Services as a Driver of Economic Growth and Job Creation in South Africa: Can the AfCFTA Assist?

Nelson Mandela Bridge at sunset, Johannesburg, South Africa. Image: Getty, THEGIFT777
Nelson Mandela Bridge at sunset, Johannesburg, South Africa. Image: Getty, THEGIFT777

This policy insight reviews the state of South Africa’s service sector, casting light on the associated challenges and opportunities at national and regional level.

Summary:

  • South Africa has a large service sector, which has grown significantly in the past decade.
  • Demand from domestic sources is driven by a large public sector, a credit-fuelled retail sector and large growth in security services. As a result, growth must be sought through an increase in traded services.
  • Drivers of growth in South African services include tourism, agribusiness, business process outsourcing and other new internet-driven niches.
  • The African Continental Free Trade Area (AfCFTA) was launched in 2021, but commitments have been reached only under the goods protocol. Progress on services is lagging.
  • It is not anticipated that AfCFTA will live up to expectations for driving growth in services trade owing to the lack of a cohering force among smaller private sector services companies in South Africa, and the lack of sufficient cross-border services networks.
  • To achieve AfCFTA agreements and boost growth in services trade in Africa, South African corporates need to build a strong, united voice and energise cross-border relationships.

14 Jul 2021