9/2026: Population, Growth and Inequality: Has South Africa underestimated the demographic dimension of inequality?

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PUBLICATION INFORMATION

Title: Population, Growth and Inequality: Has South Africa underestimated the demographic dimension of inequality?

Author(s): Daryl Swanepoel

Publication type: Occasional Paper

Publication date: September 2026

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SUGGESTED CITATION

Swanepoel, D. 2026. Population, Growth and Inequality: Has South Africa underestimated the demographic dimension of inequality? Cape Town: Inclusive Society Institute.

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Abstract

This paper examines whether South Africa’s relatively high population growth has been an underappreciated factor in the country’s persistent income inequality. While inequality is conventionally attributed to historical disadvantage, unequal access to opportunity, high unemployment and weak economic growth, the paper argues that demographic change warrants greater attention. Since 1994, South Africa’s population has increased by more than 50%, placing growing demands on an economy that has struggled to expand productive opportunities at a comparable rate.

Using Statistics South Africa data, the paper tests the relative importance of economic and demographic factors through three counterfactual scenarios: actual economic performance with population growth limited to 1% annually; actual population growth with real GDP growth averaging 4%; and a combination of 1% population growth and 4% economic growth. The results show that stronger economic growth would have had by far the greater effect on GDP per capita, but that slower population growth would nevertheless have produced a material additional improvement. Labour-market evidence reinforces the argument: between 2001 and 2023 employment increased by 36.6%, while the number of unemployed people increased by approximately 92.4%.

The paper concludes that South Africa’s central challenge is one of economic absorption. Population growth does not inherently produce inequality, but where economic and employment growth fail to keep pace with an expanding working-age population, unemployment accumulates and income inequality can be aggravated. The findings therefore argue for demographic trends and population projections to be incorporated more explicitly into economic scenario planning. South Africa requires substantially stronger economic growth, but the adequacy of that growth should ultimately be judged against the rate at which the population requiring employment and economic opportunity is expanding.

Keywords: South Africa; income inequality; population growth; economic growth; GDP per capita; unemployment; employment creation; demographic change; working-age population; economic absorption; scenario analysis.

1. Introduction

South Africa's extreme income inequality is generally explained by its history, unequal access to opportunity, exceptionally high unemployment and sluggish economic growth.

All are important. But there is another possibility that deserves closer examination: South Africa's relatively high population growth may itself have materially contributed to the problem.

Since 1994, South Africa's population has increased from 41.9 million to 63.0 million. Statistics South Africa calculates average annual population growth over the period at approximately 1.4% (Stats SA, 2024:4).

That means the population increased by more than 50% in three decades.

The question, therefore, is whether South Africa's extreme income inequality is principally a consequence of inadequate economic growth, or whether relatively high population growth has been an important additional driver by expanding the population faster than the economy has been able to productively absorb it.

This report tests that proposition through three counterfactual scenarios:

• Scenario 1: South Africa follows its actual economic trajectory, but population grows at an average of 1% a year from 1994.

• Scenario 2: Population follows its actual trajectory, but real GDP grows at an average of 4% a year.

• Scenario 3: Population grows at 1% a year and real GDP grows at 4% a year.

The purpose is not to recreate an alternative history. It is to separate the demographic and economic components of the problem and ask which appears to matter most.

2. Population Growth Since 1994

Figure 1: What if South Africa's population had grown more slowly? Actual population compared with 1% annual population growth, 1994–2024

Source: Statistics South Africa, World Population Day in the Context of 30 Years of Democracy from a Statistical Perspective, Report 03-00-22 (2024); author's calculations.

South Africa's population increased from 41.9 million in 1994 to 63.0 million in 2024, at an average annual growth rate of approximately 1.4%. Had population instead grown at exactly 1% a year, the same 41.9 million starting population would have reached approximately 56.5 million in 2024. The difference is substantial: 6.5 million fewer people.

