Read the full Occasional Paper by downloading the PDF below. PUBLICATION INFORMATION Title: Who owns South Africa? Testing the claim that 80% of the economy remains in white hands Author(s): Daryl Swanepoel Publication type: Occasional Paper Publication date: October 2026 PUBLISHED BY Inclusive Society Institute | NPO Registration: 235-515 5 High Cape House, 21 Ben Avenue, Vredehoek, Cape Town, 8001, South Africa PO Box 12609, Mill Street, Cape Town, 8010, South Africa Tel: +27 (0)21 201 1589 Email: admin@inclusivesociety.org.za Website: www.inclusivesociety.org.za COPYRIGHT © 2026 Inclusive Society Institute. Unless otherwise expressly indicated, copyright in this publication is owned exclusively by the Inclusive Society Institute. All rights reserved. No part of this publication may be reproduced, stored, distributed or transmitted in any form or by any means without the Institute’s prior written permission, except as permitted by applicable law. Brief extracts may be quoted for criticism, review, research or educational purposes, provided that the authors, title and publisher are appropriately acknowledged. Permission requests should be directed to info@inclusivesociety.org.za. SUGGESTED CITATION Swanepoel, D. 2026. Who owns South Africa? Testing the claim that 80% of the economy remains in white hands. Cape Town: Inclusive Society Institute. DISCLAIMER This publication has been prepared for research, discussion and public-information purposes. The views expressed are those of the authors and do not necessarily reflect the official position of the Inclusive Society Institute, its Board, staff, funders, partners or associated organisations. While reasonable care has been taken to ensure the accuracy of the information at the time of publication, the Institute and the authors make no warranty regarding its completeness, accuracy or continued relevance. This publication does not constitute professional advice. To the fullest extent permitted by law, the Institute and the authors accept no liability for any loss or damage arising from reliance on its contents. References to third-party organisations, products, services or websites do not constitute endorsement. The Institute is not responsible for the content, availability or accuracy of external websites. Executive summary A powerful proposition continues to shape South Africa’s transformation debate: that white South Africans still own around 80% of the economy. The precise figure varies, some contemporary political claims put white ownership or control even higher, but the underlying assertion is consistent: that the overwhelming bulk of South Africa’s economy remains in white hands. But there appears to be no comprehensive empirical dataset capable of establishing whether this is in fact the case. This does not mean that racial economic inequality has disappeared. The evidence overwhelmingly demonstrates that wealth remains highly concentrated and that the average white South African household remains substantially wealthier than the average black African household. But average wealth, aggregate racial ownership and ownership of productive economic assets are different measures. They should not be conflated. Available evidence provides good reason to question the 80% proposition. The JSE’s underlying study reported a decade ago already that “black South Africans hold at least 23% of the Top 100 companies listed on the Johannesburg Stock Exchange (JSE)”, comprising “10% held directly” and “13% through mandated investment” (JSE, 2015). The published ownership breakdown estimated white South African investment at 22%, foreign investment at 39% and a further 16% as not yet analysed (JSE, 2015). The importance of beneficial, rather than merely registered ownership is illustrated by the Public Investment Corporation (PIC). Its report states: “During the year under review, the PIC grew assets under management (AuM) to R3.049 trillion by 31 March 2025 from R2.691 trillion the previous financial year.” It adds that the Government Employees Pension Fund (GEPF), its “single largest client (88% of AuM), grew to R2.677 trillion” (PIC, 2025:68). The Government Pensions Administration Agency (GPAA) reports that “the racial demographic of contributing members consist of 74% Africans, 13% Whites, 8% Coloureds, 3% Asians and a <2% population classified as ‘unknown’” (GPAA, 2018:23). Household wealth statistics raise further questions. The Momentum-Unisa report records the following population-group shares in its table: African Black households represented 82.1% of households and 57.3% of household wealth; white households represented 8.6% of households and 32.2% of household wealth; Coloured households represented 6.9% of households and 6.6% of wealth; and Indian/Asian households represented 2.4% of households and 3.9% of wealth (Momentum-Unisa, 2024:6). The report’s exact conclusion is that “The African Black population group possess almost 60% of the value of total household wealth” but “also comprise more than 80% of all households” (Momentum-Unisa, 2024:9). White households therefore remained substantially wealthier on average despite African Black households collectively possessing the larger aggregate share. These findings do not establish the racial distribution of ownership of the South African economy. Household wealth is not synonymous with ownership of productive assets, and survey-based wealth estimates have important methodological limitations. They do, however, demonstrate why the 80% claim should not be treated as an established empirical fact. More importantly, South Africa cannot currently provide a credible alternative figure. After more than three decades of economic transformation policy, this represents a significant weakness in the country’s statistical and policy architecture. If transformation seeks to alter the racial distribution of economic ownership, government should be capable of measuring the outcome. This paper therefore recommends that the B-BBEE Commission lead a funded feasibility study into a National Economic Ownership and Wealth Index, working with Statistics South Africa, the South African Reserve Bank, SARS, the FSCA, CIPC and other relevant institutions. The study should establish which assets and ultimate beneficiaries can be measured credibly; what disclosure requirements, legal safeguards and data-sharing arrangements would be needed; how often results could be produced; and what compliance and administrative costs would arise. A decision to establish the Index should follow from those findings. If transformation has progressed substantially, South Africans should know it. If it has not, policymakers should know that too. Either conclusion is preferable to continuing to conduct one of the country’s most consequential policy debates through estimates, proxies and assertion. Keywords: South Africa; Economic ownership; Racial wealth inequality; Economic transformation; Beneficial ownership; Household wealth; Wealth concentration; B-BBEE; Evidence-based policymaking; National Economic Ownership; Wealth Index 1. Introduction A powerful proposition continues to shape South Africa’s transformation debate: that white South Africans still own around 80% of the economy. The precise figure varies, but the underlying assertion is consistent, that more than three decades into democracy, the overwhelming bulk of South Africa’s economy remains in white hands. This is not merely an historical proposition. It remains firmly embedded in contemporary political discourse. In May 2026, ATM leader Vuyolwethu Zungula told the National Assembly that the “country’s economy is still characterized by oligopolies, which are a few white companies owned by a few white people dominating over 90% of the market share in all industries” (Parliament of South Africa, 2026). The proposition also continues to inform the government’s defence of economic redress. In December 2025, Minister of International Relations and Cooperation Ronald Lamola invoked Nelson Mandela’s description of “the economic power relations represented by the reality of the excessive concentration of power in a few white hands”, together with Mandela’s warning that South Africa could not overcome its economic crisis while perpetuating “this power structure” (Lamola, 2025). By invoking these words in defence of current policy, Lamola reinforced the government narrative that economic power remains excessively concentrated in white hands, although neither he nor the passage cited a specific percentage. Perhaps the clearest official expression of this narrative came from Tshediso Matona, the B-BBEE Commissioner, the official responsible for monitoring the implementation of the country’s empowerment framework. Addressing a B-BBEE conference in October 2023, Matona stated that “70% of the economy is owned and controlled by 7.9% percent of the population who are White” (Kagiso Capital, 2023:19). The significance of the statement lies not merely in the percentage cited, but in its source: it was advanced by the head of the statutory commission charged with monitoring economic transformation. But Matona also acknowledged the underlying measurement problem, stating that “we don’t read from the same evidentiary base” and lack “a shared view of progress or lack thereof” (Kagiso Capital, 2023:5). His remarks therefore capture the central problem examined in this paper: a precise racial-ownership figure is asserted authoritatively even while the official responsible for monitoring transformation acknowledges that the available evidence is incomplete. There is no question that South Africa remains profoundly unequal. Chatterjee, Czajka and Gethin describe the country as being “characterized by unparalleled levels of wealth concentration” (Chatterjee, Czajka and Gethin, 2022). Racial disparities in average wealth remain substantial, and white South Africans continue to be disproportionately represented among wealthier households. But these facts do not, in themselves, establish that white South Africans collectively own 80%, or indeed the overwhelming majority, of the South African economy. That is the proposition this paper seeks to test. Not whether racial inequality remains severe; it plainly does. Not whether the average white household remains substantially wealthier than the average black African household; the evidence demonstrates that it does. The narrower and more fundamental question is whether white South Africans, collectively, still own the overwhelming majority of South Africa’s economic assets. Surprisingly, the available evidence cannot answer that question with confidence. Indeed, this paper finds no comprehensive empirical dataset capable of establishing the racial distribution of ultimate beneficial ownership across the South African economy. Available evidence provides sufficient reason to question whether aggregate white ownership could still be as high as 80%. But it does not permit a credible alternative economy-wide percentage to be calculated. That is arguably the more important finding. After more than three decades of pursuing economic transformation, South Africa still cannot reliably answer one of the most fundamental questions against which the success of that policy should be assessed: Who ultimately owns South Africa’s economic assets? 2. What does it mean to “own the economy”? There is no single asset called “the economy”. South African economic wealth comprises listed and unlisted businesses, residential and commercial property, agricultural land, pension and provident fund assets, retirement annuities, collective investments, deposits, bonds and other financial and non-financial assets. There is also substantial foreign ownership of South African assets and significant ownership by the state. This immediately exposes a weakness in claims that a particular racial group owns a specified percentage of “the economy”. Such claims frequently move between land ownership, JSE ownership, corporate ownership and household wealth as though these were interchangeable concepts. They are not. A further distinction is equally important: registered ownership is not necessarily beneficial ownership. The name appearing on a shareholder register may belong to an investment institution, pension fund, nominee company, custodian or asset manager. That identifies the legal or institutional holder. It does not necessarily identify the people who ultimately possess the economic interest. This distinction is particularly important in South Africa, because institutional investment represents such a substantial component of financial ownership. 3. The JSE illustrates the problem The Johannesburg Stock Exchange has frequently been used as a proxy for measuring racial ownership. But available JSE research itself demonstrates why simplistic conclusions should be avoided. Research cited in the public debate reported the following ownership distribution for the Top 100 JSE-listed companies in 2013. The JSE’s published finding was that “black South Africans hold at least 23% of the Top 100 companies listed on the Johannesburg Stock Exchange (JSE)” (JSE, 2015): The JSE used “black” in the context of Broad-Based Black Economic Empowerment. The research was undertaken for the JSE by the BEE advisory group Alternative Prosperity and, in its methodological note, the JSE stated that it was “Applying dti Generic Codes of practice (2007) method of calculation to latest research”, adding that “the dti describes its method of calculating black economic interest” (JSE, 2015). “Black” should therefore be understood in the B-BBEE sense, encompassing African, Coloured and Indian South Africans, rather than African South Africans alone. The same research explained that the black ownership estimate included “10% held directly (largely through BEE schemes) and 13% through mandated investment, mostly through individuals contributing to pension funds, unit trusts and life policies” (JSE, 2015). Separate research conducted by Alternative Prosperity for the JSE estimated that direct investments accounted for approximately 24% of total South African investment in the Top 100 JSE-listed companies. Of this, “less than a third” was held by individuals with investment portfolios, equivalent to approximately 7% of total equity capital, comprising about 6% held by white individuals and less than 1% by black individuals (JSE, 2015). The 2013 figures should not be presented as a current racial ownership measure. They are more than a decade old, 16% of holdings remained unanalysed, and the methodology involved estimates of indirect ownership. Subsequent transactions and changes in investment patterns may have altered the distribution, but without an updated comparable measure, neither the direction nor the extent of change can be established with confidence. The historical figures nevertheless demonstrate two important points. First, the available historical evidence does not support treating 80% white ownership of the JSE as an established fact. Second, determining who ultimately owns listed shares requires looking through layers of institutional ownership. That remains a problem today. In 2026, when the Minister of Finance was asked for a racial breakdown of JSE ownership, the response stated: “Data on the racial composition of ownership of shares listed on the JSE is not readily available.” It explained that investments are “often held through multiple layers of intermediaries, including custodians, pension funds, unit trusts, and nominee accounts” and that it is consequently difficult to determine the race of the underlying beneficial investors accurately (Minister of Finance, 2026). More than a decade after the earlier JSE research, therefore, the fundamental measurement problem remains. 4. The PIC and GEPF demonstrate why beneficial ownership matters The Public Investment Corporation provides a particularly clear illustration of the distinction between asset management and underlying economic ownership. At 31 March 2025, the PIC managed R3.049 trillion in assets. The report states that the PIC “grew assets under management (AuM) to R3.049 trillion by 31 March 2025” and that the GEPF, its “single largest client (88% of AuM), grew to R2.677 trillion” (PIC, 2025:68). The PIC therefore does not beneficially own most of the wealth it manages. It invests assets on behalf of clients. The demographic composition of the GEPF is consequently relevant. Government Pensions Administration Agency data for March 2017 stated that “the racial demographic of contributing members consist of 74% Africans, 13% Whites, 8% Coloureds, 3% Asians and a <2% population classified as ‘unknown’” (GPAA, 2018:23): On this measure, more than 85% of contributing members whose population group was identified were African, Coloured or Asian. This does not mean that 85% of the Rand value of GEPF assets can automatically be classified as black-owned. Pension entitlements vary according to remuneration, years of service and other factors. Member numbers and asset values are not interchangeable. But the data make the underlying methodological point clear. A large PIC shareholding in a listed company cannot simply be treated as belonging to the asset manager or the state. Behind it sits a pension fund whose assets ultimately exist to meet obligations to its members and beneficiaries. The same conceptual problem applies to private pension and provident funds, retirement annuities, collective investment schemes and investment-linked savings products. A credible measure of economic ownership must therefore distinguish between the institution administering an asset and the people possessing the underlying economic claim. 5. Aggregate ownership is not average wealth One of the most important distinctions in this debate is between aggregate racial ownership and average or median wealth by race. They answer different questions. South Africa unquestionably exhibits extraordinary wealth inequality. Chatterjee, Czajka and Gethin, using “microdata covering the universe of income tax returns, household surveys, and macroeconomic balance sheet statistics”, estimated the distribution of personal wealth in South Africa (Chatterjee, Czajka and Gethin, 2022). Their table records a wealth share of 85.6% for the top 10% and 54.7% for the top 1% in 2017 (Chatterjee, Czajka and Gethin, 2022). The racial dimension of inequality is also well established in the wider literature. But a large difference between the average wealth of black and white households does not tell us what percentage of aggregate South African wealth each population group collectively owns. The distinction matters, because of South Africa’s demographic composition. Consider a simplified hypothetical economy containing R100 of household wealth. Assume black citizens collectively own R65 and white citizens R35. If the R65 is distributed among 80 black citizens while the R35 is distributed among eight white citizens, average black wealth would be approximately R0.81 per person and average white wealth approximately R4.38. Black citizens would collectively own almost two-thirds of the wealth while the average white citizen would still be more than five times wealthier. The available household evidence illustrates the same distinction. Momentum-Unisa estimated that African Black households held 57.3% of total household wealth in 2023, compared with 32.2% held by white households. Because African Black households accounted for 82.1% of households and white households for 8.6%, estimated average wealth per white household was approximately 5.4 times average wealth per African Black household (Momentum-Unisa, 2024:6). There is no contradiction. The first statistic measures aggregate ownership. The second measures average inequality. A third measure, the population share of each group, indicates whether aggregate ownership is proportionate to population. These three concepts should not be conflated. It is therefore entirely possible for black South Africans collectively to own the majority of a particular category of South African assets while the average white household remains substantially wealthier. If that were the case, it would indicate significant transformation of aggregate ownership while simultaneously demonstrating that profound racial inequality remained. 