The new World Bank Group Country Partnership Framework (CPF) is aimed at supporting cooperation with South Africa in its efforts to stimulate investment and job creation as the country recovers from the impacts of the COVID-19 pandemic on lives, livelihoods, and the economy. The strategy covers five years from 2022 to 2026 and was recently endorsed by the Group’s Board of Executive Directors.

The new CPF is aligned with the Government of South Africa’s priorities as contained in the Economic Reconstruction and Recovery Plan (ERRP), the State of the Nation Address (SONA) of 2020 and 2021 and the country’s long-term vision in the National Development Plan (NDP) 2030. It is also informed by consultations with a broad range of stakeholders and the findings of both the World Bank Group’s Systematic Country Diagnostic (SCD), and the Country Private Sector Diagnostic (CPSD), which align with the country’s own diagnostics of the persistent triple challenge of poverty, unemployment, especially high among youth, and inequality, all made worse by the Covid-19 pandemic.

The WBG will focus on three broad areas under the new CPF:

  •  increased competition and an improved business environment
  •  strengthened micro, small, and medium enterprises and
  •  skills development to boost job creation improvements in the infrastructure investment framework and selected infrastructure services.

Across all its activities, the World Bank Group will seek to harness the digital economy, empower women and girls, and strengthen South Africa’s institutional framework.

Focus Area 2: Strengthen MSME performance and skills development to support job creation

While foreign investment, trade, and large, competitive industries are necessary for job creation, job growth could be accelerated through targeted support to MSMEs and startups in high potential value chains, and through improved education and training to meet the skills demands emerging from economic and technological change. It is critical that government and private sector efforts to address joblessness focus more on the most vulnerable, low-skilled youth, who are the largest group among the unemployed.

To address this complex challenge, a Jobs Platform for Inclusive Job Creation approach will be adopted. The focus areas will be on aspects of :

(a) the demand-side for labor – Increased development of selected value chains with strong job-creating potential;
(b) a strengthened ecosystem for MSME creation and growth; and
(c) on the supply side of labor through strengthened employment and skills development services.

Objective 2.2: Strengthened ecosystem for MSME creation and growth

Building a vibrant ecosystem for MSMEs and entrepreneurship can lead to better outcomes in investments and jobs. MSMEs account for about half the country’s work force and more than a third of GDP. Given the already high levels of informality of MSMEs and limited financing opportunities, there is an increasing risk that the worsening macroeconomic challenges will drive more MSMEs into decline. Additionally, black and female ownership is concentrated in the micro and small business segment of the MSME sector. These firms are highly vulnerable to the impact of COVID-19 and need better coordinated and harmonized support to achieve better outcomes (see Box 9).

To improve a range of public and private sector programs targeting the growth of MSMEs and entrepreneurship, WBG support will aim at:
(a) facilitating increased collaboration among startup ecosystem actors through a Startup Community for sharing of data, knowledge and experiences and piloting innovative approaches;
(b) improving monitoring and evaluation (M&E) frameworks and tools to ensure optimization of public finance support; and
(c) facilitating access to markets and crowding in of early stage private financing, especially through targeted solutions for women and youth.

This support will be delivered through the Jobs Platform multi-year programmatic ASA.

To help MSMEs to overcome constraints resulting from limited access to collateral and early stage finance and low coverage by credit bureaus, the WBG will support: (a) GoSA’s efforts to develop and adopt the MSME Access to Finance Action Plan, improve the impact of the Partial Credit Guarantee Schemes, and establish an Online Movable Asset Registry;
(b) the development of regulatory and policy responses to Fintech;
(c) the assessment of state-owned financial institutions (SOFIs) to identify key constraints to the effectiveness of MSME support programs; and
(d) public and private sector initiatives to strengthen the financial and non-financial support for early stage ventures.

This support will be delivered through a multi-year programmatic ASA on financial inclusion and development, as well as through the SECO-funded Financial Sector Development Reform Program.