Low Informality Amidst Excessive Unemployment: South Africa’s Empirical Smoking Gun?

Prof. Haroon Bhorat’s (DPRU, UCT) 2026 Public Economics Conference keynote examined South Africa’s “empirical smoking gun”: among 87 middle-income countries, SA combines the highest unemployment rate (~34%) with one of the lowest rates of informality (~16%). Bhorat argues that barriers to formal-sector employment, such as labour regulation, wages and output-employment elasticities, are not the binding constraint. The real puzzle, he suggests, is why the informal sector fails to absorb labour, pointing to regulation, spatial apartheid, weak urban infrastructure and crime, and a supply-side response of deregulation, infrastructure and fiscal support. Presented at the 2026 Public Economics Conference.