6. What the household wealth evidence tells us The South African Reserve Bank states: “The net worth of households increased significantly from R7.3 trillion at the end of December 2010 to R18.3 trillion at the end of December 2023.” It adds that non-financial assets contributed an average 34.4% of household net worth, net financial wealth contributed 65.6%, and that “Growth in the market value of pension entitlements and listed shareholdings was the major source of households’ wealth accumulation over this period” (Mokoena & Setshedi, 2024:110). This reinforces the importance of institutional ownership. Much household economic ownership does not appear as shares registered directly in individuals’ names. It exists through pensions, retirement investments and other financial structures. The Momentum-Unisa Household Wealth Index provides an additional perspective, because its 2023 household survey explicitly estimated the distribution of wealth, assets and liabilities by population group. The report states that its “distributional analysis indicated in table 2 is based on household and not individual level” (Momentum-Unisa, 2024:6). Its results were: The result illustrates precisely why aggregate ownership and average prosperity must be distinguished. African Black households collectively accounted for 57.3% of estimated household wealth, compared with 32.2% for white households. But African Black households constituted 82.1% of households, whereas white households represented only 8.6%. White households therefore remained vastly wealthier on average even though African Black households collectively accounted for the larger share of aggregate household wealth. Momentum-Unisa itself notes this disparity: “The African Black population group possess almost 60% of the value of total household wealth, two-thirds of the value of household assets and owes almost 60% of outstanding debt.” It immediately adds: “However, they also comprise more than 80% of all households, suggesting an unequal accumulation of wealth compared to other population groups” (Momentum-Unisa, 2024:9). The report also identifies differences in asset composition: “The African Black household group in general hold more assets via ownership of residential property, other tangible assets and deposits/cash compared to the other population groups.” It adds that “the other three population groups accumulate more of their assets via saving and investments” (Momentum-Unisa, 2024:9). These findings must be interpreted cautiously. Household wealth is not synonymous with ownership of the productive economy. Household surveys also face well-known difficulties in capturing very wealthy households and complex assets such as private companies, trusts and offshore investments. Chatterjee, Czajka and Gethin explain that “there exists no unified administrative database in South Africa measuring wealth at the micro level for the full population” and that the wealth distribution therefore has to be measured “by combining several complementary data sources” (Chatterjee, Czajka and Gethin, 2022). The Momentum-Unisa estimates therefore cannot simply be used to proclaim that black South Africans “own 57.3% of the economy”. But they are highly relevant to another proposition. They provide substantial reason to question whether a blanket assertion that white South Africans still own 80% of South African wealth or the economy can responsibly be treated as established empirical fact. 7. What we know and what we do not The evidence allows several conclusions to be drawn with reasonable confidence. We know that South African wealth remains extraordinarily concentrated. We know that racial disparities in average wealth remain substantial. We know that direct individual shareholding represents only a relatively small component of JSE ownership. We know that pension funds, collective investments and other institutional structures represent substantial economic interests ultimately held for the benefit of individuals. We know that the largest institutional investor in the country, the PIC, manages most of its assets on behalf of the GEPF, whose contributing membership is overwhelmingly black. We have household survey evidence estimating African Black households as collectively possessing a larger share of aggregate household wealth than white households, notwithstanding white households remaining substantially wealthier on average. And we know that foreign ownership constitutes a substantial part of South African listed equity ownership and must be separated from domestic racial ownership. What we do not know is the current racial distribution of ultimate beneficial ownership across the South African economy as a whole. That distinction is the central finding of this paper. 8. Government may have achieved more than it knows There is an important possibility arising from this statistical failure. Government may have been considerably more successful in transforming patterns of economic ownership than it gives itself credit for. Over more than three decades, millions of black South Africans have entered formal employment, accumulated pension rights, acquired homes, established businesses and accumulated investments through retirement funds, collective investment schemes and other financial products. If these forms of beneficial ownership are inadequately reflected in conventional transformation measures, aggregate racial ownership may have changed considerably more than the dominant public narrative suggests. The available evidence does not allow that conclusion to be asserted. But neither does it allow it to be dismissed. Perhaps government has achieved more than it knows. If so, its failure to measure ultimate beneficial ownership means that it is unable to demonstrate one of the potentially most important achievements of the transformation project. 9. But perhaps transformation has not progressed sufficiently The opposite possibility must be treated with equal seriousness. Transformation may have progressed substantially less than intended. Ownership of important productive assets may remain heavily concentrated. Black South Africans may have accumulated substantial pension and household assets while remaining underrepresented in direct entrepreneurial ownership or particular classes of productive capital. If that is the reality, government needs to know that too. Reliable evidence would identify precisely where transformation has stalled, which asset classes remain disproportionately concentrated and where existing policy instruments have failed. It would allow intervention to become more targeted and evidence-based. At present, neither proposition can be adequately demonstrated. If transformation has worked, we should be able to prove it. If it has failed, we should be able to prove that too. Instead, one of the most consequential debates in South Africa continues to rely too heavily on proxies, competing methodologies and frequently repeated claims that eventually acquire the status of fact through repetition. 10. The consequences for social cohesion This statistical failure has consequences beyond economic policy. It affects social cohesion. The repeated assertion that white South Africans continue to own approximately 80% of the economy conveys a powerful underlying message: that more than three decades after apartheid, very little has changed. It can reinforce a perception that those who accumulated wealth under the previous economic order have largely resisted transformation while the majority remain excluded from meaningful economic ownership. If that accurately describes South Africa, the country needs to confront it. But if it does not, repeatedly presenting it as fact carries its own social cost. If ownership has become substantially more representative, recognising that progress would not mean declaring transformation complete. It would not negate the large racial differences in average wealth, nor remove the need for further economic inclusion. It would simply allow South Africans to acknowledge progress where progress has occurred. The reverse is equally important. If credible measurement establishes that ownership remains overwhelmingly racially concentrated, the country could confront that reality on the basis of evidence, rather than accusation. Those arguing that transformation has progressed far enough would then have to engage with measurable facts. Either outcome provides something the present debate frequently lacks: a common factual starting point. That has particular value in a society where questions of race, wealth and historical redress remain deeply contested. 11. The missing instrument of transformation policy South Africa has developed an extensive architecture for measuring aspects of transformation. B-BBEE measures ownership structures, management control, skills development, enterprise development and procurement. Employment equity measures occupational representation. Sector charters establish targets. Public procurement increasingly incorporates transformation requirements. These instruments provide important information. But they predominantly measure mechanisms, structures and proxies for transformation. They do not collectively answer the economy-wide outcome question: How is the underlying stock of South African economic wealth ultimately distributed? The consequence is potentially serious. Government may continue concentrating intervention in areas where substantial transformation has already occurred while overlooking areas in which ownership remains highly concentrated. It may underestimate wealth accumulated by black South Africans through institutional investments. Conversely, it may overestimate transformation where formal empowerment structures have not translated into substantial underlying wealth accumulation. Without comprehensive measurement, policymakers cannot know which is occurring. 12. Assess the feasibility of a National Economic Ownership and Wealth Index South Africa should commission a funded feasibility study into a National Economic Ownership and Wealth Index. The B-BBEE Commission should lead the study, working with Statistics South Africa, the South African Reserve Bank, SARS, the Financial Sector Conduct Authority, CIPC, the deeds registration system and relevant public and private institutions. The study should first establish what information is already collected, whether it records racial classification and ultimate beneficial ownership, and whether existing records can lawfully and reliably be linked. It should identify any additional disclosure requirements, data-sharing arrangements, privacy safeguards and legislative or regulatory changes that would be necessary. It should also assess how reported classifications could be validated without assuming that a comprehensive administrative record of each person’s race exists. The study should test the practical ability to trace assets held through pension and provident funds, retirement annuities, collective investment schemes, insurers and other intermediaries to their underlying economic beneficiaries. It should examine listed equities, unlisted businesses, property, deposits and other significant assets, while identifying gaps involving informal and unregistered holdings. Foreign and state ownership would require separate treatment. A proposed methodology should distinguish aggregate ownership by population group from average and median wealth within each group, and report each group’s population share alongside those measures. It should specify which estimates could be produced reliably, how frequently they could be updated, and what uncertainty or exclusions would need to be published with them. Finally, the study should estimate implementation and continuing costs for reporting entities and public institutions, assess institutional capacity and identify a realistic funding source. It should compare a comprehensive administrative index with narrower or survey-based approaches. Only if a credible, lawful and proportionately funded method is demonstrated should government proceed to establish the Index, potentially in stages as data quality improves. 13. Conclusion South Africa knows that it remains profoundly unequal. It knows that average wealth differs substantially by race. It knows that wealth is extraordinarily concentrated among a relatively small proportion of the population. What it does not know with sufficient empirical precision is how the country's aggregate stock of economic assets is ultimately distributed by race. Those are different questions. The frequently repeated claim that white South Africans still own approximately 80% of the economy cannot presently be substantiated through a comprehensive economy-wide measure of ultimate beneficial ownership. There is sufficient empirical evidence to raise serious questions about the figure. But there is not sufficient evidence to replace it responsibly with another economy-wide percentage. That distinction is important. Perhaps transformation has progressed considerably further than South Africans realise. If so, government should be able to demonstrate that progress. Apart from allowing policy effectiveness to be assessed, doing so could contribute to social cohesion by demonstrating that the economy is changing even while substantial inequalities remain. Perhaps transformation has progressed far less than intended. If so, government should be able to demonstrate that failure and identify precisely where intervention is required. Either finding would advance the transformation debate. The present uncertainty does not. After more than three decades of transformation policy, the absence of a credible national measure of ultimate racial economic ownership is itself a policy failure. One cannot credibly manage transformation if one does not measure transformation. South Africa should stop debating one of its most consequential economic questions through competing estimates. A funded feasibility study led by the B-BBEE Commission should establish whether a credible and affordable national measure can be produced, what information and safeguards it would require, and which gaps would remain. Its findings should determine whether an index is warranted and, if so, how it should be built. That study is the necessary first step towards answering, as reliably as the evidence permits, the deceptively simple question at the heart of the transformation debate: Who owns South Africa’s economy? 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Read the full paper by downloading the PDF below. PUBLICATION INFORMATION Title: Six Months of War with Iran: What Has Happened? What Comes Next? Rapporteur: Klaus Kotzé Publication type: GSPN Open Consultation Mondays event report Publication date: September 2026 Event date: 14 September 2026 This report summarises the principal discussions and conclusions arising from the event. PUBLISHER Global South Perspectives Network (GSPN) c/o Inclusive Society Institute (Secretariat) 5 High Cape House, 21 Ben Avenue, Vredehoek, Cape Town, 8001, South Africa PO Box 12609, Mill Street, Cape Town, 8010, South Africa Tel: +27 (0)21 201 1589 Email: info@globalsouthperspectives.org Website: www.globalsouthperspectives.org COPYRIGHT Copyright © 2026 Global South Perspectives Network. All rights reserved. Reproduction requires the publisher’s prior written permission, except for brief quotations used for review, research or scholarly citation. SUGGESTED CITATION Kotzé, K. 2026. Six Months of War with Iran: What Has Happened? What Comes Next? Cape Town: Global South Perspectives Network. USE OF ARTIFICIAL INTELLIGENCE Artificial intelligence tools may have assisted with the drafting, editing and presentation of this report. All substantive content was subject to human review. Responsibility for the final publication rests with the rapporteur and publisher. DISCLAIMER This report summarises contributions made during a GSPN Open Consultation Mondays event. The views expressed are those of the respective speakers and participants and do not necessarily represent those of GSPN, the Inclusive Society Institute or their affiliated organisations. While reasonable care has been taken to ensure accuracy, no warranty is given regarding the completeness, accuracy or continued relevance of the information. This publication does not constitute professional advice. Neither GSPN nor the authors accept liability for loss or damage arising from reliance on its contents. References to third-party organisations, products, services or websites do not constitute endorsement. GSPNtute is not responsible for external website content, availability or accuracy. CONTENTS 1 What has this war changed? 2 Two vantage points 3 A war of choice and a war of survival 4 Three miscalculations 5 The fortress that Washington removed 6 Geography returns 7 Crossing the conventional threshold 8 What force could not do 9 The costs that were not priced 10 Who would guarantee an agreement 11 Israel’s influence and the president’s decision 12 Nationalism and nuclear weapons 13 Three paths, and what each requires 14 Reflection Cover image: AI-generated using OpenAI’s image generation tool, 23 September 2026. LIST OF TABLES Table 1: Three miscalculations identified in the report Table 2: What military force could and could not achieve Table 3: Potential external roles in a negotiated settlement Table 4: Three possible paths from the current conflict LIST OF FIGURES Figure 1: Key turning points in the adversarial relationship, as framed in the report Figure 2: Status of the three strategic objectives stated in the discussion Figure 3: Transmission of conflict-related economic pressure beyond the region 1 WHAT HAS THIS WAR CHANGED? The September edition of the Open Consultation Mondays was convened 199 days after the war against Iran began. On the morning of the session the Iran–Gulf meeting on the Hormuz corridor was called off before it could begin. The fighting has slowed and the institutions have spoken. Nothing has been settled. The question put to the session was accordingly narrow: after six months, what has this war achieved, and what should the rest of the world understand about it? Two speakers introduced the discussion. Professor Mohsen Milani, of the Center for Strategic and Diplomatic Studies at the University of South Florida, who works on Iranian politics and regional security, was joined by Professor Abel Esterhuyse, of the Department of Strategic Studies at Stellenbosch University and the South African Military Academy. 2 TWO VANTAGE POINTS Professor Milani works on Iranian politics and American foreign policy from a university in Florida; his frame is the regional order in its long duration. Professor Esterhuyse works on strategic theory at a military academy in the Western Cape; his frame is what armed force can and cannot accomplish. Different disciplines, different continents, different formations. They agreed on almost everything that mattered. That the war is existential for Iran and elective for the United States. That the American invasion of Iraq in 2003 was the turning point which shifted the regional balance in Iran’s favour. That geography has proved decisive, that operational success has not become strategic success, that collapse would bring civil war rather than stability, that Israel’s influence was real and the American president’s responsibility absolute, that China is now the consequential external actor, and that there is no military route out of this war. Professor Esterhuyse opened by saying that what he wished to argue aligned almost entirely with Professor Milani. Two analysts with no reason to align, arriving at the same reading. 3 A WAR OF CHOICE AND A WAR OF SURVIVAL Professor Milani opened by naming the paradox at the centre of the conflict. Despite overwhelming military strength, neither the United States nor Israel has achieved its strategic goals. The original objectives were clear enough: to eliminate the threat of Iran’s nuclear programme, to disable its missile and drone capabilities, and, should the opportunity present itself, to bring about the collapse of the Islamic Republic. Six months and two wars later - one of twelve days, one of forty - none has been secured. Iran has instead acquired leverage it did not hold before: a measure of control over navigation and the flow of oil through the Strait of Hormuz. Professor Esterhuyse sharpened the asymmetry. The war is a war of choice for the United States. For Iran it is a war of survival, and for the Iranian government an existential one. Two parties to the same war, calculating on entirely different terms. Professor Milani made the consequence plain. From the moment the Supreme Leader and the senior leadership were killed, winning, for Iran, meant surviving. It is a low bar. It has been cleared. He added a correction to the language now in general use. The American president has called what occurred regime change. What occurred is change within the regime: the men at the top were killed, and other men hold those offices. That is the difference between removing a government and rearranging one. 4 THREE MISCALCULATIONS Much of Professor Milani’s presentation explained how a misreading of Iran produced this outcome. Three assumptions, each defensible on its own terms, and each wrong. The first was that Iran’s weakened regional position meant that Iran itself was weak. Iranian policy had rested for decades on the axis of resistance: aligned forces in Iraq, Hezbollah in Lebanon - in his description Iran’s most formidable military instrument - the Assad dynasty in Syria, missiles and drones to the Houthis, support to Hamas in Gaza. Before October 2023, he argued, Iran was doing extremely well. That structure has since been dismantled. Soleimani was assassinated in 2020, a case in which one individual mattered more than the institution around him; Assad had fallen, a loss he placed on the same order for Iran as the collapse of the monarchy in 1979 was for the United States; Hamas and Hezbollah were badly struck. Reading this ledger, Washington and Tel Aviv saw a generational opportunity. What they did not distinguish was regional reach from national capacity. The second was that domestic discontent amounted to readiness for regime change. Popular dissatisfaction in Iran is real, long-standing, and requires no special insight to observe. To read it as readiness to remove the government was a badly placed inference. There is a considerable distance between being unhappy with a government and being willing to take to the streets against it. When the attacks came, many Iranians who hold no affection for the Islamic Republic rallied to the defence of the country. Not in support of the government. In support of the territorial integrity of a country they love. The third was that degraded defences meant degraded capability. Iran’s air defence system had been damaged in earlier exchanges, and Israel knew it. Its offensive capability had not been touched. Nor, he suggested, was either government prepared to accept that a state under attack would strike back. Professor Milani had set the argument out in print two weeks before the first campaign, under the title “Iran is not as weak as it seems”. He claimed no foresight for it. He called it logic. Table 1: Three miscalculations identified in the report Source: Synthesis of the report discussion. 