There is something deeply unsettling about South Africa’s economic future that does not get nearly enough attention: we are living through a demographic window that will not remain open indefinitely, and we have so far struggled to turn it into the economic dividend it could have produced.
But, first, what is a demographic dividend?
When a country has a relatively large working-age population compared with the number of children and elderly people who depend on it, there is an opportunity for rapid increases in employment, productivity, savings and living standards. But a large working-age population is not enough on its own. Those people have to be healthy, educated and productively employed.
South Africa currently has the first ingredient in abundance. What it lacks is the ability to translate it into sufficiently broad-based economic participation.
The numbers are brutal: Statistics South Africa estimates that there are 42.2 million people aged between 15 and 64 in South Africa in 2026. Almost half of them are between 15 and 34. Yet in the first quarter of this year only 5.6 million young people aged 15 to 34 were employed, while 4.7 million were unemployed and another 10.6 million were outside the labour force. Among those aged 15 to 24, the unemployment rate was 60.9%.
That is the central paradox of South Africa’s demographic position: we have spent years discussing the risks associated with having a very young population while failing to fully exploit the extraordinary economic resource that this population represents.
And the window is shifting.
South Africa’s fertility rate has been falling steadily. Stats SA’s latest estimates put total fertility at around 2.12 children per woman in 2026, down from 2.78 in 2008. The decline in births has become particularly noticeable since 2020.
Lower fertility
This is not necessarily bad news. Lower fertility can make it easier for families and governments to invest more in each child, and demographic transition can ultimately support higher living standards. The problem arises when fertility falls while employment, productivity and income growth remain weak. In that situation, a country can move from having too many dependents relative to workers to having an increasingly old population before it has become sufficiently wealthy to support it.
That is the uncomfortable possibility facing South Africa.
Stats SA estimates that 10.7% of the population is already aged 60 or older, while 25.6% is younger than 15. Longer-term projections point to a substantial increase in the older population. One projection based on the United Nations’ demographic model puts the proportion of South Africans aged 65 and over at about 11.3% by 2050, compared with roughly 7% today.
That does not mean that South Africa is about to become an old country. It means something more important: the age structure that gave us an opportunity for a demographic dividend is gradually changing.
The Institute for Security Studies’ African Futures programme identifies South Africa as one of the relatively few African countries that have already entered a potential demographic window of opportunity. Its analysis also warns that such windows are temporary and that ageing populations eventually create new economic and social pressures.
Crucial question
The crucial question is therefore not whether South Africa has young people. We obviously do. The question is whether we can turn today’s large working-age population into a much larger productive tax base before the age structure becomes less favourable.
A 2015 World Bank analysis of South Africa made the point very clearly: the country could derive enormous benefits from putting its growing working-age population to work, but capturing that dividend would require job creation, greater productivity, better education and stronger skills development.
More than a decade later, the underlying problem remains remarkably familiar.
The fiscal implications are particularly important. South Africa already operates an unusually large social protection system for an emerging economy. In the 2026/27 Budget, the government allocated R292.8 billion to social grants, with 26.5 million beneficiaries across the grant system. The old-age grant, disability grant and care dependency grant were increased to R2,400 per month.
Treasury’s own expenditure documents acknowledge the demographic pressure. The 2025 Budget Review noted that the number of social grant beneficiaries was expected to increase partly because of the growing population of older people.
There is another important number here: the tax base.
South Africa collected R2.01 trillion in net tax revenue in 2025/26, taking the tax-to-GDP ratio to 25.9%. Personal income tax accounted for 39.5% of tax revenue in the latest tax statistics.
That means the relationship between the size of the economically productive population and the number of people dependent on public spending is not an abstract demographic issue. It is directly connected to the country’s ability to finance pensions, healthcare, education, infrastructure and every other public service.
Long-term danger
This is where the long-term danger becomes more visible.
An older population does not only mean more people drawing pensions or social grants. It also means greater demand for healthcare and other age-related services. At the same time, the number of working-age people available to provide those services and generate the tax revenue that finances them eventually grows more slowly.
