Gauteng’s Challenges Reflect Broader Regional Economic Dynamics

Gauteng’s size and economic dominance have drawn increased attention to Johannesburg’s infrastructure and governance issues, which is a positive shift. However, this heightened focus may reflect recency bias, potentially overshadowing longer-standing regional declines elsewhere in the country.

Understanding South Africa’s economic landscape requires looking beyond political borders to the deeper, interconnected regional dynamics that shape growth, employment and long-term development outcomes.

The reality is that Gauteng is a political region that is a part of a broader economic region, and a big part of the solution to its troubles lie elsewhere in that long-struggling broader region.

Because, while Gauteng serves as a key contributor to economic growth and employment in the broader region around it, the opposite is also true, namely that the broader region strongly influences the economic and employment fortunes, and population pressures, of Gauteng.

Limited star performers in economy

I remember the 2014 Brazil World Cup most notably for when it all fell apart for Brazil, after their star player Neymar got injured in the quarter final. Brazil had seemingly pinned much of its hopes on him to carry the team to victory, and the Brazilian public panic could be felt around the world when he was carried off the field in the quarter-final match.

Then, in the semi-final, minus Neymar, the wheels came off in a 7-1 defeat at the hands of Germany.

While many fans might have blamed the “newer problem” of an injury to Neymar for their loss, the truth is that their failure had little to do with Neymar and more to do with an “older problem” of a lack of squad depth. Germany’s world cup record goal scorer, Miloslav Klose, by comparison went quietly about setting the record at the time, with great support from an all-round balanced squad. And Germany with its all-round squad depth would become world champions a week later.

The lessons from sport often apply to the economy, and here in the South African economy we have also possibly forgotten about the need for “squad depth”, placing increasing reliance on one or two regional economic “stars”.

By this I mean that South Africa has long-been relying heavily on only two major provincial regions to act as “engines of growth and employment”, and the biggest of those two engines is running short on steam. The two regions I am referring to are Gauteng, the country’s largest provincial economy by far, and the Western Cape, the country’s third largest economy as measured by GDP (Gross Domestic Product).

For many years, these two regions have had the lowest estimated unemployment rates and the lowest estimated poverty rates. Not surprising, therefore, they have had the most significant net population inflows, as many people “vote with their feet” and go in search of better economic opportunity.

Between the 2011 and 2022 censuses, net migration figures show that Gauteng and the Western Cape recorded by far the largest net inflows, both from other provinces and from outside the country. This migration has been a contributor to Gauteng and the Western Cape having the fastest population growth rates, and the fastest labour-force growth as a result.

Examining Statistics South Africa's labour force survey data from the first quarter of 2015 to the first quarter of 2026, the estimated population in the 15 to 64-year-old age cohort — an approximation of the working-age population — grew by 22.1% in Gauteng, the fastest provincial growth rate, and by 21.9% in the Western Cape, the second-fastest growth rate.

Gauteng struggles despite hope status

The two provinces' status as "Regions of Hope" is justified by the fact that they continue to record the lowest unemployment rates across all measures, as well as the highest labour-absorption ratios. The labour-absorption ratio refers to the proportion of the working-age population that is employed. The Western Cape and Gauteng have the highest provincial labour-absorption ratios, at 55,7 and 44,3 respectively, both above the national average of 39,7.These two provinces’ “outperformance” in terms of labour absorption into their economies is made more impressive by the fact that their employment numbers have had the fastest estimated labour-force growth to keep pace with.

However, Gauteng has been “running out of steam”, especially in the post-Covid 19 era, and this should be a cause for concern. Back in 2008, the year in which South Africa’s economic boom times ended and broad growth stagnation set in, Gauteng had a far more impressive 57,1 labour-absorption ratio, exceeding even the Western Cape’s 55,7 at the time.

However, Gauteng's labour-absorption ratio has broadly declined, and from around 2015 a significant gap began to emerge between Gauteng and the Western Cape. The Western Cape's ratio recovered from the post-Covid-19 dip to reach 55,7 in early 2026, while Gauteng recorded a much lower 44,3.

