare support for the current rules while quietly routing investment elsewhere. The American Chamber of Commerce in South Africa and surveys of EU investors have documented the same pattern.
And the low fixed investment numbers speak for themselves. This is “skin in the game” money where you cannot fake your commitment.
BEE was supposed to reduce inequality and uplift the poor. It is being increasingly recognised that it has not done that.
As long ago as 2017, the South African Communist Party blamed BEE for “increasing poverty for the majority, increasing racial inequality, and persisting mass unemployment.”[2] That view is now becoming increasingly widespread: a policy that set out to reduce inequality has produced a small black elite and left the black majority behind.
The Public Procurement Act and its regulations
The Public Procurement Act was signed into law in 2024 and has not yet commenced. Once the draft regulations under it are implemented, government will have wide discretion to apply race-based criteria across all its purchasing, making overspending even more pervasive and even less transparent than it is now.
We are not talking trivial amounts here. The national government spends over a trillion rand a year on goods and services – an amount equivalent to about a seventh the size of South Africa’s entire economy.
The problem extends beyond the direct cost. Businesses deciding whether to invest in South Africa look at the conditions under which they can compete for contracts and operate in the economy. Procurement rules that put race above value for money make those calculations unattractive. Capital goes elsewhere.
IRR polling from March this year found that only one in ten South Africans believe the priority should be buying from black-owned companies even at higher cost. Four in ten said value for money should come first. Official procurement policy is out of step with what most South Africans want.
The Expropriation Act
President Ramaphosa signed the Expropriation Act into law in early 2025. Public debate has focused mainly on land, but the Act covers all property: company shares, buildings, pension savings, intellectual property.
The Act allows any asset to be expropriated for less than market value, stipulating that compensation must be “just and equitable”. A leading jurist warned that the meaning of that phrase is difficult to define in advance of a specific case.[3] That uncertainty is the problem.
Investment requires confidence that what you build will remain yours. Weaken that confidence, and investment contracts. During the expropriation without compensation debate a few years ago, businesspeople told the IRR that South Africa had become “uninvestable” while that possibility remained open. The Act puts a version of it back on the table.
The Madlanga Commission and the infiltration of law enforcement
The fourth impediment is the most alarming, because it attacks the investment environment from within. Criminal networks have worked their way inside the state itself.
The Madlanga Commission of Inquiry was established by President Ramaphosa in July 2025, following allegations by KwaZulu-Natal Police Commissioner Lieutenant General Nhlanhla Mkhwanazi that organised crime had infiltrated senior law enforcement and that the Police Minister was protecting it.
The commission, chaired by retired Constitutional Court Justice Mbuyiseli Madlanga, has been hearing testimony since September 2025. Police Minister Senzo Mchunu was placed on leave. National Commissioner Fannie Masemola was suspended in April this year. Deputy Commissioner Shadrack Sibiya was suspended too. The three most senior figures in the national police service were removed in succession.
Testimony alleged that crime figure Vusimuzi “Cat” Matlala paid senior officials for protection and political access. Brown Mogotsi’s name appeared in testimony detailing financial transactions with Matlala. According to evidence led at the commission, Sibiya received up to R1 million a month.
For businesses deciding whether to invest in South Africa, the question is very simple: can the state protect what you build? A functioning investment environment rests on police who enforce the law and a state that protects what people build. An independent police service is indispensable. South Africa’s is not acting like one.
Blueprint for Growth: the alternative
All of these are policy choices, or the consequences of policy choices. They can be changed.
The IRR has spent the past several years developing detailed, concrete alternatives. Our Blueprint for Growth series runs to eight papers, setting out specific reforms that are costed, sequenced, and ready to use.
On BEE, we propose Economic Empowerment for the Disadvantaged, or EED, as a replacement for the existing system. The policy shifts from race as the basis for eligibility to socio-economic disadvantage.
Apartheid created socio-economic disadvantage, and that is what good policy should address. Under EED, companies earn recognition for creating jobs and investing in South Africa, rather than for meeting racial scorecards. State spending on education, health and housing gets funnelled into education, health and housing vouchers which the recipients can spend directly in accordance with their own priorities. This programme would reach a far larger number of South Africans than BEE has ever reached, and it would do so while encouraging the investment the country needs.
On property rights and race-based laws, we have drafted five Freedom Bills for introduction into Parliament. Some examples: the No More Race Laws Bill repeals the race-based legal framework that underpins race classification and employment discrimination. The Right to Own Bill strengthens property rights in statute. The Freedom from Poverty Bill replaces BEE with EED in law. All three are fully drafted legislation, ready to be introduced.
On procurement, our Value for Money Bill establishes value for money as the governing principle in government purchasing. It also requires public disclosure of every rand by which BEE rules push procurement prices above what value-for-money purchasing would cost. South Africans deserve to know what this policy costs them.
These reforms, taken together, would shift the investment environment. The pathway from 14% gross fixed capital formation to 25%, and from there via intermediate steps to the 7% GDP growth rate that our modelling suggests is achievable within a decade, runs through them.
The work has been done. The country needs a political class willing to choose growth.
Achievability and public support
Two things suggest this is within reach.
On the first: the public is already ahead of the politicians, by wide margins.
In IRR polling from March this year, unemployment and job creation was the single largest concern named, chosen as the top issue by one in four respondents, ahead of crime and corruption. The question of jobs has held the top position for the last decade and longer that we have been asking this question.
Afrobarometer’s findings are consistent with this across several years of surveys. In 2024, Afrobarometer found that 71% of South Africans cited unemployment as one of their top three priorities for government action. In a 2023 youth survey, nine in ten respondents gave government a failing mark on job creation.
On race in policy: the IRR polling found that 70% of South Africans say government should stop using apartheid-era race categories to allocate jobs and business opportunities. And 82% said that if BEE makes government procurement more expensive, government should measure and disclose the cost. That is, by any reading, a large majority accepting that BEE has a cost and that the public should know what it is.
These are majority views that official policy has been ignoring.
The second reason is structural. The Government of National Unity, for all its tensions, is a real policy window. The parties in the GNU are searching for an agenda that can drive growth. They know the current trajectory leads nowhere good. The Blueprint for Growth series gives them a concrete, credible set of proposals to argue for and act on.
The task we face as a country is narrower than it might seem. South Africa already has the institutions, the universities, the private sector, the courts, and the public sentiment needed to change direction. The task is to stop suppressing the country’s own investment rate.
Conclusion
Thirty years after the end of apartheid, South Africa has not become the country it should be. Low growth, mass unemployment, crumbling services, and criminal networks inside the state are the consequences of decisions made since 1994. They can be reversed.
The Blueprint for Growth series of papers sets out how. Each proposal is practical and constitutionally sound, and each tracks what most South Africans say they want.
Earlier I described a gap: fixed investment at under 14% of GDP against a world average of 26%. That gap is a policy consequence, and policy can change it. Change the policies, and the gap closes. Close the gap, and the harvest follows.
Many of you in this room will shape South Africa’s policy choices: as researchers, as officials, as advisors, as elected representatives. The analysis is done. The alternatives are designed. The public is ready.
It is time to take the brakes off.
Thank you.
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[1] Source: https://www.gtac.gov.za/wp-content/uploads/2026/03/Infrastructure-Trends-.pdf
[2] https://www.politicsweb.co.za/news/inequality-is-no-longer-just-about-race-african-communist
[3] https://www.litnet.co.za/straight-shot-tembeka-ngcukaitobi-about-the-expropriation-act/