5 THE FORTRESS THAT WASHINGTON REMOVED Both speakers treated Iraq as the hinge on which the present situation turns. Professor Esterhuyse argued that the invasion of 2003 shifted the regional balance and should be understood as the turning point in the power politics of the Middle East. Professor Milani said he could not agree more. For three centuries the Ottoman and Persian empires competed for primacy in this space. Iraq was constituted as a Sunni-dominated state and functioned as a fortress against Iranian expansion into the Arabian Peninsula and the Levant, notwithstanding its Shia majority. By removing the Ba’athist state, Washington demolished that fortress, and for the first time in four centuries Iraqi Shias took power in Baghdad. The destruction of the Taliban after 2001 had already removed an adversary on Iran’s other border. There is an irony here that both speakers saw plainly. The regional position Washington set out to dismantle in 2026 was created, in substantial part, by what Washington did in 2003. 6 GEOGRAPHY RETURNS Geography, Professor Milani said, is back. It can compensate for weakness. A state that cannot match an adversary’s arsenal may still sit astride the thing that adversary needs. Professor Esterhuyse endorsed the point and extended it: in Iran’s case geography matters not only geopolitically but operationally, where it determines what an attacking force can physically do. Professor Milani set this in a long frame. The Portuguese took Hormuz in 1507 and levied fees on the ships that passed for more than a century; the Iranians removed them in 1622 with British assistance, and Britain became in time the dominant power in the Gulf. For four centuries, whoever controls the Strait of Hormuz has exercised influence well beyond it. It was widely assumed that Iran’s threat to close the strait was a bluff, on the reasoning that closure would deprive Iran of its own oil revenue. Here too the calculation was made for the wrong kind of state. A country fighting for its existence does not reason as a country pursuing its interests. Iran closed the strait, for a period and with some effect, and struck United States assets and allies in the region. The Houthis, he added, are teaching the same lesson at the Bab el-Mandeb. His conclusion, set out at greater length in a Chatham House article published on the morning of the session, is that the pre-war order will not be restored. 7 CROSSING THE CONVENTIONAL THRESHOLD Professor Esterhuyse approached the same material through military strategy, and opened with two cautions. The first was a set of three rules on the use of force by democratic states, attributed to General Fox Conner, who trained both Eisenhower and Marshall. Never fight unless you have to. Never fight alone. Never fight for long. Measured against that standard, the campaign in Iran fails on all three counts. The second was Colin Gray’s warning that there is nothing to be seen in the foreseeable future. His central point concerned a threshold. The adversarial relationship dates from 1979: the revolution, the failed American operation in the Iranian desert, and American support for Israel. What matters is how it has been conducted since. For more than four decades the United States managed it below the conventional threshold, through diplomacy, through sanctions, and through the threat of force rather than its use. What is new is that the threshold has been crossed for the first time since 1979. He attached the shift to the change of administration in Washington, and was careful to present it as a military reality rather than a partisan one. Its consequences will outlast any presidency. A state that has crossed such a line has established that it will cross it. Figure 1: Key turning points in the adversarial relationship, as framed in the report 8 WHAT FORCE COULD NOT DO Professor Esterhuyse then set out why land power is not a realistic option. Iran’s geography makes invasion and occupation impractical, and the attempt would reproduce Afghanistan. Air power has degraded Iranian capabilities and can continue to do so. What it cannot do is remake a political order or eliminate regional influence. Four things stand in the way: the vastness of Iran’s territory, the hardened infrastructure built over decades, the asymmetric capabilities developed in order to retaliate, and a demonstrated ability to absorb and disperse damage. Air superiority, in his assessment, is unlikely to translate into strategic success. Maritime power runs into capabilities Iran has spent decades designing for precisely this purpose: anti-access and area denial, mass missile and drone capacity, and influence over Hormuz as a chokepoint. Naval forces have also proved unable to address land-based targets. What maritime power has done instead is escalate the conflict into a regional one, and from there into a global economic one. Whatever operational success there was has not translated into strategic success. He placed the operational centre of gravity of this war in the Strait of Hormuz, where American military, economic and political considerations converge. The strategic centre of gravity has shifted elsewhere: to the global economy. Table 2: What military force could and could not achieve Source: Synthesis of the report discussion. Figure 2: Status of the three strategic objectives stated in the discussion 9 THE COSTS THAT WERE NOT PRICED Both speakers were direct about what the war has cost the Americans and Israelis. Professor Esterhuyse set out three consequences. Washington is increasingly perceived in the region as an unreliable partner and an unreliable protector, and the Gulf states are looking to arrangements that do not depend on it. The war has drawn American attention away from other priorities, most obviously Ukraine. And the disruption around Hormuz has produced economic fallout disproportionate to anything the campaign has achieved. American global leadership has taken a knock. That third cost is not borne where the decisions are made. A Brown University study cited during the session put the additional annual burden on an average American household at somewhere in the region of $750 in fuel. The figure was offered as an approximation and should be treated as one; its order of magnitude is the point. Professor Milani set it against the two long wars that preceded this one. Afghanistan lasted two decades and cost some $1.7 trillion, and Americans were unhappy at the deaths and the expenditure, but it did not reach into their household budgets. Nor did Iraq. Iran’s calculation in pressing on the strait is precisely to close that distance. The mirror of that calculation is the American one: that Iran, sanctioned for four decades, will collapse if deprived of oil revenue. Professor Milani doubts this very much, and six months give him the better of the argument. Two governments, each betting that the other’s population breaks first. In states with no reserves to absorb it, the same pressure passes through into food prices, input costs and public budgets. Professor Esterhuyse cited Stephen Kotkin’s account of the West as vulnerable at three points: Central Europe, the Middle East, the Far East. The states that will carry much of the cost sit at none of the three. Figure 3: Transmission of conflict-related economic pressure beyond the region 10 WHO WOULD GUARANTEE AN AGREEMENT Asked what contribution BRICS might make, Professor Milani was candid: as a grouping, a limited one; as individual members, a considerable one, and China above all. China has emerged from this war in a stronger position than any other state. It is the largest economic partner both of Iran and of the Gulf states, and President Xi has signalled an implicit willingness to mediate. In intelligence and military terms, he added, China sits closer to Iran than to the Gulf monarchies. Professor Esterhuyse concurred: China is the one external power with a layered interest here, economic, strategic and opportunistic at once. The significance of this is less about mediation than about guarantee. Professor Milani set out why Iran hesitates to return to the table. It has been burned three times. The nuclear agreement of 2015, endorsed by the permanent members of the Security Council, from which an American administration unilaterally withdrew three years later before imposing crippling sanctions. The negotiations of this year, well advanced, during which the United States attacked. And the Memorandum of Understanding, a fourteen-provision document and, on his recollection, the first signed personally by an American and an Iranian president, from which the United States has since withdrawn. Qatar, Oman and Pakistan can mediate. What they cannot do is make an agreement stick. Professor Esterhuyse went further, and knowingly onto controversial ground, raising a proposal recently aired in the Israeli press: that Russia and China oversee a future understanding between Washington and Tehran, including an arrangement between Washington and Beijing on Iranian oil. He acknowledged how uncomfortable the proposition is. He argued for it regardless, as the available route back to geostrategic stability. Georgios Kostakos put the objection that such an arrangement invites. A settlement reached only among the United States, Russia and China amounts to a directorate. It resolves the war by dividing the world into spheres of influence, and finds its agreement where those spheres overlap. He asked whether there is a place in this for the United Nations, whose incoming Secretary-General takes office shortly, and for the European Union, which secured the original nuclear agreement and whose economies are directly exposed. The responses were honest. They were not encouraging. Professor Milani maintained that the core conflict can only be addressed bilaterally, and that the most useful role for the United Nations and the European Union is to press both parties towards direct talks. He invoked the Cold War precedent: Washington and Moscow maintained embassies and normal relations for decades without friendship. Normalisation, not reconciliation, is the realistic object. Professor Esterhuyse did not see the current administration involving either institution. On NATO he was unambiguous: its focus is Ukraine, Central Europe and Russia, and a defensive alliance will not act collectively in a war of this character. The multilateral route is the one most Global South actors have an interest in. It is also the one to which neither speaker could attach much probability. Table 3: Potential external roles in a negotiated settlement Source: Synthesis of the report discussion. 11 ISRAEL’S INFLUENCE AND THE PRESIDENT’S DECISION Daryl Swanepoel asked the counterfactual directly. Absent Israel’s influence, would this war have happened? And given that the war is disliked in the United States and the midterm elections approach, where do the incentives now sit? Both speakers answered the first question in the same way. Israel’s influence was real and material. Professor Esterhuyse observed that no state possesses Israel’s intelligence penetration of the Middle East and of Iran. Israeli discomfort with an Iranian nuclear capability goes back decades and has been acted on militarily more than once since 1979, and 7 October 2023 hardened that reading. On it, the nuclear question served as the argument that brought the Americans across the conventional line. Professor Milani noted that the Israeli prime minister has been candid about urging successive American administrations to act, and that every president from Carter to Biden declined - including the first Trump administration, which withdrew from the nuclear agreement but did not attack. Professor Esterhuyse described the American system as designed to bring collective decision-making to bear. Influence is not decision. The decision belonged to the President of the United States, and so does the responsibility. On timing, the incentives point in opposite directions. Rising oil prices improve the opposition’s prospects in the House, less certainly in the Senate, and Tehran understands this. Both took Mr Swanepoel’s further observation seriously: an administration that has lost the midterms is an administration with fewer restraints, and Professor Milani allowed that an impeachment attempt might give the president more incentive to escalate. Professor Esterhuyse added that Iran has reason to extend the conflict regardless of any election, because the second great vulnerability of American power, after its difficulty converting operational success into political outcomes, is the will of the American public. That vulnerability was exploited in Vietnam. It is being exploited now. Both warned against the assumption that removing the Iranian government would end the matter. Afghanistan absorbed two decades and $1.7 trillion, and the Taliban returned; Iraq is its own answer. Collapse in Iran most likely means civil war, and while Iran and the United States are not at peace the Persian Gulf will not be at peace by itself. Professor Milani put a question worth repeating. Name another state that has endured four decades of crippling sanctions, been attacked by the foremost military power in the world and the foremost in the region, had its leader and its military and intelligence chiefs killed - and survived. The point is not the extent of the government’s support, which he put at between fifteen and twenty per cent. It is that the support is ideological rather than soft, and that the state has institutionalised itself well beyond any single figure. 12 NATIONALISM AND NUCLEAR WEAPONS Mr Mohmmad Taher Gholi Tabar, joining from Iran, described a unity across cultures, faiths and political positions that he had not previously witnessed in his country. He was candid about the ambivalence in it: that many innocent people, including children, have been killed, and that the attacker has nonetheless united the country. He asked whether this might be the final war between Iran and the United States, and whether Iran would withdraw from the Treaty on the Non-Proliferation of Nuclear Weapons. Professor Milani confirmed the observation and placed it in historical company. Saddam Hussein attacked Iran in September 1980, on intelligence that the revolution had left the country weak and its factions at each other’s throats, and gave the revolution a new lease of life instead. The French and Russian revolutions taught the same lesson: an external attack consolidates what it means to destroy. Governments come and go, and Iran has seen hundreds of dynasties across three and a half thousand years. People may hate their government and love their country. An external attack asks them to choose. They choose the country. On whether this will be the last such war, he was brief: he hopes so, and does not think so. On the nuclear question both speakers were sober. Professor Milani considered withdrawal from the NPT secondary to the atmosphere the war has created. Following the domestic debate closely, he reported hearing young Iranians argue for the first time, and in numbers, that Iran has no choice but to build a weapon, because a state without one can be humiliated. Whether the leadership takes that decision he declined to predict. Opinion, he said, has moved further towards weaponisation than at any point he can recall. Professor Esterhuyse reached the same place by the strategic route, and then went beyond it. If Iran lacked a reason to pursue a weapon before the attack, it has one now, and he expects it to pursue one. He framed the matter through the counterfactual every government in the region is presumably now weighing: would the United States have attacked an Iran that possessed a nuclear weapon? The utility of nuclear weapons has never lain in their use. It lies in possession, and in the deterrence possession confers. He then suggested - and the argument is his, not the meeting’s - that an Iranian deterrent might contribute to the regional balance, between Sunni and Shia, between Arab and Persian, between Israel and its Arab neighbours, that has historically accompanied the Middle East’s more stable periods. This final note itself is a finding. When a serious strategic analyst can propose in an open forum that further nuclear proliferation is a route to regional stability, and can do so in the expectation of being taken seriously rather than dismissed, the proposition tells us less about his judgement than about the ground on which it is now made. It is a measure of how far that ground has shifted. 13 THREE PATHS, AND WHAT EACH REQUIRES Professor Milani set out the alternatives as he sees them. The first is prolonged attrition, in which each side gambles that the other has the lower tolerance for economic pain. The second is intensified economic warfare, which both parties are already waging and which he expects to lead nowhere. The third is a return to negotiation. He has long held that there is no military solution to this conflict, only a political one, and he attached a caveat to the word diplomacy. It is not the dictation of terms. It is give and take. An agreement Iran is invited to accept rather than to negotiate will not hold, and after three withdrawals from three arrangements the demand for reciprocity is not posturing. Professor Esterhuyse reached the same conclusion by the military route. Citing Lawrence Freedman’s argument that the American president has run out of options, he observed that the objectives of this war were never clearly articulated, that early expectations proved over-optimistic, and that strategic reality has since constrained political ambition. No path of escalation remains that does not carry major global consequences. Negotiation is unavoidable, and an exit requires compromise. His formulation: the American president needs to learn the diplomacy of losing well. What that requires is a combination rather than a single instrument. Internal political pressure in both capitals. Economic measures. International diplomacy. And - in his own blunt phrase - that Israel be kept under control. Table 4: Three possible paths from the current conflict Source: Synthesis of the report discussion. 