The 1% assumption is deliberately cautious. It does not represent an unusually low population-growth scenario: recent population growth across upper-middle-income countries has been considerably lower. The counterfactual therefore tests the demographic effect using a restrained assumption, rather than an extreme one. Had a lower population-growth rate been applied, the resulting population would have been smaller and the improvement in GDP per capita correspondingly greater.

Stats SA identifies births as the primary driver of South Africa's population growth. In its 2023-2024 demographic calculation, approximately 1.22 million births were added, 550,000 deaths deducted and net international migration added 160,000 people (Stats SA, 2024:5).

Stats SA's longer-term analysis similarly finds that overall population growth closely follows natural increase, with annual migration contributing only a fraction of overall growth (Stats SA, 2024:6)

The difference between the actual and counterfactual trajectories is therefore important. With population growth of 1%, South Africa would in 2024 have had roughly 10% fewer people than it actually had.

That would have meant fewer people competing for employment and other economic opportunities, while also reducing pressure on education, healthcare, housing and

infrastructure.

The question is how much economic difference that might have made.

3. Economic Growth And Output Per Person

Figure 2: What happened to economic growth? Real GDP growth, 2017–2024

Source: Statistics South Africa, Gross Domestic Product, Fourth Quarter 2024, Statistical Release P0441 (2025).

The economic side of the argument cannot be understated.

South Africa's recent growth performance has been exceptionally weak.

Real GDP grew by 1.2% in 2017, 1.5% in 2018 and 0.3% in 2019. It contracted by 6.2% in 2020, rebounded by 5.0% in 2021 and then slowed to 1.9% in 2022, 0.7% in 2023 and 0.6% in 2024 (Stats SA, 2025:5).

The significance becomes obvious when this is placed alongside population growth.

An economy growing at around 1% while its population is also expanding at around that order of magnitude produces very little improvement in economic output per person. That is why the conventional argument for substantially faster economic growth is compelling. But it does not answer the demographic question.

If population growth had been lower, the same economic performance would have been spread across fewer people.

We can measure that effect.

4. Testing The Demographic Effect

Figure 3: Isolating the demographic effect. Actual 2024 outcome compared with 1% population growth

Source: Statistics South Africa, World Population Day in the Context of 30 Years of Democracy from a Statistical Perspective, Report 03-00-22 (2024); Gross Domestic Product, Fourth Quarter 2024, Statistical Release P0441 (2025); author's calculations. Actual GDP held constant.

This is the first important test of the proposition. Nothing about South Africa's economic performance is changed. The only difference is population growth.

Had South Africa experienced exactly the same economic trajectory, but population growth averaged 1%, its population would have been approximately 56.5 million, rather than 63.0 million in 2024.

With GDP unchanged, GDP per person would have been approximately 11.6% higher. That is not an insignificant difference. But neither should it be exaggerated.

It does not establish that household incomes would have been 11.6% higher, nor that inequality would have been 11.6% lower. GDP per capita measures average output per person, not its distribution.

What it demonstrates is that population growth had a material effect on the relationship between the size of South Africa's economy and the size of the population dependent upon it.

The next question is whether that demographic pressure can be observed in the labour market.

5. Employment And Economic Absorption

Figure 4: The economy did create jobs. Employment, 2001–2023

Source: Statistics South Africa, World Population Day in the Context of 30 Years of Democracy from a Statistical Perspective, Report 03-00-22 (2024:48).

If South Africa's population growth contributed to the inequality problem because the economy could not absorb the expanding population, we should expect to see evidence of this in employment. And we do.

But it is more complicated than simply saying that South Africa failed to create jobs.

Stats SA records employment increasing from approximately 12.1 million in 2001 to 16.5 million in 2023. That represents approximately 4.4 million additional jobs, an increase of 36.6%.

South Africa therefore created millions of jobs. The crucial question is whether it created enough.

5.1. Employment And Unemployment Growth

Figure 5: The imbalance that matters - Employment growth versus unemployment growth, 2001–2023

Source: Statistics South Africa, World Population Day in the Context of 30 Years of Democracy from a Statistical Perspective, Report 03-00-22 (2024).

This is where the demographic argument becomes considerably more powerful.

