To participate in the South African economy is to pay an entry fee long before one earns a return.
For individuals, that fee is paid through transport fares, data bundles, school fees, electricity, debt-service costs and the time spent looking for work.
For businesses, it is paid through unreliable infrastructure, logistics delays, security costs, compliance burdens, working-capital pressures and the rising price of energy. The result is an economy in which participation is formally open, but practically expensive.
This matters because South Africa’s central economic problem is not only low growth; it is also the high cost of being included in that growth.
Recent data shows the scale of the challenge. Stats SA reported that real GDP grew by only 0.5% in the first quarter of 2026.
Meanwhile, labour-market data showed the official unemployment rate at 32.7% in the first quarter of the year, while consumer inflation reached 4.5% in May.
The economy is therefore asking households and firms to absorb high participation costs in a context of weak growth, limited jobs and renewed price pressure.
Survival spending
The household budget tells the story most clearly. Stats SA’s Income and Expenditure Survey 2022/23 estimated that, on average, households spent nearly R143,691 on the consumption of goods and services in 2023.
But the composition of that spending reveals how little room many households have to invest in opportunity. Housing, water, electricity, gas and other fuels absorbed 34.7% of household consumption expenditure, while food and non-alcoholic beverages took 16.3%, transport accounted for 15.3%, and insurance and financial services absorbed 9.3%.
In other words, about three-quarters of household spending was concentrated in the basic costs of shelter, food, mobility and financial protection.
The labour market compounds this pressure. In the first quarter of 2025, the official unemployment rate was 32.9%, with 8.2-million unemployed people. Youth unemployment was even more severe at 4.8-million, translating into a youth unemployment rate of 46.1%.
These figures mean that for millions, participation in the economy begins not with wages, but with the cost of searching for work, which includes printing CVs, buying data, travelling to interviews and carrying the psychological cost of repeated rejection.
Even when inflation moderates, the level of prices remains high. Average consumer inflation slowed to 4.4% in 2024, down from 6.0% in 2023. Yet this disinflation does not mean affordability has been restored. Prices that rose sharply during the previous inflation cycle have largely stayed high, while wages and social support (social grants) have not fully closed the gap.
Mobility, connectivity and finance
Transport is one of the clearest examples of the price of participation. A worker living far from their place of work must pay before earning. A job seeker must spend before knowing whether a job exists.
A small trader must move goods before making a sale. When transport accounts for 15.3% of household consumption expenditure, mobility is not a marginal cost; it is a gatekeeper to income.
Apartheid played a central role in creating this burden by deliberately locating black households far from economic opportunity, restricting asset ownership and education, and embedding spatial and financial inequalities that continue to raise the cost of participation today.
Digital access is now another gatekeeper. DataReportal (2025) estimated that South Africa had 50.8-million internet users at the start of 2025, representing internet penetration of 78.9%, and 124-million cellular mobile connections, equivalent to 193% of the population.
These figures show a connected society, but they do not prove affordable or equal access. For the unemployed, students, informal traders and micro-enterprises, the cost of devices, data and digital literacy can determine whether they can apply for jobs, access markets, compare prices, receive payments or comply with administrative requirements.
Financial participation also carries a price. Standard Bank’s 2024 spending analysis found that a growing share of consumer spending was going to interest payments, reflecting the pressure of elevated interest rates.
For lower- and middle-income households, credit often becomes a bridge between income and necessity. But when borrowing finances for food, transport or school costs, the economy is not expanding opportunity; it is monetising desperation.
Price paid in duplicated infrastructure
Businesses face a parallel problem. In many countries, firms pay taxes and receive reliable infrastructure.
In South Africa, too many firms pay taxes and then pay again for substitutes, comprising generators, solar systems, inverters, batteries, boreholes, private security, fleet tracking, backup connectivity and compliance consultants.
These duplicated costs raise the hurdle rate for investment and widen the gap between large firms that can internalise infrastructure and small firms that cannot.
The electricity crisis illustrates the point. Load-shedding was severe in 2022 and 2023, with estimates showing 205 days of load-shedding and 8.1-million megawatt-hours shed in 2022, worsening to 335 days and 16.6-million megawatt-hours shed in 2023.