14 REFLECTION The thread running through the September meeting was the distance between military superiority and strategic achievement. The most powerful military coalition in the world has spent six months, two campaigns and fifty-two days of bombardment against Iran, and has not obtained what it went to war for. The nuclear programme has not been eliminated. The government has not fallen. The missile and drone capability persists. And the one unambiguous change in the strategic balance runs the wrong way. What gives that assessment its weight is that it was reached twice, independently. A specialist in Iranian politics working in an American university and a military strategist working at a South African academy share no discipline, no continent, no formation and no audience. Yet on the character of the war, on its origins in 2003, on the primacy of geography, on the limits of every instrument of force, on the consequences of collapse and on the necessity of negotiation, they said the same things in different vocabularies. The lesson reaches beyond this conflict, and it is one the Global South has learned repeatedly at its own expense. Force can destroy. It cannot govern. Professor Esterhuyse’s caution against over-dramatising the present should not obscure what is already legible: the constraints that held this relationship below the conventional threshold have been removed, and removing them proved far easier than restoring them will be. A threshold crossed cannot be uncrossed by declaration. It has to be rebuilt, by parties who no longer trust one another, under the supervision of powers whose own interests are engaged. The gravity of the moment is best measured by what has become sayable within it. A war has produced a surge of nationalism in the country it was meant to destabilise, and an argument for nuclear acquisition in the country it was meant to disarm. Non-proliferation has held for decades on the understanding that possession invites danger rather than confers safety. Six months of this war have made the opposite case more persuasively than any state ever argued it. For the Global South the implications are immediate rather than theoretical. The world is paying for this war: in fuel, in freight, in food, in the cost of borrowing, and in the erosion of the multilateral mechanisms through which smaller states exercise what influence they have. Should the war be resolved by a directorate of great powers, as Mr Kostakos cautioned, the resolution will confirm a distribution of authority in which most of the world is spectator to decisions that determine its conditions. Beneath the strategic accounting sit the people. Iranians are being killed, including the children that the participant from Iran mentioned without emphasis and without rhetorical use. Families across the region and far beyond it are absorbing costs generated in rooms they will never see. The proper response to a war that has settled nothing is not resignation. It is to say, from every platform available, that force has failed on its own terms, that negotiation is the only route remaining. This report has been published by the Inclusive Society Institute on behalf of the Global South Perspectives Network The Global South Perspectives Network (GSPN) is an international coalition founded in 2022 by HumanizaCom, the Foundation for Global Governance and Sustainability (FOGGS), and the Inclusive Society Institute (ISI). It connects think tanks and experts from Latin America, the Caribbean, Africa and the Middle East to bring a wider range of Global South perspectives into debates on international affairs and global governance. GSPN was established in response to the need for stronger Southern representation in the institutions and discussions that shape global policy. Its work focuses particularly on United Nations reform and the future of multilateralism. The network provides a space for experts from different regions to exchange ideas, identify shared priorities and contribute proposals grounded in their own experiences. Through research, dialogue and advocacy, GSPN seeks to broaden participation in global decision-making. It also promotes more equitable partnerships between the Global South and North, recognising that effective responses to international challenges require the knowledge and participation of countries across both. Among GSPN’s initiatives is the 2023 report Global South Perspectives on Global Governance Reform, which was presented at a United Nations workshop in New York. The network has also contributed to international dialogue through events including a United Nations civil society workshop held in Nairobi in 2024. GSPN’s mission is to help ensure that Global South countries participate as equal partners in shaping global policy. By connecting perspectives across regions and bringing them into international discussions, the network works towards a fairer, more inclusive and more sustainable international order. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full Occasional Paper by downloading the PDF below. 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 PUBLISHED BY Inclusive Society Institute | NPO Registration: 235-515 5 High Cape House, 21 Ben Avenue, Vredehoek, Cape Town, 8001, South Africa PO Box 12609, Mill Street, Cape Town, 8010, South Africa Tel: +27 (0)21 201 1589 Email: admin@inclusivesociety.org.za Website: www.inclusivesociety.org.za COPYRIGHT © 2026 Inclusive Society Institute. Unless otherwise expressly indicated, copyright in this publication is owned exclusively by the Inclusive Society Institute. All rights reserved. No part of this publication may be reproduced, stored, distributed or transmitted in any form or by any means without the Institute’s prior written permission, except as permitted by applicable law. Brief extracts may be quoted for criticism, review, research or educational purposes, provided that the authors, title and publisher are appropriately acknowledged. Permission requests should be directed to info@inclusivesociety.org.za. SUGGESTED CITATION Swanepoel, D. 2026. Population, Growth and Inequality: Has South Africa underestimated the demographic dimension of inequality? Cape Town: Inclusive Society Institute. DISCLAIMER This publication has been prepared for research, discussion and public-information purposes. The views expressed are those of the authors and do not necessarily reflect the official position of the Inclusive Society Institute, its Board, staff, funders, partners or associated organisations. While reasonable care has been taken to ensure the accuracy of the information at the time of publication, the Institute and the authors make no warranty regarding its completeness, accuracy or continued relevance. This publication does not constitute professional advice. To the fullest extent permitted by law, the Institute and the authors accept no liability for any loss or damage arising from reliance on its contents. References to third-party organisations, products, services or websites do not constitute endorsement. The Institute is not responsible for the content, availability or accuracy of external websites. 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 counterfactual population was calculated by applying annual population growth of 1% to South Africa’s 1994 population of 41.9 million for 30 years: 41.9 million × (1.01)³⁰ = 56.5 million. Compared with the actual 2024 population of 63.0 million, this is 6.5 million fewer people, or 10.3% below the actual population: (63.0 − 56.5) ÷ 63.0 × 100 = 10.3%. 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. With GDP unchanged, GDP per person would have been approximately 11.6% higher. This is because the same level of GDP would have been shared across a population of approximately 56.47 million rather than 63.02 million. The calculation is 63,015,904 ÷ 56,474,870 = 1.1158, meaning GDP per capita 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.

Inclusive Society Institute (ISI) CEO Daryl Swanepoel participated in a T20 U.S. dialogue held in New York on 25 September 2026 during the United Nations General Assembly’s high-level week. The event, Engaging Diverse Voices in the G20 U.S. for Better Policymaking and Action in Uncertain Times, brought the T20 policy research network together with other G20 engagement groups. Its focus was on which ideas from the recent G20 presidencies of South Africa, Brazil, India and Indonesia should remain on the agenda, and how a wider range of voices can help keep the G20 an inclusive forum for practical cooperation. The dialogue formed part of the preparations for the T20 U.S. Summit in New York on 18-19 November. ISI’s participation continues its engagement with international discussions on more inclusive and effective global governance.

Inclusive Society Institute (ISI) CEO Daryl Swanepoel participated in From Consensus to Coalitions: The Think Tank Agenda for the G20 Handover on 22 September 2026. The discussion took place in New York during the United Nations General Assembly’s high-level week. The dialogue brought together think tanks engaged in the T20 process to consider which priorities under the United States’ G20 presidency should carry into the United Kingdom’s presidency. It also provided an opportunity to strengthen cooperation among researchers working across the G20, G7 and BRICS tracks ahead of the T20 Summit in November. ISI’s participation forms part of its continuing engagement with international policy discussions on effective multilateral cooperation and the role of the Global South in shaping it.

The Inclusive Society Institute (ISI) was a principal sponsor of the Symposium on Gender Inequality and Anti-Corruption, held in Cape Town from 12 to 14 August 2026. Hosted by ACCERUS at Stellenbosch University’s School of Public Leadership, the three-day symposium brought together policymakers, academics, civil society representatives and governance practitioners under the theme, Advancing Gender-Responsive Governance, Accountability and Institutional Reform. The programme examined the relationship between gender inequality, corruption and governance through nine panel discussions. Topics included the gendered effects of corruption; corruption in public and social services; gender-based violence; institutional accountability; whistle-blower protection; women’s participation in leadership; evidence-based policymaking; and partnerships between civil society, academia and the private sector. The symposium concluded with a call for stronger cross-sector collaboration and integrated institutional reform. The ISI was represented by Thabang Chiloane, Deputy Chairperson of the Institute’s Advisory Council, who emphasised the importance of effective institutions, public accountability and collaboration in confronting corruption and its unequal social consequences. The ISI’s support for the symposium forms part of its commitment to strengthening ethical governance and contributing to practical, evidence-based responses to corruption, inequality and institutional weakness. [Click here to read Mr Chiloane’s contribution.] Photographs courtesy of ACCERUS and Sanlam.

Read the full Occasional Paper by downloading the PDF below. PUBLICATION INFORMATION Title: From Redress to Empowerment Authors: Daryl Swanepoel Publication type: Occasional Paper Publication date: September 2026 PUBLISHED BY Inclusive Society Institute | NPO Registration: 235-515 5 High Cape House, 21 Ben Avenue, Vredehoek, Cape Town, 8001, South Africa PO Box 12609, Mill Street, Cape Town, 8010, South Africa Tel: +27 (0)21 201 1589 Email: admin@inclusivesociety.org.za | Website: www.inclusivesociety.org.za COPYRIGHT © 2026 Inclusive Society Institute. Unless otherwise expressly indicated, copyright in this publication is owned exclusively by the Inclusive Society Institute. All rights reserved. No part of this publication may be reproduced, stored, distributed or transmitted in any form or by any means without the Institute’s prior written permission, except as permitted by applicable law. Brief extracts may be quoted for criticism, review, research or educational purposes, provided that the authors, title and publisher are appropriately acknowledged. Permission requests should be directed to info@inclusivesociety.org.za. SUGGESTED CITATION Swanepoel, D. 2026. From Redress to Empowerment: An ISI Assessment of South Africa’s Proposed Preferential Procurement Regime and the Case for an Outcomes-Based Pathway to Economic Normalisation. Cape Town: Inclusive Society Institute. DISCLAIMER This publication has been prepared for research, discussion and public-information purposes. The views expressed are those of the authors and do not necessarily reflect the official position of the Inclusive Society Institute, its Board, staff, funders, partners or associated organisations. While reasonable care has been taken to ensure the accuracy of the information at the time of publication, the Institute and the authors make no warranty regarding its completeness, accuracy or continued relevance. This publication does not constitute professional advice. To the fullest extent permitted by law, the Institute and the authors accept no liability for any loss or damage arising from reliance on its contents. References to third-party organisations, products, services or websites do not constitute endorsement. The Institute is not responsible for the content, availability or accuracy of external websites. Executive summary Public discussion around South Africa’s Draft General Public Procurement Regulations, 2026 has become increasingly polarised. At one end are claims that white-owned businesses are to be barred from government contracts below R20 million. At the other is a tendency to treat criticism of the proposed regulations as opposition to transformation itself. Neither position is satisfactory. A close reading of the Public Procurement Act 28 of 2024 and the Draft General Public Procurement Regulations, 2026 shows that the claim that white South Africans are simply to be excluded from all state procurement below R20 million is incorrect. The proposed regime is considerably more complex. It provides for set-asides for a range of designated categories, some racial and some non-racial. These include black people and black women, but also women, people with disabilities, military veterans, small enterprises, co-operatives and, within the small-enterprise category, enterprises owned by youth. A white woman, a white person with a disability, a white youth who owns a qualifying small enterprise, or a white-owned small enterprise may therefore qualify under particular set-asides depending on the category selected. Nor does the 30% target for black people mean that exactly 30% of contracts below R20 million are racially reserved while the remaining 70% are automatically open. The 30% is a minimum target expressed as a percentage of an institution’s annual procurement budget for that identified category. Other categories carry different targets, categories may overlap, and the regulations permit institutions to identify up to five categories. Conversely, the 30% is a minimum rather than a ceiling. There is therefore no legally guaranteed “70% open pool”. The actual effect will depend on the procurement profile of each institution, the categories it selects and the tenders to which set-asides can practically be applied. In the interests of good governance, it is critical that these criteria around set-asides be transparently disclosed in procurement policies and annual procurement plans when the budget of a public institution is tabled annually, and that there is oversight, both by the executive authority and the Procurement Office/provincial treasuries in relation to these set-asides to ensure that these are executed in accordance with the plan and compliant with regulations. Correcting misinformation, however, should not shield the proposed system from scrutiny. The requirement that enterprises in several designated categories be 100% owned by persons belonging to the selected category is unusually rigid. In a black-ownership set-aside, for example, a 99% black-owned enterprise with a 1% white shareholder would fail the ownership requirement and its bid would have to be disqualified. The same logic applies to other relevant designated categories, such as persons without disabilities who own businesses jointly with persons who are disabled, or youth as defined to be less than 35 years and non-youth aged older than 35. This raises questions about proportionality, economic incentives, partnership, investment and the increasingly elaborate administrative classification of citizens and businesses. The Inclusive Society Institute’s assessment is therefore neither that redress has run its course nor that race should immediately disappear from economic policy. South Africa’s constitutional project expressly recognises the continuing legitimacy of measures designed to overcome disadvantage produced by unfair discrimination. The Constitutional Court has repeatedly affirmed this. But remedial measures are directed towards an outcome. They are not constitutionally valuable merely because they exist. The Court has cautioned that they are not ends in themselves and that their ultimate purpose is a more equal, fair, non-racial, non-sexist and socially inclusive society and economy. This paper proposes that South Africa begin moving towards an outcomes-based sunset framework for race- and gender-conscious economic redress. This is not an arbitrary date on which transformation ends. It is a system under which the intensity and form of remedial intervention change as measurable disadvantage changes. Strong redress would remain where substantial disadvantage persists. As measurable progress is achieved, policy would move progressively from exclusionary or protective measures towards preference, enterprise development, access to finance, skills transfer, supplier development and ultimately needs- and circumstance-based assistance. Race- and gender-based intervention would diminish not because a particular number of years had passed, but because the conditions that justified it had demonstrably changed. The central proposition is simple: South Africa still requires redress. But successful redress should progressively make the most intrusive forms of racial intervention less necessary. This is particularly important given the growing administrative burden of monitoring and evaluating increasingly precise identity classifications, which become more difficult to sustain the further South Africa moves from apartheid-era systems of formal racial classification. 1. Introduction: between denial and permanence South Africa’s debate about economic transformation frequently becomes trapped between two unsatisfactory propositions. The first is that more than three decades have passed since the establishment of democracy and that race-conscious redress has therefore exceeded its legitimate lifespan. The weakness in this proposition is obvious. Time elapsed is not an adequate measurement of disadvantage overcome. If the material consequences of past racial exclusion remain evident in ownership, access to capital, management, skills, opportunity or participation in particular sectors, the fact that thirty or forty years have elapsed does not by itself eliminate the constitutional or policy rationale for remedial measures. The second proposition is that because apartheid created profound racial inequality, race-conscious remedial measures may continue indefinitely in substantially their present form. That position is equally unsatisfactory. If an intervention exists to overcome disadvantage, there must ultimately be some means of assessing whether the disadvantage has diminished and whether the intervention should consequently change. The Constitution itself contains both sides of this equation. Section 1 identifies both the achievement of equality and non-racialism as founding values (Republic of South Africa, 1996:3). Section 9 recognises formal equality, but also expressly permits legislative and other measures designed to protect or advance persons or categories of persons disadvantaged by unfair discrimination in order to promote the achievement of equality (Republic of South Africa, 1996:5–6). These principles are complementary, rather than contradictory. South Africa is constitutionally committed both to redressing the racialised inequality inherited from its past and to building a society in which race ultimately matters less, rather than more. The difficulty is that public policy has never adequately defined the bridge between those two objectives. The controversy surrounding the Public Procurement Act 28 of 2024 and the Draft General Public Procurement Regulations, 2026 provides an opportunity to address that omission. It also demonstrates why accurate description matters. Public debate has increasingly characterised the proposed procurement regime as one in which white businesses are to be excluded from all state contracts below R20 million. That is not what the legislation and draft regulations say. Correcting that exaggeration should not, however, become a defence of every aspect of the proposed system. There are legitimate concerns about the rigidity of the proposed ownership requirements, the administrative burden of increasingly precise identity classification, the implications for partnerships and investment, and the relationship between transformation, competition and value for money. An evidence-based position must therefore be capable of doing two things at once: rebut misinformation and critically assess the policy that actually exists. 2. The constitutional starting point: redress is legitimate Any serious assessment must begin by rejecting the proposition that the Constitution requires government to be colour-blind in procurement. It does not. Section 217(1) requires state procurement to operate through a system that is “fair, equitable, transparent, competitive and cost-effective” (Republic of South Africa, 1996:112). But section 217(2) immediately confirms that this does not prevent organs of state from implementing procurement policies providing for categories of preference and for the protection or advancement of persons or categories of persons disadvantaged by unfair discrimination (Republic of South Africa, 1996:113). The constitutional framework therefore expressly accommodates preferential procurement. The Constitutional Court has similarly rejected a purely formal conception of equality. In Minister of Finance v Van Heerden, Moseneke J formulated the now-established three-part test for remedial measures. The measure must target persons or categories of persons disadvantaged by unfair discrimination; it must be designed to protect or advance them; and it must promote the achievement of equality (Minister of Finance v Van Heerden, 2004:23). Importantly, the Court did not require government to establish that its chosen remedial measure was the only possible or strictly necessary means of achieving the objective. It recognised that policy operates prospectively and that exact outcomes cannot always be predicted (Minister of Finance v Van Heerden, 2004:25–26). This makes an important point for the contemporary debate. An argument that preferential procurement is illegitimate merely because it treats historically disadvantaged categories differently is unlikely to survive serious constitutional scrutiny. But Van Heerden also supplies the limitation. Remedial measures are directed towards an “envisaged future outcome”. They must be reasonably capable of attaining that outcome. Measures that are arbitrary, capricious or amount to naked preference cannot satisfy the constitutional purpose (Minister of Finance v Van Heerden, 2004:25). The issue is consequently not whether government may pursue redress. It may. The issue is whether the measures chosen remain appropriately connected to their constitutional objective and whether their design and implementation continue to promote equality. 