Between 2001 and 2023, employment increased by 36.6%, but the number of unemployed people increased by approximately 92.4% (Stas SA, 2024:48). The unemployment rate consequently increased from 25.4% in 2001 to 32.4% in 2023 (Stas SA, 2024:50).

South Africa was therefore creating jobs at the same time as unemployment was increasing dramatically. That can happen when the number of people requiring employment increases faster than the economy's ability to create it.

This is precisely why population growth matters.

Stats SA identifies a working-age bulge in South Africa's demographic structure and notes that, if successfully harnessed, it can generate a demographic dividend. But the reverse is equally important.

A demographic dividend depends upon productive absorption.

If a rapidly expanding working-age population enters an economy incapable of creating sufficient employment, the potential dividend is not realised. Instead, increasing numbers of people remain outside productive employment.

The South African figures are consistent with precisely such an absorption problem.

5.2. How Population Growth Affects Inequality

Figure 6: Why population growth can matter for income inequality. The transmission mechanism

Source: Author's synthesis (2026).

This is the central proposition.

Population growth does not automatically cause inequality. A rapidly growing population that is successfully educated, employed and integrated into a productive economy can increase economic output. But the South African circumstances are different.

The economy has struggled to generate sufficient growth and employment to absorb the expanding population. That distinction provides the link between demography and income inequality.

A person entering productive employment receives labour income. A person unable to find employment does not. If the number of people unable to enter productive employment grows rapidly, a larger share of the population remains dependent on transfers, informal income or household support, rather than earnings from employment. The result is a widening divide between those participating successfully in the labour market and those excluded from it.

This does not prove that population growth caused South Africa's high Gini coefficient. But it provides a credible mechanism through which relatively high population growth can aggravate an already unequal income distribution when economic absorption is inadequate.

6. Comparing The Three Scenarios

So, which matters more: economic growth or population growth?

This was the question the three scenarios were intended to test.

Scenario 1

Lower population growth, actual economic performance: Had population growth averaged 1%, South Africa would have had approximately 56.5 million, rather than 63.0 million people in 2024. With economic performance unchanged, GDP per person would have been approximately 11.6% higher. Population growth therefore clearly matters.

Scenario 2

 Actual population growth, 4% economic growth: The second scenario asks what would have happened if population followed its actual trajectory, but real GDP had grown at an average of 4% annually from 1994. Stats SA records real GDP at approximately R2.39 trillion in 1994, measured at constant 2015 prices (ISI, 2026:6). Had that economy grown at an average annual rate of 4% for 30 years, real GDP would have reached approximately R7.75 trillion by 2024. With the actual 2024 population of approximately 63.0 million, GDP per person would therefore have been approximately R123,000, compared with the actual outcome of R73,853, roughly 66.6% higher (author’s calculation).

Scenario 3

Lower population growth and stronger economic growth: The third scenario combines both changes: population growth averaging 1% annually and real GDP growth averaging 4% annually from 1994. Under these assumptions, real GDP would have reached approximately R7.75 trillion by 2024, while the population would have reached approximately 56.5 million, rather than 63.0 million. GDP per person would therefore have been approximately R137,260, compared with the actual outcome of R73,853, approximately 85.9% higher. This produces the strongest outcome of the three scenarios, as stronger economic growth is combined with a population growing more slowly than it actually did (author’s calculations).

Figure 7: What difference would the three scenarios have made?

Source: Statistics South Africa, World Population Day in the Context of 30 Years of Democracy from a Statistical Perspective, Report 03-00-22 (2024); Gross Domestic Product: Time Series Data, Fourth Quarter 2024, P0441 (2025); author's calculations.

7. The proposition revisited

The analysis began by asking whether South Africa's extreme income inequality is principally a consequence of inadequate economic growth, or whether relatively high population growth has been an important additional driver.

The three scenarios suggest that this should not be framed as an either-or question.

Population growth clearly matters. Had South Africa experienced exactly the same economic performance, but population growth averaged 1% annually, GDP per person in 2024 would have been approximately 11.6% higher.