The situation improved significantly in 2024, with 83 days of load-shedding, and further in the first eight months of 2025, when only 12 days were recorded.
Yet the improvement has come partly because households and firms have shifted away from exclusive reliance on the grid. The National Treasury estimates revealed that rooftop solar photovoltaic capacity increased by 276% to 6,165MW between December 2022 and December 2024.
That is an impressive private-sector response, but it is also evidence of a costly self-insurance economy.
Energy costs are not only about keeping lights on. They affect refrigeration, manufacturing shifts, digital transactions, irrigation, mining, retail trading hours and the cost of capital.
A large retailer can install solar across its property portfolio; a township spaza shop cannot always finance a reliable backup system. A manufacturer can negotiate supply contracts; a micro-enterprise often pays retail prices for electricity, fuel and connectivity. The same shock therefore produces different competitive outcomes.
Compliance is necessary but costly
The formal economy also has administrative entrance fees. Formalisation requires registration, accounting, tax compliance, labour law compliance, municipal approvals, sector permits, banking relationships and often professional advice.
These rules are necessary for a functioning economy, but their cumulative cost can discourage smaller firms from entering or remaining in the formal sector.
The risk is that the economy punishes the very behaviour it claims to encourage. A business that formalises may gain access to procurement, finance and larger customers, but it also assumes fixed costs that informal competitors may avoid.
If the benefits of formality are uncertain while the costs are immediate, many entrepreneurs will rationally remain small, invisible or semi-formal. That is bad for tax revenue, productivity, worker protection and long-term growth.
The unequal price of the same economy
The price of participation is not evenly distributed. Households in richer metros spend far more in absolute terms than those in poorer areas. Stats SA’s 2022/23 income and expenditure data show that Cape Town households recorded a median expenditure of R140,523, while Tshwane followed at R123,176 and Buffalo City recorded R75,283.
These figures point to different local economies, different opportunity structures and different costs of accessing work, services and markets. The General Household Survey 2024 also shows how dependent households remain on labour income and social support.
Nationally, salaries, wages and commission were reported as ae reported by 50.9%. In some provinces, grants were more common than salaries as a household incomet the labour market is not carrying enough households into productive participation
For firms, inequality also matters. A micro-enterprise cannot. A firm operating near a port, highway or affluent market faces different costs from one operating in a rural municipality or township with weak infrastructure.
The economy therefore rewards incumbency and scale, while making entry expensive for precisely the businesses South Africa needs most.
Lowering the entry fee
South Africa does not need to abolish the costs of participation; no economy can. But it must reduce unnecessary costs and make necessary costs more predictable, transparent and productive.
The first priority is infrastructure reliability. The improvement in load-shedding is welcome, but durable energy security requires faster grid investment and more generation capacity. Private investment should complement public infrastructure, not permanently substitute for it.
Second, transport policy must be treated as labour-market policy. If transport takes more than 15% of household consumption expenditure, then safer, cheaper and better-integrated public transport is not a social convenience; it is an employment intervention.
Spatial reform, affordable housing near economic nodes and reliable commuter systems would lower the cost of job search and expand the effective labour market.
Third, digital inclusion must move beyond coverage to affordability. With internet penetration close to 79%, the next policy question is not only whether people are connected but also whether they can afford meaningful participation.
Lower data costs, public Wi-Fi in transport nodes and community facilities, digital skills programmes and cheaper devices would help turn connectivity into income-generating capability.
Fourth, the state should simplify the path to formality for small businesses. A single digital business portal, lighter reporting for micro-enterprises, pre-filled tax returns, simplified municipal permitting and targeted accounting support would reduce the fixed cost of compliance. The goal should not be deregulation at any cost, but smart regulation that makes legality easier than informality.
The South African economy is often described through aggregates such as GDP growth, inflation, unemployment and investment.
But behind these numbers is a more human and commercial reality. The economy has become expensive to enter, expensive to navigate and expensive to remain in. Households pay to search for work, move across space, connect online and manage debt.
Firms pay to secure electricity, move goods, comply with rules and protect assets. These costs do not merely reduce disposable income or profit margins; they shape who gets to participate at all. An inclusive economy is not built only by creating opportunities on paper. It is built by lowering the cost of reaching them.
- Naape is an economist and founder of the Baneng Naape Foundation.
