This article interrogates the impact and nature of South Africa's post-apartheid economic growth performance through the lens of human capital investment with a particular emphasis on higher education. The South African economy has been characterised by a skills-biased trajectory, ensuring jobs for the better educated. By differentiating between tertiary and vocational training, we find that further education and training (FET) graduates are almost as likely to be employed as school leavers without higher education. We analyse the extent to which the educational attainments of labour affect the nature and trajectory of economic growth in South Africa, by estimating Olley and Pakes' two-stage regression on a modified Cobb-Douglas production function. The results indicate that the degree cohort contributes to economic growth whilst other higher education institutions, including FET colleges, do not productively contribute to economic growth.

South Africa has exhibited tepid economic growth over the past twenty years, as well as high levels of income inequality characteristic of a middle-income country growth trap. This chapter compares and contrasts South Africa’s growth trap relative to middle-income peer economies. In addition, it studies the policies and structures of the South African economy that have perpetuated the persistently low levels of growth observed. In particular, it considers the capital-intensive nature of manufacturing, regulation in the telecommunication and transport sector, and the inadequacies of Black Economic Empowerment (BEE) policies. The chapter concludes discussing the welfare outcomes on the vast majority of South Africans who are unable to participate in the economy.

Typescript prepared by Janis Vehmaan-Kreula at UNU-WIDER. UNU-WIDER acknowledges specific programme contribution from KOICA for the series of studies on 'The Practice of Industrial Policy -Lessons for Africa' and core financial support to its work programme for the governments of Denmark, Finland, Sweden, and the United Kingdom.The World Institute for Development Economics Research (WIDER) was established by the United Nations University (UNU) as its first research and training centre and started work in Helsinki, Finland in 1985. The Institute undertakes applied research and policy analysis on structural changes affecting the developing and transitional economies, provides a forum for the advocacy of policies leading to robust, equitable and environmentally sustainable growth, and promotes capacity strengthening and training in the field of economic and social policy-making. Work is carried out by staff researchers and visiting scholars in Helsinki and through networks of collaborating scholars and institutions around the world.

This study has been prepared within the UNU-WIDER project on 'Southern Africa-towards inclusive economic development (SA-TIED)'.

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.