But the counterfactual also demonstrates that economic growth matters more. Had the population followed its actual trajectory while real GDP grew at an average of 4% annually, GDP per person would have been approximately 66.6% higher. Combining 4% economic growth with 1% population growth produces the strongest outcome, with GDP per person approximately 85.9% higher than the actual 2024 level.

The conclusion is therefore not that South Africa's inequality problem is primarily demographic. It is that demography has compounded an economic-growth problem. Faster economic growth would have made by far the larger difference, but slower population growth would have materially amplified its effect.

The labour-market evidence reinforces that conclusion. South Africa created millions of jobs, yet between 2001 and 2023 employment increased by 36.6% while unemployment increased by 92.4%. The economy expanded productive opportunity, but not rapidly enough to absorb the growing number of people requiring it.

The policy implication is not that South Africa should pursue population reduction as an economic objective. Nor can demographic policy substitute for the need for substantially faster economic growth. The evidence instead points to a two-sided response.

First, South Africa needs economic growth and employment creation capable of absorbing its expanding working-age population. The relevant measure of success is therefore not simply whether the economy is creating jobs, but whether it is creating them fast enough relative to the number of people requiring productive employment.

Second, demographic considerations need to become a more explicit part of economic planning. This means strengthening voluntary family-planning and reproductive-health services, continuing to expand education and economic opportunity, particularly for women, and ensuring that people have the information and means to make informed choices about family size. It also means systematically incorporating population projections into planning for employment, education, healthcare, housing and infrastructure.

Above all, economic and demographic policy should not be treated as separate exercises. Growth targets should be assessed against projected population and working-age population growth. The objective is neither growth alone nor slower population growth alone, but an economy that expands productive opportunity faster than the population requiring it.

8. Conclusion

South Africa's sluggish economic growth is unquestionably the dominant part of the country's economic challenge. But the evidence suggests that it is not the whole story. Population growth matters too.

The three counterfactual scenarios help illustrate the relative importance of the two. Had population growth averaged 1% annually while economic performance remained unchanged, GDP per person in 2024 would have been approximately 11.6% higher. Had real GDP instead grown at an average of 4% annually while population followed its actual trajectory, GDP per person would have been approximately 66.6% higher. Had both occurred, GDP per person would have been approximately 85.9% higher.

The results therefore do not support an argument that population growth, rather than inadequate economic growth explains South Africa's predicament. They point to something more nuanced. Economic growth is the larger part of the equation, but population growth has materially affected the scale of the challenge.

The labour-market evidence shows why. South Africa created millions of additional jobs, but unemployment grew considerably faster than employment. The economy was creating productive opportunities, but not rapidly enough to absorb the expanding number of people requiring them. That accumulation of unemployment provides an important mechanism through which relatively high population growth can aggravate an already unequal distribution of income.

The policy debate should therefore move beyond the proposition that South Africa simply needs faster GDP growth. It certainly does. But growth must be considered alongside the size and rate of expansion of the population that the economy must educate, employ, house, service and economically absorb.

South Africa's central challenge is therefore one of economic absorption: expanding productive opportunity faster than the population requiring it. That requires substantially stronger economic growth and employment creation, while recognising that demographic trends are themselves an important part of long-term economic planning.

That is the demographic dimension missing from much of South Africa's inequality debate.

References

Inclusive Society Institute (ISI). 2026. True South Africa - Evidence Series: The Economy. Cape Town: Inclusive Society Institute.

Statistics South Africa. 2024. Mid-year Population Estimates 2024. Statistical Release P0302. Pretoria: Statistics South Africa.

Statistics South Africa. 2024. World Population Day in the Context of 30 Years of Democracy from a Statistical Perspective. Report 03-00-22. Pretoria: Statistics South Africa.

Statistics South Africa. 2025. Gross Domestic Product, Fourth Quarter 2024. Statistical Release P0441. Pretoria: Statistics South Africa.

Statistics South Africa. 2025. Gross Domestic Product: Time Series Data, Fourth Quarter 2024. P0441 accompanying time-series dataset. Pretoria: Statistics South Africa.