The decline in Gauteng’s ratio should not only cause concern in Gauteng, but should also be of concern for the Western Cape. The latter region is at risk of becoming the only major engine of economic and employment growth left, which would risk accelerating its net inward migration of people in search of a better life. At some point, the risk is then that the Western Cape’s expansion of infrastructure and services cannot keep up with population growth either.

While Western Cape planners may be concerned about the impact of weak job creation in other regions, Gauteng faces similar pressures as a result of the even weaker job-creation performance of the provinces surrounding it.

Economic gains meet urban limits

Major cities and towns are often "people magnets", with populations in many parts of the world increasingly urbanising and moving to larger urban areas in search of better economic opportunities. This trend brings many potential benefits. Urbanisation can generate economic gains through the creation of scale in a range of areas, including lower per-capita infrastructure and service costs, as well as the more efficient mass provision of consumer goods and services.

Major urban areas often foster greater innovation through knowledge sharing, and greater efficiency through specialisation of labour is possible.But the risk is that, as populations grow in the major metros, the pressure on services and infrastructure, and employment creation, can’t keep up with the growth. In short, there are limits.

…and Gauteng, part of a broader inland economic region, needs help from its neighbours... Despite a very significant decline over almost two decades, Gauteng still has a noticeably higher labour absorption ratio (44,3) than its four neighbouring provinces, namely Mpumalanga (39,1), Free State (38), Limpopo (36,6) and North West (31,2). And of those four provinces, three have seen a decline in their ratios since 2008, with only Limpopo improving its still-lowly ratio.

While many Gauteng residents bemoan the infrastructure and services decay and decline in Gauteng’s metros, negatively impacting its economic and employment performance, part of its problem is that many local authorities in the regions surrounding Gauteng are in worse shape. This contributes to their poorer economic and job-creating performance, and therefore in part to Gauteng’s mounting pressures.

Gauteng, and within it Greater Johannesburg, serves as an important economic hub for the broader South African inland economic region of which it is part, and arguably for Southern Africa more broadly. Gauteng accounts for 33,2% of South Africa's GDP. Combined with its four neighbouring inland provinces — Free State, Mpumalanga, Limpopo and North West — these five provinces account for nearly 60% of national GDP. The region is also responsible for 56,2% of South Africa's manufacturing output and almost 90% of its mining production.

If we buy into the idea that Gauteng is this broader region’s services hub, then it follows that Gauteng’s fortunes are in major part dependent on the economic performances of the surrounding provinces, because this will drive a significant portion of demand for the services and goods production of Gauteng’s economy.

In addition, those regions’ economic and employment trends significantly influence the pace of population inflows into Gauteng, thus influencing the extent of the population pressures on Gauteng’s infrastructure and services.

Gauteng depends on regional strength

On a smaller scale, the principle is similar within the Western Cape Province, where the City of Cape Town’s economic fortunes and population pressures are not only driven by its own standards of local government management, but also by those of the surrounding towns. And in that metro’s case, it must benefit greatly from the impressive performances of many of its surrounding towns and sub-regions.

Many of them have become economic growth nodes and “people magnets” themselves, no doubt also boosting the demand for goods and services out of City of Cape Town, while likely easing the pace of the city’s mounting population pressures too.

Solutions lie beyond Gauteng’s borders

Urbanisation may not only be desirable in many ways, but also seemingly inevitable, and can contribute to better economic growth ultimately. But if South Africa wishes to shift back into the 5%-plus economic growth that it achieved briefly for a few years prior to 2008, it arguably requires more of these major urban and regional “engines of growth and employment”. Smaller cities’/regions’ performances are crucial in spreading the population load as well as to drive national growth.

The existence of a cognitive bias in humans called “recency bias” suggests that we are prone to overlooking older problems. Recency bias is defined simply as “a cognitive bias where people give disproportionate weight to recent events or information over older, often more relevant data”.

The Neymar injury was Brazil’s newest problem at the time of the 2014 world cup, but not its biggest problem. Similarly, the poor state of Gauteng is perhaps one of SA’s newer problems, but by far not its only important regional problem. Many problems are just older, not less important.