3. What the proposed procurement regime actually does The Public Procurement Act expressly requires procuring institutions to develop and implement preferential procurement policies (Republic of South Africa, 2024:26). Where prescribed thresholds and conditions are met, section 17 requires a procuring institution to set aside a bid for a designated category of persons (Republic of South Africa, 2024:28). The categories are important, because they immediately expose the weakness in describing the system simply as racial exclusion. Section 17(3) includes black people and black women, but it separately includes women, black people with disabilities, people with disabilities and military veterans. It also provides for small enterprises owned by various categories, including black people, black women, women, people with disabilities, black youth and youth. Small enterprises generally, co-operatives and geographically defined categories are also included (Republic of South Africa, 2024:28, 30). The distinction between “black youth” and “youth” is deliberate. Likewise, “black people with disabilities” and “people with disabilities” are separate categories, as are “black women” and “women”. The legislation therefore establishes a designated-category procurement system, not a system in which every set-aside is necessarily racial. This matters materially. A white South African woman may fall within the category “women”. A white South African person with a disability may fall within the category “people with disabilities”. A qualifying small enterprise owned by white South African youth may fall within the “small enterprises owned by youth” category. A small enterprise owned by white South Africans may fall within the general small-enterprise category. Race is an important component of the regime, but it is not the sole organising principle. 4. The R20 million claim: what is true and what is not The draft regulations provide that a procuring institution must identify up to five categories from those contemplated in section 17(3). In doing so, it must consider its strategic mandate, the relevant sector or supply market and the availability of potential suppliers in the selected category (National Treasury, 2026:57). For a set-aside to operate, the estimated value of the contract or specifically unbundled portion may not exceed R20 million, and there must be at least three potentially qualifying suppliers in the identified category (National Treasury, 2026:58). Where those threshold and supplier conditions are satisfied, the institution must set aside the bid for one or more of its identified categories (National Treasury, 2026:58). The R20 million figure therefore determines the upper value of a contract, or an unbundled portion of a contract specifically apportioned for set-asides, to which the set-aside mechanism may apply. It does not say that every contract worth R20 million or less must be reserved for black-owned enterprises. That distinction has been substantially blurred in parts of the public debate. NEASA, for example, has publicly described the proposals as requiring government to “set aside all tenders that are R20 million and below” for companies 100% owned by designated categories, and has presented the mechanism primarily as one that will completely disqualify white-male-owned businesses (NEASA, 2026). This interpretation has also found its way into mainstream commentary. Writing in Business Day, Lael Bethlehem stated that the regulations “set aside any procurement below R20m for suppliers that are 100% black-owned” and went on to suggest that every supplier of every service below that threshold would have to be 100% black-owned (Bethlehem, 2026). That is not what the draft regulations provide. The R20 million threshold applies to the set-aside mechanism, while the Act provides for multiple designated categories, including non-racial ones. An institution must select up to five such categories with reference to its mandate, the relevant supply market and supplier availability. The black-ownership category is therefore one possible category within the system, not a universal eligibility condition governing every procurement below R20 million. The same interpretation subsequently reached a wider readership through The Citizen. Reporting on Mavuso’s criticism of the regulations, Koteli repeated the proposition that “[a]ll tenders under R20m are set aside exclusively for 100% black-owned suppliers” (Koteli, 2026). The significance is that a contested interpretation of the regulations was thereby being presented to readers as a straightforward description of what the regulations propose. As the analysis above demonstrates, that formulation conflates one designated category with the set-aside regime as a whole and therefore materially overstates the extent of racial exclusion. Across these accounts, the same important qualifications in the actual regulations are lost. First, procuring institutions identify particular categories, not one universal racial category. Second, some of the legislated categories are non-racial. Third, the regulation expressly requires attention to the nature of the market and the availability of qualifying suppliers. Fourth, at least three potentially qualifying suppliers must exist before the set-aside condition is satisfied. Finally, where qualifying bids are not received, the institution must cancel and re-advertise, potentially using another identified category, prequalification, or ultimately no preferential procurement after the required reporting process (National Treasury, 2026:58). It is therefore inaccurate to state that a white-owned business is, merely because it is white-owned, prohibited from competing for every government contract below R20 million. It may be excluded from a particular set-aside whose ownership criterion it does not satisfy. That is a materially different proposition. This distinction does not mean that all media criticism of the proposals is misplaced. Some commentary has described the mechanism more carefully. Business Day, for example, reported Sakeliga’s concern that race would become a condition of entry for particular tenders and that the 100% ownership requirement could discourage interracial business partnerships (Khumalo, 2026). More recently, Ann Bernstein argued in the same newspaper that “certain tenders” up to R20 million may be set aside for designated categories, while questioning whether the resulting restrictions would reduce competition and increase procurement costs (Bernstein, 2026). Those are legitimate policy questions. They differ materially from the claim that white-owned businesses are simply barred from all state contracts below R20 million. Moreover, a reasonable premium might be a justifiable business development cost, but there should be bench marking between set aside unit costs vs open market unit costs. 5. The 30% question, and why there is no simple 30/70 split Annexure 2 of the regulations introduces minimum set-aside targets expressed as percentages of a procuring institution’s annual procurement budget. For “black people”, the minimum is 30%. For black women it is 15%; women 18%; people with disabilities 4%; military veterans 2%; small enterprises owned by youth 4%; small enterprises generally 30%; and various other categories carry their own targets (National Treasury, 2026:90). The regulations state that a procuring institution must set aside the minimum percentage of its annual procurement budget in accordance with Annexure 2 in respect of its identified categories (National Treasury, 2026:58). This requires careful interpretation. It is incorrect to say simply that “30% of all contracts below R20 million are reserved for black businesses”. The target is expressed against the annual procurement budget, not against the number of contracts below R20 million. It is equally incorrect to say that the remaining 70% of a department’s total procurement budget is automatically an unrestricted pool. There are several reasons. First, the 30% figure is a minimum, not a ceiling. Second, the department may identify up to five categories. Third, the categories overlap. A black woman with a disability who owns a small enterprise could potentially fall within multiple categories. The percentages therefore cannot simply be added arithmetically as though each represents a separate portion of the budget. Fourth, not all designated categories are racial. Fifth, which parts of a department’s procurement programme can practically be set aside depends upon its actual procurement profile and the existence of the required supplier base. The correct conclusion is therefore more nuanced. There is no guaranteed 70% open pool written into the regulations. At the same time, it is entirely possible that considerably more than 70% of a particular institution’s real procurement opportunities will remain accessible to white-owned firms, depending on the institution’s procurement mix and the categories chosen. A white-owned business might itself qualify under a women, disability, youth-owned small-enterprise, general small-enterprise or other non-racial set-aside. It may also compete outside set-asides, albeit within the broader preferential procurement framework. The public debate loses this complexity when it converts “R20 million” and “30%” into a claim of blanket racial exclusion. 6. The 100% rule: the more serious concern Correcting misinformation does not dispose of the substantive policy concern. Regulation 57 provides that businesses falling under section 17(3)(a) to (h) must be 100% owned by members of the relevant selected category. It further provides that bids failing the relevant ownership and eligibility requirements must be disqualified (National Treasury, 2026:58–59). The consequence can be stark. Where the selected category is black people, a 100% black-owned company qualifies. A 99% black-owned company with a 1% white shareholder does not. Where the category is women, a company that is 100% women-owned can qualify, but one containing an ownership interest held by a man would fail the relevant 100% category test. Where the category is a qualifying small enterprise owned by youth, all relevant ownership would have to satisfy the youth requirement. The question is not whether such distinctions are automatically unconstitutional. The Constitution permits targeted remedial action, and Van Heerden specifically cautions against imposing an unnecessarily strict necessity test on government’s choice of remedial means. The better question is whether 100% ownership is a rational and productive policy instrument. A black entrepreneur may need investment, technical knowledge, networks or experience from a partner who happens to be white. A 100% rule creates a potential incentive not to enter that partnership. The same principle can apply across other categories. A policy ostensibly intended to foster enterprise development may inadvertently discourage the pooling of capital, knowledge and experience. That becomes particularly significant because Van Heerden requires the measure to be reasonably capable of achieving its intended outcome and cautions against arbitrary, capricious or naked preference (Minister of Finance v Van Heerden, 2004:25). The issue deserving scrutiny is therefore not simply whether preference is permitted. It is whether the absolute ownership threshold advances empowerment better than a less rigid mechanism would. 7. Procurement has more than one constitutional purpose Transformation is not the only constitutional value governing procurement. Section 217(1) requires fairness, equity, transparency, competitiveness and cost-effectiveness (Republic of South Africa, 1996:112). Section 217(2) authorises preference and redress (Republic of South Africa, 1996:113). The Constitution requires the two to coexist. In AllPay, the Constitutional Court emphasised that the purpose of a tender is to obtain the best solution through a process that is fair, equitable, transparent, cost-effective and competitive (AllPay Consolidated Investment Holdings v CEO of SASSA, 2013:52). That does not mean preference must disappear whenever it narrows competition. If that were the test, section 217(2) would have little practical meaning. But neither can transformation make competitiveness and cost-effectiveness irrelevant. The draft regulations themselves recognise this tension. They define value for money by reference to economical acquisition, efficiency and effectiveness, while expressly including transformation imperatives among the outcomes against which effectiveness may be assessed (National Treasury, 2026:7–8). The proper policy task is consequently one of balance. A set-aside that creates sustainable new suppliers, develops capacity and broadens future competition may advance both transformation and long-term value for money. A set-aside that merely reduces the available supplier pool without building sustainable productive capability may do neither. That distinction is central to moving from redistributing contracts to building economic capability. 8. Afribusiness: another area in which the public debate requires care The 2022 Constitutional Court judgment in Minister of Finance v Afribusiness NPC is frequently invoked as though the Court held that racial prequalification in public procurement is inherently unconstitutional. That is not an accurate statement of the majority judgment. The majority’s central finding concerned the powers of the Minister under the then applicable Preferential Procurement Policy Framework Act. Madlanga J held that the Minister could not use regulations to appropriate a policy-making power that the legislation had vested in individual organs of state (Minister of Finance v Afribusiness NPC, 2022:40–47). Of particular relevance today, the Court expressly observed that the Minister could instead introduce legislation in Parliament so that the Act itself contained the desired preferential procurement policy, while adding the crucial qualification that the content of such legislation would still have to pass constitutional muster (Minister of Finance v Afribusiness NPC, 2022:46). That is substantially what has now occurred. The Public Procurement Act itself expressly provides for set-asides, prequalification and related preferential procurement mechanisms (Republic of South Africa, 2024:28, 30). This does not immunise the new system from constitutional challenge. It changes the nature of the challenge. The straightforward ultra vires objection that prevailed in Afribusiness cannot simply be transposed onto a new Act in which Parliament itself has expressly authorised the mechanisms concerned. Critics are entitled to challenge whether the new Act or its regulations comply substantively with sections 9 and 217. But it is misleading to claim that the Constitutional Court has already definitively ruled the new policy unconstitutional. It has not. 9. The administrative problem: when empowerment becomes classification There is nevertheless an uncomfortable feature of the proposed system that deserves more attention. The more precise the ownership gateway becomes, the more precise the state’s classification machinery must become. The draft regulations require prospective suppliers to provide identity information and ownership information, including information concerning directors, members, owners and beneficial owners. Procuring institutions must verify submitted information against available data sources and databases (National Treasury, 2026:12). That is understandable in any procurement system. Government must know who owns and controls its suppliers. But a 100% category rule changes the consequences of classification. When race is merely one element of a broader score, uncertainty at the margin affects points. When 100% racial ownership determines whether a business may compete at all for a particular opportunity, classification becomes a gateway to market participation. The draft regulations examined for this paper do not themselves establish a comprehensive new mechanism explaining how disputed racial identity is to be determined. They prescribe ownership information and verification, but the intensity of the 100% rule gives the underlying classification question greater significance. This is the sense in which the system risks becoming administratively Orwellian, not because the objective of redress is illegitimate, but because the state may progressively find itself constructing more elaborate systems for determining which citizen belongs in which category before deciding who may participate in particular economic opportunities. This places ever more onerous administrative burdens on procurement processes, the need for internal controls, the reporting by procurement entities and the auditing by the Auditor-General. That should make South Africans uncomfortable even while accepting that redress remains necessary. A constitutional democracy committed simultaneously to equality and non-racialism should be asking not only how to administer such classifications more effectively, but how successful transformation can progressively make them less necessary. 10. From contract allocation to empowerment There is a more constructive route. South Africa should not abandon redress before the conditions that justify it have been overcome. But it should increasingly distinguish between protected access to opportunity and the creation of lasting economic capability. The B-BBEE framework itself points in this direction. Significantly, this concern is not confined to critics of B-BBEE. Reporting on a February 2026 meeting between the Minister of Trade, Industry and Competition and the sector charter councils, NewsDay recorded Minister Parks Tau as arguing that the focus should increasingly move beyond compliance towards measurable outcomes, asking what had actually changed in ownership, management, skills, enterprise growth and industrial capability (Kersten, 2026). That is substantially the distinction this paper seeks to develop: transformation should ultimately be judged not merely by whether prescribed inputs have been satisfied, but by whether lasting economic capability has been created. The Generic Code does not conceptualise empowerment solely as ownership. It includes ownership, management control, skills development, enterprise and supplier development and socio-economic development (Department of Trade and Industry, 2013:10–11). Enterprise and supplier development is explicitly intended to assist and accelerate the growth and sustainability of black enterprises (Department of Trade and Industry, 2013:11). That broader conception of empowerment is important. An emerging entrepreneur who wins a protected government contract has received access to a market. That may be valuable redress. But sustainable empowerment requires more: capital, skills, technology, management capability, networks, productive assets, access to private as well as public markets, and an ability eventually to compete without protection. A transformation system should therefore ask whether a beneficiary remains dependent upon preferential procurement or whether preferential procurement has helped create an enterprise capable of competing independently. The state should guard against endless cycles in which the same entities repeatedly benefit from preferential procurement. There should therefore be limits on repeat access to set-asides once an enterprise has demonstrably developed the capability to compete independently. Moreover, success in employment creation should be demonstrated. Material or repeated failure to deliver on a set-aside, without reasonable justification, should result in debarment from accessing other set-asides until the underlying shortcomings are demonstrably remedied. The principle of broadening rather than concentrating the benefits of preferential procurement should also apply within each fiscal year. There should be a reasonable limit on the number of set-aside contracts that a single entity may receive during that period. The purpose of set-asides should be to broaden economic participation and develop a wider pool of sustainable enterprises, rather than repeatedly concentrating protected procurement opportunities among the same beneficiaries. National Treasury should therefore establish appropriate annual limits, taking account of contract value, sector and the availability of qualifying suppliers. The distinction can be expressed simply: Redress creates access. Empowerment creates capability, for example, experiential learning associated with location within local and global value chains and market access. Public policy needs both, but over time the balance should increasingly move towards capability. This could include substantially stronger development-finance mechanisms, working-capital guarantees, technical support, apprenticeship and skills programmes, supplier-development partnerships, technology transfer, access to export markets and incentives for genuine joint ventures. It should encourage productive interracial and intergenerational partnerships, rather than inadvertently penalising them. A transformation policy that makes a black entrepreneur less eligible for public work because that entrepreneur has brought an experienced white investor into the business may be achieving formal ownership purity at the expense of genuine empowerment. 