South Africa’s problem is therefore not that its elderly are somehow an economic burden in themselves. The problem is that aging becomes considerably harder to finance when it occurs in a country that has not yet achieved high levels of employment and productivity.
And this is why economic (and jobs) growth matters so much.
There is a compounding problem here. If economic growth remains weak, the tax base grows slowly. If the tax base grows slowly while demands on the state rise, pressure on existing taxpayers increases. Higher tax rates can generate additional revenue for a time, but the National Treasury itself has warned that very high direct taxes can weaken incentives to work, save and invest, and that the sustainable way to increase revenue is ultimately to broaden the tax base and grow the economy.
This is why South Africa should be thinking about demographics as an economic growth issue rather than simply a population issue.
The country has perhaps two decades, give or take, in which the consequences of our demographic transition can still be substantially shaped by economic performance. The precise length of the window is uncertain because demographic projections change with fertility, migration, mortality and labour-force participation. But the direction is clear: the opportunity created by a large working-age cohort is temporary.
The Institute for Security Studies’ projections illustrate the stakes. Its South Africa modelling suggests that without major improvements, the country will continue to experience relatively modest growth and persistent unemployment through the early 2040s. By contrast, stronger performance in areas such as education, manufacturing, infrastructure, governance and regional trade produces materially better economic outcomes.
That is the part of this debate that matters most to me.
Cannot simply be stopped
The demographic clock cannot simply be stopped. Fertility will continue to change. People will live longer. The population will age. Those are normal features of development.
What can change is what South Africa does with the people who are entering adulthood right now.
Can we get significantly more young South Africans into productive employment? Can we fix the parts of the education system that are failing to produce foundational literacy, numeracy and useful skills? Can we build an economy capable of producing far more tradable goods and services? Can we expand manufacturing, agriculture, tourism, business services, technology and export industries? Can we increase productivity sufficiently so that each worker produces substantially more wealth?
These are ultimately demographic questions as much as economic and (industrial and labour) policy ones.
There is also a more human dimension to all of this.
A widely cited retirement-industry statistic says that only around 6% of South Africans are on track to retire comfortably. Ninety One has used that figure in its public retirement communications, although it should be treated as an industry estimate rather than an official Stats SA measure.
If a large proportion of today’s workers reach old age without sufficient private savings, then the pressure on families and the state becomes greater. And if the future working population is smaller relative to the elderly population, that pressure is going to overwhelm the working age population especially in a high-tax-burden country like South Africa. It is not hyperbole to suggest that this could incentivize even more skilled young people to emigrate in search of higher wages, creating a tax base death spiral.
Difficult economic decisions
This is why the idea of simply postponing difficult economic decisions is so dangerous.
Every decade in which South Africa grows slowly, fails to improve educational outcomes, struggles to create enough formal employment and allows productive capacity to stagnate is a decade in which today’s demographic opportunity is converted into tomorrow’s fiscal problem.
We are not facing an overnight collapse. That is what makes the issue so easy to ignore.
It is more like a slow-moving car crash: gradual enough that every individual year can be explained away, but cumulative enough that the destination can eventually become very difficult to change.
The hopeful part is that demographic decline is not destiny.
Countries can become richer as they age. Productivity, capital accumulation, technology, better healthcare and longer working lives can all offset some of the economic consequences of an ageing population. The objective, therefore, is not to somehow prevent South Africa from ageing. It is to become substantially wealthier before the age structure becomes substantially older.
That is why the 2026 local government elections are a useful first litmus test.
2026 gives us a useful reality check. The population is still young. Fertility is already falling. Youth unemployment remains extraordinarily high. Economic growth is weak. The state is supporting millions of people through the social protection system. And the next generation is entering adulthood in an economy that has not yet created enough productive work for them.
That combination should concentrate minds.
South Africa still has an enormous human-capital opportunity. But demographic dividends are not automatic, and they are not permanent.
Demographic transition
The country can spend the next twenty years becoming richer, more productive and better educated, thereby making the coming demographic transition considerably easier to manage.
Or it can continue postponing hard problems, hoping that the future will somehow become less demanding than the present.
Demography will not care which option we choose.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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