South Africa spends 6% of its GDP on education, which is more than other emerging markets – Brazil at 5.5%, China at 4% and India at 4.1% – as well as several developed countries, but has a skills gap and significant unemployment.

Shifting this spending into demand-led approaches would get better results because how South Africa spends on education matters as much as how much it spends, says business organisation Business Leadership South Africa CEO Busisiwe Mavuso.

“We need skilled people to grow and we cannot build a prosperous country while so many young people are locked out of work. Business leaders struggle to find the right people for the roles available.

“As a result, we sit with two market failures, as businesses cannot grow because they cannot find people with the right skills while people cannot find work. If we can ensure people are given the skills that companies actually need, we can enable businesses to grow and young people to get jobs,” she says.

National Treasury, in the October 21 Medium-Term Budget Policy Statement, reported that debt-to-GDP had stabilised at 78.4% in 2025/26 and is now projected to decline, while the budget deficit is narrowing to 3.9% of GDP this year.

Treasury’s success in getting spending under control is only half the battle. The country can deliver more for young people without putting fiscal discipline at risk. Government’s programme to professionalise the public service will help by building the capability to design and manage spending that delivers results at lower cost, Mavuso says.

The aim is to facilitate a demand-led skills revolution. Business has a direct stake in this and stands ready to work with government to make demand-led skills the norm rather than the exception, she adds.

While growth is the point of sound fiscal management, it is a means to a more important end, namely ensuring citizens have access to good jobs and can live good lives.

“Our current skills system, including technical and vocational education and training (TVET) colleges, sector education and training authorities (Setas) and the higher education system, is not incentivised to focus on what employers actually need,” says Mavuso.

INCENTIVISING RELEVANT TRAINING 

Incentivising different behaviours has been pioneered by the Presidency through the National Skills Fund. Under its Jobs Boost Outcomes Fund, skills providers received 80% of their payment only if a young person secured and held a quality job as a result of the training the person undertook.

The first phase of this programme, which is now concluding, led to 7 000 young people from no-fee schools with no qualification beyond matric entering good formal sector jobs, and did it at less than one-third of the cost of the average Seta learnership, she points out.

“Because the skills providers were at risk if the young people they trained did not get jobs, they focused much more on engaging with employers and then customising the support that the young people needed.

“This is far more effective than handing out certificates at the end of a course, with no guarantee that anyone is actually going to get a job,” she says.

“Innovation and partnerships that focus on the needs of employers can create sustainable employment.”