11. The missing element: what does success look like? The deepest weakness in South Africa’s transformation debate is not that there are remedial measures. It is that the country has never adequately agreed on what successful completion of different stages of transformation looks like. The result is predictable. Critics ask: “It has been more than thirty years. When does this end?” Supporters respond: “Inequality remains. Redress is still necessary.” Both may be correct, but neither proposition supplies a policy mechanism for moving forward. The passage of thirty years cannot be the test. If material disadvantage remains, the calendar does not cure it. But historical injustice alone cannot tell policymakers whether a particular intervention should remain unchanged for another thirty years. The correct variable is effect. Has the measure reduced the disadvantage it was designed to address? If not, why not? If it has, by how much? Has the affected group developed meaningful productive capacity? Has ownership broadened? Has access to finance improved? Have management and professional participation changed? Are enterprises surviving and growing outside protected procurement? Are disparities narrowing? And at what point does the evidence justify moving to a less intrusive form of intervention? Without answers to those questions, transformation risks becoming a process without an agreed destination. 12. An outcomes-based sunset framework The Institute proposes consideration of an outcomes-based sunset framework for race-conscious economic redress. This should not be confused with an arbitrary sunset date. A provision stating that B-BBEE or preferential procurement ends in 2035, 2040 or 2050 would be intellectually weak. It would substitute chronology for evidence. Instead, the intensity and character of interventions should be linked to measurable outcomes. Alternatively, Parliament could establish a provisional sunset date, subject to renewal on clearly defined and evidence-based grounds. Such a date would operate as a statutory decision point rather than as an automatic termination of transformation policy. If the specified outcomes have not been achieved, the relevant measures could be renewed for a further defined period, with their scope and intensity determined by the evidence and, where appropriate, by sector-specific circumstances. This would preserve the outcomes-based character of the framework while providing greater policy certainty and potentially generating less opposition. The framework could operate through four broad phases. Phase 1: Intensive redress Where credible data show severe continuing exclusion, strong remedial mechanisms remain available. These could include targeted set-asides, enhanced preference, development finance and sector-specific interventions. The justification would be transparent: the relevant disparity remains sufficiently severe to warrant intensive intervention. Phase 2: Preference and capability building As measurable participation improves, the system should move away from absolute exclusion and towards preference combined with capability-building. Ownership thresholds could become less absolute. Greater weight could be placed on skills transfer, management participation, investment, enterprise development, employment creation and supplier development. Phase 3: Empowerment based increasingly on circumstances As racial disparities narrow materially, support should shift progressively towards indicators such as socioeconomic disadvantage, geography, access to capital, enterprise size, youth, disability and exclusion from opportunity. Race may remain relevant where evidence shows that race remains a predictor of disadvantage, but it should become less determinative as that relationship weakens. Phase 4: Normalised competition Once the measurable disadvantage that justified a particular race-based intervention has substantially been overcome, that intervention should fall away. Government may continue supporting small firms, poor communities, new entrants, youth, persons with disabilities or economically marginalised regions. But assistance would increasingly be based on present disadvantage rather than historical racial classification. This is not the abandonment of transformation. It is the completion of successful transformation. 13. How should the sunset be measured? The measurements should be established in advance rather than improvised when political pressure arises. They could include inter alia the following sector-specific indicators of improved empowerment of the respective identified historically disadvantaged classes: Transformative ownership of productive assets; Improved participation in senior and executive management; Improved access to development and commercial finance; Improved entry and survival rates of black-owned and other identified enterprises; Growth of enterprises beyond protected public procurement; More advanced professional and technical skills participation; Improved employment and apprenticeship creation; Greater participation in private-sector supply chains; Reduced income and wealth disparities; Less geographic concentration of disadvantage; and Evidence of reduction in continuing barriers to entry. No single indicator should determine the outcome. Nor should a national average automatically determine policy for every sector. Transformation may progress faster in one industry than another. A sector with substantial and sustainable black participation may warrant a different policy intensity from one in which historical exclusion remains entrenched. The model should therefore be evidence-based, sector-sensitive and periodically reviewed. Importantly, the Public Procurement Act already recognises the need for review. Section 68 requires the Minister, within 24 months after publication of the Act, to review its implementation and the need for amendments, consult stakeholders, and publish and submit a report to Parliament within 27 months (Republic of South Africa, 2024:72). That is valuable, but it is a review mechanism rather than an outcomes-based sunset mechanism. The proposed next step is to require government not merely to ask whether the law is functioning, but whether the underlying disadvantage is changing sufficiently to alter the intervention itself. 14. Why this approach strengthens rather than weakens transformation An outcomes-based approach answers two different anxieties in South African society. To historically disadvantaged South Africans, it says: Redress will not disappear simply because an arbitrary number of years has passed. Where measurable disadvantage remains, there remains a legitimate case for intervention. To citizens who fear that racial classification has become permanent, it says: Race-conscious measures are not intended to organise the economy forever. As their objective is achieved, their intensity will diminish. That distinction also improves certainty for businesses and investors. Economic actors can plan more rationally when the state provides not merely present rules but an intelligible policy trajectory. A business would know which transformation outcomes are being pursued, how progress will be measured, when rules will be reviewed and what improvement could trigger a transition to a different form of support. Transformation thereby becomes an increasingly progressive pathway, rather than an indefinite condition. 15. The Constitutional Court already points towards this destination The Constitutional Court’s jurisprudence strongly supports the idea that redress must remain connected to an ultimate constitutional outcome. In Barnard, Moseneke ACJ emphasised that substantive equality remains necessary, because past disadvantage continues. But he immediately added that remedial measures must operate within constitutional discipline, must not unduly invade dignity and are “not an end in themselves”. Their ultimate goal is a more equal, fair, non-racial, non-sexist and socially inclusive society (South African Police Service v Solidarity obo Barnard, 2014:16). The Court further observed that restitution measures, important though they are, cannot do all the work required to achieve social equity (South African Police Service v Solidarity obo Barnard, 2014:17). In a separate judgment, Van der Westhuizen J made an equally relevant observation: assessing whether equality is promoted must involve attention to the actual effect and impact of the measure, and the enquiry must remain alive to shifting circumstances and the changing distribution of privilege and under-privilege (South African Police Service v Solidarity obo Barnard, 2014:72–73). That is precisely the logic of an outcomes-based sunset mechanism. If changing circumstances matter in judging whether a remedial measure remains justifiable, public policy should measure those changing circumstances systematically rather than waiting for litigation. 16. An ISI assessment of the 2026 procurement proposals The Inclusive Society Institute’s assessment can therefore be summarised in four propositions. First, the claim that white businesses are being barred from all government contracts below R20 million is materially misleading. The legislation creates a designated-category set-aside system. Some categories are race-based; others are not. The R20 million figure is a threshold for the mechanism, not a blanket prohibition on white participation. The 30% black-people target is a minimum annual procurement-budget target for that category, not a rule that all sub-R20 million contracts are black-only. Second, the existence of preferential procurement and set-asides is not inherently unconstitutional. Sections 9(2) and 217(2) expressly recognise remedial and preferential measures. The constitutional argument must concern their design, effect and implementation, rather than the mere fact that preference exists. Third, parts of the proposed design deserve serious reconsideration. The 100% ownership rule is particularly rigid. Government should be required to demonstrate why absolute category ownership produces better empowerment outcomes than a model permitting meaningful majority ownership, partnership, investment and skills transfer. The administrative implications of absolute identity-based eligibility also require scrutiny. Legislative clarity on defining and validating historically advantaged and disadvantaged classes should be urgently obtained. Fourth, South Africa needs to move the transformation debate over time from duration to outcomes. Thirty years is neither proof that redress is no longer required nor justification for its indefinite continuation unchanged. The proper question is what measurable disadvantage remains and whether the current intervention is reducing it. 17. Recommendations The Institute proposes that government and Parliament consider the following approach. The proposed procurement framework should retain legitimate preferential mechanisms where material disadvantage remains, but the 100% ownership requirement should be reviewed against evidence demonstrating whether such an absolute threshold is necessary to produce superior empowerment outcomes. National Treasury should publish a clear rationale for each set-aside target and ownership threshold, including the economic and supplier-development outcomes expected from the measure. Transformation policy should increasingly reward measurable capability-building: enterprise growth, skills, jobs, capital formation, supplier development, technology transfer, management participation and sustainable access to private markets. Government should explicitly encourage genuine partnerships between established and emerging entrepreneurs rather than create incentives that may discourage mixed ownership or external investment. The procurement system should establish transparent indicators against which the effect of race-conscious interventions is periodically assessed. Finally, Parliament should develop an outcomes-based sunset framework under which the intensity of race-conscious measures diminishes as independently measured disadvantage diminishes. This could operate either through continuous outcomes-based adjustment or through a provisional sunset date subject to renewal on clearly defined, evidence-based grounds. Neither approach should predetermine when transformation ends merely through the passage of time. Both should establish how South Africa will determine whether a particular form of redress remains necessary, should be modified, or has succeeded. 18. Conclusion: successful redress should make itself less necessary South Africa should resist two temptations. The first is to allow legitimate frustration with transformation policy to become denial of the continuing consequences of historical exclusion. The second is to allow legitimate commitment to redress to turn temporary remedial categories into permanent features of citizenship and economic participation. The current procurement controversy demonstrates both dangers. Claims that whites are simply being expelled from all state procurement below R20 million do not survive careful reading of the legislation and regulations. Such misinformation inflames racial anxiety without improving the policy debate. But the exaggeration of critics must not become an excuse for dismissing legitimate concerns. A system that insists upon 100% category ownership, disqualifies businesses that fall marginally outside that requirement and relies increasingly on precise identity classification deserves careful constitutional, administrative and economic scrutiny. South Africa still needs transformation. But transformation should have a destination. That destination cannot sensibly be determined by saying that thirty years, forty years or fifty years is enough. Time does not measure equality. Neither can the destination remain undefined. A democratic state should be able to explain what disadvantage an intervention seeks to overcome, how progress will be measured, whether the intervention is working, and what evidence will justify changing or ending it. The objective should be a deliberate progression: from redress, to empowerment, to capability, to normalised opportunity. The most successful transformation policy will not be the one that perfects the permanent administration of racial categories. It will be the one that progressively creates the conditions in which those categories are needed less. That is not a retreat from redress. It is what successful redress should ultimately achieve. References AllPay Consolidated Investment Holdings (Pty) Ltd and Others v Chief Executive Officer of the South African Social Security Agency and Others [2013] ZACC 42. Department of Trade and Industry. 2013. Amended Codes of Good Practice under the Broad-Based Black Economic Empowerment Act, Government Gazette No. 36928, 11 October 2013. Pretoria: Government Printer. Minister of Finance and Another v Van Heerden [2004] ZACC 3. Minister of Finance v Afribusiness NPC [2022] ZACC 4. National Employers’ Association of South Africa (NEASA). 2026. ‘Exclusionary race-based tendering rejected: Public Procurement Regulations 2026: NEASA submits comments’, 16 July 2026. Online publication. National Treasury. 2026. Draft General Public Procurement Regulations, 2026. Pretoria: National Treasury. Republic of South Africa. 1996. Constitution of the Republic of South Africa, 1996, as amended. Pretoria: Government Printer. Republic of South Africa. 2024. Public Procurement Act 28 of 2024. Government Gazette No. 50967, 23 July 2024. Cape Town: Government Printer. South African Police Service v Solidarity obo Barnard [2014] ZACC 23. Bernstein, A. 2026. ‘Procurement reforms risk making the state less effective’. Business Day, 16 July 2026. Available at: https://www.businessday.co.za/opinion/2026-07-16-ann-bernstein-procurement-reforms-risk-making-the-state-less-effective/ Bethlehem, L. 2026. ‘Procurement overhaul could sideline many qualified suppliers’. Business Day, 7 May 2026. Available at: https://www.businessday.co.za/opinion/columnists/2026-05-07-lael-bethlehem-procurement-overhaul-could-sideline-many-qualified-suppliers/ Khumalo, K. 2026. ‘Public procurement rules polarise business groups’. Business Day, 24 April 2026. Available at: https://www.businessday.co.za/news/2026-04-24-public-procurement-rules-polarise-business-lobby-groups-along-racial-lines/ Kersten, K. 2026. ‘R100 billion spent on BEE skills development and nothing to show for it’. NewsDay, 28 February 2026. Koteli, T.C. 2026. ‘BLSA CEO questions whether changes to BEE will grow South Africa’. The Citizen, 12 May 2026.

Dr Pedzisai Ndagurwa, Senior Lecturer in Demography and Population Studies at the University of the Witwatersrand, represented the Inclusive Society Institute (ISI) at the Africa Youth Economic Forum (AYEF) 2026, held at the Pan-African Parliament in Midrand on 10–11 September 2026. Convened under the theme “Unlocking Africa’s Youth Dividend: Innovation, Inclusion, Resilience and Economic Transformation”, the Forum brought together young Africans, policymakers, parliamentarians, development institutions, academics, investors, civil society and private sector representatives to explore the role of young people in Africa’s economic transformation. Drawing on ISI’s recently completed demographic research, Dr Ndagurwa delivered a plenary presentation examining whether Africa’s youthful population constitutes a demographic dividend. He explored the implications of demographic trends for youth participation, economic inclusion and the continent’s development prospects. He also participated as a panellist in Plenary I, “Youth at the Table: Shaping Africa’s Economic Governance Architecture”. Dr Ndagurwa’s participation brought an evidence-based demographic perspective to the discussions, contributing to the broader dialogue on how Africa can translate its youthful population into meaningful economic opportunities and lasting development gains.

On 9 September 2026, the Stimson Center and the Academic Council on the United Nations System (ACUNS) co-hosted a fireside chat with María Fernanda Espinosa, a candidate to become the tenth Secretary-General of the United Nations from 1 January 2027. Espinosa served as President of the 73rd session of the United Nations General Assembly and previously held office as Ecuador’s Minister of Foreign Affairs and Minister of Defence. Her extensive experience in diplomacy and multilateral affairs provided the backdrop to a discussion about the future direction of the United Nations. The conversation focused on Espinosa’s vision for the organisation, the future of multilateral cooperation and the qualities of global leadership required at a time of growing geopolitical division and pressure on international institutions. The Inclusive Society Institute (ISI) was represented by its Chief Executive Officer, Daryl Swanepoel. During the discussion, Swanepoel questioned Espinosa on how she envisaged the role of the United Nations in upholding international law. Espinosa acknowledged that the United Nations had an important role to play in defending and reinforcing the international legal order. She emphasised that this was necessary to build trust and strengthen its legitimacy. The exchange was particularly relevant as the United Nations confronts growing questions about its effectiveness, credibility and ability to respond consistently to violations of international law. The discussion provided an opportunity to consider not only the priorities of a prospective Secretary-General, but also the reforms needed to ensure that the multilateral system remains representative, trusted and capable of effective action. Opening remarks were delivered by Dr Sandra Tombe, Executive Director of ACUNS. The discussion was moderated by Dr Richard Ponzio, Director and Senior Fellow in the Global Governance, Justice and Security Program at the Stimson Center.

The Inclusive Society Institute (ISI) participated in the Safety 2026 World Conference, held in Cape Town from 1 to 4 September 2026. The conference brought together policymakers, researchers, practitioners, civil society organisations and international partners to examine the complex and interconnected challenges affecting safety and wellbeing. Its programme focused on moving beyond diagnosis towards practical action, stronger collaboration and improved accountability. In preparation for the conference, eight Thematic Working Groups were convened to consider key areas of safety: violence prevention, crime and social cohesion; safe work, transport and livelihoods; safe communities and urban design; mental health, substance use and wellbeing; child, youth and school safety; climate, environmental and disaster safety; digital safety and emerging harms; and injury care, rehabilitation and data systems. The ISI played an important technical role in this process. It was responsible for compiling the deliberations and submissions arising from the eight working groups into a coherent series of technical reports. These reports identified the principal challenges, distilled the strategic conclusions emerging from the consultations and translated the discussions into proposed national actions and key messages. The reports provided an evidence-informed foundation for the development of the Safety 2026 National Action Consensus Plan. In undertaking this work, the Institute sought to ensure that the breadth of contributions received through the working-group process was accurately and systematically reflected in the conference’s technical documentation. The ISI also participated during the conference by hosting a networking stand in the Global Village. The stand provided an opportunity to engage delegates, exchange ideas and contribute to the wider discussions taking place alongside the formal conference programme. The Institute’s involvement in Safety 2026 reflects its commitment to supporting inclusive policy development, strengthening cooperation across sectors and helping translate public dialogue into practical programmes of action. Image source: World Safety Conference 2026 Image source: CTICC / World Safety Conference 2026

Read the full Occasional Paper by downloading the PDF below. PUBLICATION INFORMATION Title: South Africa’s Population Dynamics, Economic Growth, and Employment Prospects, 2030–2045 Authors: Shamsunisaa Miles-Timotheus and Pedzisai Ndagurwa, PhD Publication type: Occasional Paper Publication date: September 2026 PUBLISHED BY Inclusive Society Institute | NPO Registration: 235-515 5 High Cape House, 21 Ben Avenue, Vredehoek, Cape Town, 8001, South Africa PO Box 12609, Mill Street, Cape Town, 8010, South Africa Tel: +27 (0)21 201 1589 | Email: info@inclusivesociety.org.za | Website: www.inclusivesociety.org.za COPYRIGHT © 2026 Inclusive Society Institute. Unless otherwise expressly indicated, copyright in this publication is owned exclusively by the Inclusive Society Institute. All rights reserved. No part of this publication may be reproduced, stored, distributed or transmitted in any form or by any means without the Institute’s prior written permission, except as permitted by applicable law. Brief extracts may be quoted for criticism, review, research or educational purposes, provided that the authors, title and publisher are appropriately acknowledged. Permission requests should be directed to admin@inclusivesociety.org.za. SUGGESTED CITATION Miles-Timotheus, S. & Ndagurwa, P. (2026). South Africa’s Population Dynamics, Economic Growth, and Employment Prospects, 2030–2045. Inclusive Society Institute. USE OF ARTIFICIAL INTELLIGENCE Artificial intelligence (AI) tools may have been used to assist with the drafting, editing, synthesis and presentation of this paper. All substantive content, interpretations and conclusions remain subject to human review and editorial oversight, and responsibility for the final publication rests with the authors and publisher. DISCLAIMER This publication has been prepared for research, discussion and public-information purposes. The views expressed are those of the authors and do not necessarily reflect the official position of the Inclusive Society Institute, its Board, staff, funders, partners or associated organisations. While reasonable care has been taken to ensure the accuracy of the information at the time of publication, the Institute and the authors make no warranty regarding its completeness, accuracy or continued relevance. This publication does not constitute professional advice. To the fullest extent permitted by law, the Institute and the authors accept no liability for any loss or damage arising from reliance on its contents. References to third-party organisations, products, services or websites do not constitute endorsement. The Institute is not responsible for the content, availability or accuracy of external websites. SOUTH AFRICA’S POPULATION DYNAMICS, ECONOMIC GROWTH, AND EMPLOYMENT PROSPECTS 2030–2045 by Shamsunisaa Miles-Timotheus and Pedzisai Ndagurwa (Ph.D.) Abstract This paper conducts a series of population projections for South Africa and use these projected populations as a base to estimate potential labour market outcomes, namely, unemployment rates, number of employed and the number of the unemployed. Population projections were based on the cohort component method (CCM), making use of a set of fertility, mortality and migration assumptions. The projections of labour market outcomes are conducted based on a set of gross domestic product (GDP) growth assumptions and Okun’s Law coefficients. The Okun coefficients, which measure the unemployment rate elasticity of GDP growth, included an empirically derived coefficient and three imposed coefficients. The results show that South Africa’s population and working-age population will continue to grow across all fertility and mortality scenarios, thereby substantially expanding the labour force. Employment growth over the projection period will likely be insufficient to absorb new entrants to the labour market. Under the empirical Okun scenarios, unemployment remains persistently high, with only marginal differences observed between low (1%), moderate (2.5%), and high (4%) economic growth trajectories. Improved employment responsiveness leads to gradual declines in unemployment rates; however, even under the most favourable conditions, unemployment remains above 30% by 2045. Importantly, the number of unemployed individuals increases across all scenarios, reflecting the scale of labour-supply pressures. The findings highlight that a weak relationship between economic growth and employment in South Africa will result in persistent high unemployment rates and point to the need for addressing the underlying structural nature of unemployment. While demographic change influences the scale of the challenge, it does not resolve the imbalance between labour supply and demand. The study concludes that addressing unemployment will require not only sustained economic growth but also structural reforms to enhance labour absorption. Keywords: South Africa, Population projections, Employment projections, Unemployment, Economic growth, Okun’s Law, Cohort-component method, Working-age population, Labour absorption, Demographic dividend 1. Introduction South Africa’s development path is influenced by both demographic change and economic performance. As a middle-income country facing high unemployment, understanding how these forces interact has become increasingly important for long-term planning. On the one hand, the country has experienced a sustained decline in fertility over recent decades, reflecting increased urbanisation, expanded access to education, and greater use of modern contraception. On the other hand, population momentum continues to drive growth in the absolute size of the population, particularly within the working‑age population. At the same time, South Africa’s economy has recorded persistently low growth rates since the early 2010s, limiting its capacity to generate employment. The coexistence of a growing labour supply and weak demand for unskilled and semi-skilled labour has resulted in one of the highest unemployment rates globally. Most analyses of South Africa’s future labour‑market prospects examine either demographic change or economic growth in isolation, rather than integrating the two, as seen in OECD, (2025), van Aardt et al. (2026) and Statistics South Africa (2023). Population projections are typically used to anticipate future demand for services, infrastructure, and social protection, while employment projections often rely on macroeconomic assumptions that treat population trends as fixed or implicit (Buettner, 2022). This separation obscures the fundamental interaction between population dynamics and labour‑market outcomes. Population growth and age structure shape the supply of labour, while economic growth determines the economy’s ability to absorb that labour into productive employment. From a theoretical perspective, this interaction is central to the concept of the demographic dividend, which emphasises that favourable age structures yield economic gains under the right conditions (Bloom et al., 2003). This paper seeks to bridge this analytical gap by integrating cohort‑component population projections with employment projections based on a dynamic version of Okun’s Law and a constrained imposed coefficient. By jointly considering demographic and economic scenarios, the paper provides a more comprehensive assessment of South Africa’s employment prospects over the medium to long-term. Specifically, the paper addresses the following questions: How will South Africa’s population and working‑age population evolve between 2025 and 2045 under alternative fertility assumptions? What will be the employment and unemployment rates for the given GDP growth scenarios? The paper makes three main contributions. First, it provides transparent population projections based on explicit fertility assumptions, highlighting the uncertainty in South Africa’s demographic future. Second, it applies a dynamic Okun’s Law framework to project employment outcomes under alternative growth paths. Third, it combines these elements to generate a scenario matrix that links demographic and economic trajectories, offering policy‑relevant insights for long‑term planning. 2. Demographic and economic context South Africa is situated in the later stages of the demographic transition, characterised by low fertility and mortality alongside continued population growth driven by demographic momentum. Total fertility has fallen substantially from levels above five children per woman in the mid‑twentieth century to around replacement level in recent years. Despite this decline, population growth has not halted. This is because the large cohorts born during earlier periods of higher fertility are now entering or already in the working-age years, creating both opportunities for economic growth and challenges in employment absorption. The working‑age population (15-64 years) is particularly important for economic development, as it represents the potential labour supply. In theory, an increasing share of the working‑age population can generate a demographic dividend in a context with sufficient job creation, skills development, and supportive institutions. In practice, South Africa has struggled to turn this potential into meaningful economic gains. Structural constraints, skills mismatches, and slow economic growth have limited employment creation, resulting in widespread unemployment and underemployment. From an economic perspective, South Africa’s growth performance since the global financial crisis of 2009 has been subdued. Average GDP growth has remained well below the levels required to meaningfully reduce unemployment, averaging 1.3% annually between 2009 and 2025 (World Bank, 2026). While short‑term cyclical factors have played a role, structural issues, including energy constraints, weak investment, and institutional challenges, have constrained growth. Consequently, employment growth has lagged labour‑force growth, particularly among young people. The literature on employment dynamics often draws on Okun’s Law, which posits a negative relationship between economic growth and unemployment. While the strength of this relationship varies across countries and over time, it provides a useful framework for linking macroeconomic performance to labour‑market outcomes. In the South African context, studies have found that the relationship between GDP growth and unemployment is inconsistent (Chiranga et al., 2025). This is consistent with evidence across African countries, where the relationship between growth and unemployment is often weak or absent due to structural or labour market factors (Ibourk & Elayaoui, 2024). Nonetheless, Okun‑type relationships remain valuable for scenario analysis and long‑term projections. 3. Methodology I: Population projections The gold standard method for projecting populations into the future is the cohort-component method (Ernst et al., 2023; Smith et al., 2013). The cohort-component method (CCM) is a well-established formal demographic technique for estimating future population sizes, taking into consideration empirically derived assumptions about fertility, mortality and migration (Preston et al., 2001). The procedure for CCM involves three main steps. First, starting with a current snapshot of the population, broken down by age and sex, we project to the next five years, by forward-surviving each age group by sex, to obtain the number of each cohort that will be alive by the fifth year. Second, we estimate the number of children who will be born alive to women aged 15-49 years over the next five years and add them to the population. Finally, we estimate the net migration for the population by subtracting the total number of people who move out of South Africa and adding those who will move into the country. The base population for the projections is the 2025 mid‑year population estimates for South Africa, disaggregated by five‑year age groups and sex. The projections extend to 2045, with results reported for the years 2030, 2035, 2040, and 2045. 3.1 Fertility assumptions Three alternative fertility scenarios were specified to reflect uncertainty about future fertility trends, namely low-fertility, medium, and high-fertility. The low‑fertility scenario assumes a continued downward trend in fertility, with the total fertility rate (TFR) declining to approximately 1.0 by 2045. The medium‑fertility scenario assumes a more moderate decline, with TFR reaching approximately 1.8 in 2045, representing a realistic continuation of recent trends. The high‑fertility scenario assumes that the TFR remains constant at around 2.26, a situation known in demographic literature as a stalled fertility trend. Fertility declines are projected based on the current TFR of 2.26. To project future fertility, the current age-specific fertility rates (ASFRs) are scaled down until they are consistent with a target TFR while maintaining the age distribution of fertility. The sex ratio at birth is assumed to be 105 males for every 100 female births. 3.2 Mortality The standard life table approach was used to derive the mortality experiences of the population of South Africa. The population data for the life table were obtained from the 2022 census, and the counts of deaths were obtained from the latest death registration data, which includes all 2022 deaths, including late registrations that were captured in 2023. It is noteworthy that the 2022 census had the highest undercount rates ever recorded in South Africa post-1994, and quality concerns were acknowledged by Statistics South Africa on some of its data, such as fertility. However, the census remains the only data source for national population data. Furthermore, the post-enumeration survey (PES) conducted shortly after each national census has been found to be effective in generating adjustment factors for calibrating final census counts (Gumbo, 2016). Three mortality scenarios were assumed for the projections. The first scenario was the current mortality level based on real data. This was considered a high-mortality scenario, based on 2022 deaths, a period affected by the COVID-19 pandemic. The second scenario assumed a medium mortality level, with improvements in mortality to a magnitude of 10% reduction in the number of deaths at each age from the current level. The third scenario assumed a low mortality level, assuming 20% reduction in the number of deaths at each age from the current level. 3.3 Migration Migration is an important component of the population dynamics of South Africa, as it is one of the major destinations on the African continent for international migrants. Over the last intercensal period, 2011-2022, South Africa had an annual average net migration rate (NMR) of 2.9 per 1,000, that is, a net gain (arrivals minus departures) of roughly three persons for every 1,000 people in the country. Net migration was assumed to be constant over the projection period at approximately 56,000 persons per year, reflecting the estimated net migration level observed in the 2022 census. Most migrants entering South Africa are concentrated in the 20-39 age group, and this age distribution is assumed to remain constant throughout the projection period. In the projection process, net migration is incorporated after the population has been aged forward using survival method and after births have been accounted for. 4. Methodology II: Employment projections using Okun’s Law Employment and unemployment projections were conducted using Okun’s Law coefficient, which relates changes in unemployment to changes in gross domestic product (GDP), allowing for lagged effects. It is traced to Okun (1962) who observed an inverse association between unemployment and GDP over short-term periods. In his seminal work, Okun (1962) found that a three-percentage increase in GDP was inversely associated with a one-percentage point decrease in unemployment rate. Some studies conducted after Okun’s seminal work have also confirmed the inverse relationship between GDP shifts and unemployment (Prachowny, 1993; Boďa, & Považanová, 2025). In Other studies, such as by Blackley (1991), this relationship was found to be closer to two-percentage points increase in GDP being associated with one-percentage point decrease in unemployment. Applications of the dynamic version of Okun’s Law specify an empirical GDP-employment relationship that allows for time lags and past trends, allowing for the quantification of the relationship in a temporal continuum (Aguiar‑Conraria, Martins & Soares, 2020). In this study, the dynamic Okun’s coefficient was estimated using an Autoregressive Distributed Lag (ARDL) model. The dynamic Okun is an improvement on the static version which assumes only immediate employment responses to GDP shifts. To obtain the long‑run dynamic Okun coefficient, the sum of short‑run effects is divided by a persistence factor, calculated as one minus the coefficient on lagged unemployment, which accounts for the dependence of unemployment on its past values. The resulting measure represents the long‑run responsiveness of unemployment to GDP shifts, which captures a more structurally accurate understanding of the relationship between economic growth (or decrease, stagnation) and labour market outcomes over time. In this study, the dynamic Okun coefficient was estimated using GDP and employment data from the 2009-2025 period. It is noteworthy that the empirically derived Okun coefficient for South Africa for the period 2009 to 2025, including the COVID-19 pandemic period, contradicted theoretical Okun assumptions, producing a positive coefficient of 0.0193. To mitigate the impact of the COVID-19 pandemic on the GDP-unemployment relationship, the empirical Okun coefficient was estimated using data for the 2009-2019 period, yielding a coefficient of -0.0841. This coefficient, however, represents a weak relationship between economic growth and unemployment reduction in South Africa, a situation observed in most low- to medium-income economies (COVID-19). Some of the reasons cited for the weak Okun coefficient in economies like South Africa’s are that unemployment is driven by structural factors and that GDP growth has been capital-intensive rather than labour-intensive (Habiyaremye et al., 2022; Moloto et al., 2025). Furthermore, GDP growth can stimulate a return to the job market by previously discouraged workers, adding to the additions from cohort shifts, which subdues changes in unemployment rates during times of economic growth (Dinkelman, & Pirouz, 2002; Ngundu & Ngalawa; 2023; Tchereni, 2021). To mitigate the weaknesses of an empirical dynamic Okun coefficient for South Africa and to test prospects of unemployment rates under different GDP-employment regimes, we also used three Okun coefficients (-0.02, -0.1, and -0.2) to capture diverse conditions. Values around -0.02 capture scenarios of minimal employment response, -0.1 represents a typical weak response observed in emerging markets, and -0.2 reflects a stronger, but still plausible, labour market adjustment consistent with empirical evidence (Sovbetov, 2025). Three GDP growth scenarios were specified: a low‑growth scenario of 1% per annum, reflecting prolonged economic stagnation; a moderate‑growth scenario of 2.5%, consistent with partial structural reform and recovery; and a high‑growth scenario of 4%, reflecting sustained reform and improved investment conditions. Employment trajectories were projected under each growth assumption, combined with population projections and a constant labour force participation rate to derive unemployment outcomes. The baseline for the labour force participation rate was derived from the 2025 Quarterly Labour Force Survey (QLFS) as an annual average, which was 59.5%. The overall estimation procedure proceeded as follows: population projections were conducted by first deriving age‑sex population cohorts for each target year (2030, 2035, 2040, and 2045) using the cohort component method, incorporating survival ratios, age‑specific fertility rates, and age‑specific net migration, using 2025 as the base year. From these projections, the working‑age population (15–64) is aggregated for each period and converted to the labour force by applying a fixed labour force participation rate of 59.5%, the average for the base year 2025. Changes in the unemployment rate are then modelled using a constrained Okun relationship, where GDP growth scenarios of low (1%), medium (2.5%) and high (4%) were translated into marginal adjustments in the unemployment rate using one empirically derived (0.0193) and three imposed (-0.02, -0.1, and -0.2) Okun coefficients. The resulting unemployment rates are applied to the projected labour force to derive the number of unemployed, with employment obtained as a residual. 5. Results I: Population projections Under all mortality and fertility scenarios, South Africa’s total population is projected to continue growing between 2025 and 2045, though at different magnitudes. Projections under low-fertility scenarios produced the slowest population growth and a gradual stabilisation of the working‑age population toward the end of the projection period. The medium‑fertility scenario yields moderate growth, while the high‑fertility scenario results in a substantially larger population and faster expansion of the working‑age group. Age‑structure changes differ markedly across scenarios. Lower fertility accelerates population ageing and reduces youth dependency, while higher fertility sustains a younger age structure but increases pressure on education and labour markets. These dynamics have direct implications for employment prospects when combined with economic growth trajectories. 5.1 Based on high mortality, medium fertility and constant migration trends Based on high (current) mortality, medium fertility, and constant migration trends, South Africa’s population is projected to grow steadily from 63.1 million in 2025 to 73.6 million in 2045. The growth trajectory reflects ongoing demographic momentum. This scenario represents the most plausible pathway, assuming no major shifts in fertility, mortality and migration patterns. Table 1. Projected population under high mortality and medium fertility 2025 2030 2035 2040 2045 Total Pop 63 100 945 64 999 745 68 282 203 71 170 029 73 627 514 The age-sex structure of South Africa is projected to be dominated by adults in the 25-39 and 50-59-year age groups. Figure 1 below compares the 2025 age-sex structure with the projected one for 2045. There will be just as many 0-9-year-olds as 50-59-year-olds in 2045 if mortality remains constant and fertility decline continues at the current trend. Figure 1. Current mortality, medium fertility and constant migration 5.2 Based on high mortality, high fertility and constant migration trends Assuming fertility remains constant at current levels, population growth is more pronounced, reaching approximately 77 million by 2045. Compared to the baseline year, the higher population size reflects the cumulative effect of sustained fertility, which reinforces the expansion of younger cohorts and contributes to a larger overall population over time. Table 2. Projected population size under a high mortality and high fertility scenario 2025 2030 2035 2040 2045 Total Pop 63 100 945 65 421 219 69 379 283 73 252 528 77 026 721 With high mortality and fertility remaining high (constant at TFR = 2.26), the age distribution of the population in South Africa will shift upward, with an increasing proportion of the population aged 45 and older. The proportion below 20 years will decrease, but not to the same extent as would occur when fertility decreases (as is the case in Figure 1). Figure 2 below compares the age-sex structures for 2025 and 2045 under high mortality and high fertility. Figure 2. Age-sex structure between 2025 and 2045 in the event of high mortality and high fertility 5.3 Based on high mortality, low fertility and constant migration trends In a low-fertility scenario, in which the total fertility rate declines to 1, population growth slows considerably, reaching 67.9 million by 2045. While the population continues to grow in the short- to medium-term due to demographic momentum, the long-term trajectory indicates gradual stabilisation, with significantly smaller cohort sizes emerging over time. Table 3. Population projections under a high mortality and low fertility scenario 2025 2030 2035 2040 2045 Total Pop 63 100 945 64 161 084 66 259 684 67 521 285 67 882 220 Under a high mortality and low fertility scenario, South Africa’s age structure will undergo a significant transition by 2045. The age pyramid will have a narrow base that broadens in the youth and adult age groups, as shown in Figure 3 below. Figure 3. Prospective age-sex structure shifts under high mortality, low fertility 5.4 Based on medium mortality, medium fertility and constant migration trends Under medium mortality assumptions and current fertility trends, the population is projected to increase to 74.6 million by 2045. Improvements in mortality contribute to population growth, although the overall trajectory remains similar to the baseline scenario. Table 4. Population projections under the medium mortality and medium fertility scenario 2025 2030 2035 2040 2045 Total Pop 63 100 945 65 263 570 68 791 966 71 909 082 74 583 188 Assuming continuation of current fertility trends (medium fertility scenario) and a 10% decline in mortality (medium mortality scenario), South Africa will undergo a moderate transition towards an ageing population structure. As shown in Figure 4 below, the proportion of cohorts under 15 years will be smaller than in 2025. As in other scenarios, the 45-64 age group will increase their share of the population. Figure 4. Medium mortality and medium fertility 5.5 Based on medium mortality, high fertility and constant migration trends With both improved survival rates and sustained fertility levels, population growth is further amplified, reaching approximately 78 million by 2045. Table 5. Population projections under the medium mortality and high fertility scenario 2025 2030 2035 2040 2045 Total Pop 63 100 945 65 686 207 69 893 986 74 002 959 78 003 740 A high fertility regime combined with medium mortality will cause notable shifts in the age structure [Figure 5 below], but to a lesser extent compared to a medium fertility regime. Figure 5. Age-sex structure under medium mortality and high fertility 5.6 Based on medium mortality, low fertility and constant migration trends When fertility declines to below replacement level. Under medium mortality conditions, population growth moderates, reaching 68.8 million by 2045. Although improved mortality supports population increases, the impact of reduced fertility ultimately slows overall growth. Table 6. Population projections under medium mortality and low fertility 2025 2030 2035 2040 2045 Total Pop 63 100 945 64 422 594 66 760 243 68 240 274 68 801 709 A combination of medium mortality and low fertility will yield a population in 2045 where children below 15 years of age will account for a small proportion of the population [Figure 6]. Figure 6. Age-sex structure under medium mortality and low fertility. 5.7 Based on low mortality, medium fertility and constant migration trends In a low mortality scenario, the population is projected to reach 75.6 million by 2045. The increase reflects the growing number of individuals surviving into older age groups, alongside sustained fertility trends. Table 7. Population projections under low mortality and medium fertility 2025 2030 2035 2040 2045 Total Pop 63 100 945 65 530 136 69 311 774 72 667 934 75 569 707 The base of South Africa’s age structure will narrow with medium fertility and low mortality, with defined gains in the 50-64 age range [Figure 7]. Figure 7. Age-sex structure under low mortality and medium fertility. 5.8 Based on low mortality, and high fertility This scenario produces the highest population growth, with the total population reaching approximately 79 million by 2045. The combination of low mortality and high fertility leads to substantial expansion across all age groups, reinforcing long-term population growth. Table 8. Population projections under the low mortality and high fertility scenario 2025 2030 2035 2040 2045 Total Pop 63 100 945 65 953 940 70 418 756 74 773 254 79 011 746 As shown in Figure 8 below, high fertility will slow the transition to an ageing population pyramid compared to medium fertility. Figure 8. Age-sex structure under low mortality and high fertility. 5.9 Based on low mortality, low fertility and constant migration trends Even under low mortality conditions, a decline in fertility to below-replacement level results in slower population growth, with the total population reaching 69.8 million by 2045. While increased longevity sustains growth in older age groups, reduced fertility limits expansion in younger cohorts. Table 9. Population projections under the low mortality and low fertility scenario 2025 2030 2035 2040 2045 Total Pop 63 100 945 64 686 840 67 270 802 68 978 945 69 751 806 As shown in Figure 9 below, low mortality and low fertility will result in an age structure with a very narrow base, just as in medium and high mortality scenarios involving low fertility. Figure 9. Age-sex structure under low mortality and low fertility. 5.10 Summary of population projections The population of South Africa is set to continue growing, as seen across all scenarios. The low mortality-high fertility scenario will produce the fastest population growth, while the high mortality-low fertility scenario will produce the slowest growth. The most likely to prevail is the medium mortality, medium fertility scenario. We anticipate that fertility rates will continue the downward 2008-2025 trend (medium fertility scenario), and mortality rates will fall to pre-COVID levels (medium mortality scenario). The likely population estimate for South Africa in 2045 is therefore 75 million. Figure 10. Summary of population prospects by projection scenarios The proportion of the population under 15 years will shrink, although the absolute number will increase. As the current (2025) cohorts in the age groups 0-19 and 25-39 years, to 15-44 and 40-59 years, respectively, they will account for the majority of the population, signifying a transition to a mature population age structure. This has important implications for services and policies such as those aligned to post-secondary education, health for an ageing population. 6. Results II: Employment and unemployment projections Unemployment projections were conducted based on observed demographic events from population data, and these were the scenarios of high mortality, medium fertility, and constant net migration. The sections below, therefore, present the unemployment projections by type of Okun coefficient and GDP growth rate. 6.1 Empirical Okun coefficient and 1% GDP Over the projection period, labour market outcomes deteriorate gradually despite increases in employment. The unemployment rate declines steadily from 32.4% in 2025 to 31.6% by 2045. Although employment increases steadily from 16.1 million in 2025 to 19.9 million in 2045, this growth is insufficient to keep pace with the expanding labour force. As a result, the number of unemployed individuals increases significantly, from 7.7 million to 9.2 million over the same period. Overall, the simultaneous rise in both employment and unemployment highlights a key structural challenge: while jobs will be created with modest GDP growth, they will not be generated at a rate fast enough to offset labour force growth. This leads to persistently high and increasing unemployment, reflecting weak labour-market absorption. Table 10. Unemployment projections based on a dynamic empirical Okun coefficient and 1% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employment Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.2% 16 913 153 8 035 634 2035 44 982 576 26 742 141 32.0% 18 186 787 8 555 355 2040 47 532 255 28 257 926 31.8% 19 278 815 8 979 111 2045 48 948 282 29 099 753 31.6% 19 916 143 9 183 610 6.2 Empirical Okun coefficient and 2.5% GDP growth Under a moderate economic growth scenario of 2.5%, labour market outcomes improve marginally compared to the low-growth baseline. While employment increases slightly faster, reaching 20 million by 2045, this remains insufficient to absorb the expanding labour force, which grows to 29.1 million. As a result, unemployment remains persistently high, with slight improvement from 32.4% in 2025 to 31.4% in 2045, only marginally lower than in the 1% growth scenario. The number of unemployed individuals increases to approximately 9.1 million. Overall, the results indicate that moderate economic growth will have a limited impact on the levels of unemployment, reinforcing the existing weak relationship between employment and economic growth in South Africa. Table 11. Unemployment projections based on a dynamic empirical Okun coefficient and 2.5% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.2% 16 921 760 8 027 027 2035 44 982 576 26 742 141 31.9% 18 205 239 8 536 902 2040 47 532 255 28 257 926 31.7% 19 308 062 8 949 864 2045 48 948 282 29 099 753 31.4% 19 956 301 9 143 452 6.3 Empirical Okun coefficient and 4% GDP growth Under this scenario, labour market outcomes deteriorate slightly over time, reflecting the economy’s limited capacity to absorb a growing labour force. The unemployment rate decreases gradually from 32.4% in 2025 to 31.3% by 2045. Employment increases steadily from 16.1 million to just over 20 million over the projection period, indicating continued job creation. However, the number of unemployed individuals still rises in absolute terms, from 7.7 million to slightly over 9.1 million. Overall, the results suggest that even 4% annual GDP growth in the context of the currently existing relationship between economic growth and employment will not be sufficient to reduce unemployment rates meaningfully. Table 12. Unemployment projections based on a dynamic empirical Okun coefficient and 4% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.1% 16 930 367 8 018 419 2035 44 982 576 26 742 141 31.9% 18 223 691 8 518 450 2040 47 532 255 28 257 926 31.6% 19 337 309 8 920 617 2045 48 948 282 29 099 753 31.3% 19 996 459 9 103 295 6.4 Low Okun coefficient and 1% GDP growth In this scenario, labour market outcomes show slight improvement over time, although overall conditions remain challenging. The unemployment rate declines marginally from 32.4% in 2025 to 32.1% by 2045, suggesting a modest strengthening in the economy’s ability to absorb labour. Employment increases steadily from 16.1 million to 19.7 million over the projection period. However, the number of unemployed individuals also rises, from 7.7 million to 9.4 million, due to continued labour force growth. Overall, the results suggest that while employment growth can be realised with a low Okun coefficient, there will be no meaningful impacts on the unemployment rate, and the size of the unemployed population will also grow. Table 13. Unemployment projections based on a low Okun coefficient and 1% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.4% 16 876 357 8 072 429 2035 44 982 576 26 742 141 32.3% 18 107 906 8 634 235 2040 47 532 255 28 257 926 32.2% 19 153 787 9 104 138 2045 48 948 282 29 099 753 32.1% 19 744 474 9 355 280 6.5 Low Okun coefficient and 2.5% GDP growth This scenario reflects a gradual improvement in labour market outcomes over time. The unemployment rate declines slightly from 32.4% in 2025 to 32.0% by 2045, suggesting a modest increase in the economy’s capacity to absorb labour. Employment grows steadily from 16.1million to 19.8 million, indicating continued job creation over the projection period. However, despite this positive trend, the number of unemployed individuals still increases in absolute terms from 7.7 million to just over 9.3 million, driven by ongoing labour force expansion. Overall, while the declining unemployment rate points to incremental improvements in labour market performance, the persistent rise in the number of unemployed highlights the scale of the challenge. Job creation, although improving, remains insufficient to fully counterbalance the growth in labour supply, underscoring the structural nature of unemployment. Table 14. Unemployment projections based on a low Okun coefficient and 2.5% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.3% 16 884 965 8 063 822 2035 44 982 576 26 742 141 32.2% 18 126 358 8 615 783 2040 47 532 255 28 257 926 32.1% 19 183 034 9 074 892 2045 48 948 282 29 099 753 32.0% 19 784 631 9 315 122 6.6 Low Okun coefficient and 4% GDP growth This scenario shows a slightly greater improvement in labour market outcomes over time. The unemployment rate declines from 32.4% in 2025 to 31.9% by 2045, indicating a gradual strengthening in the economy’s ability to absorb labour. Employment increases consistently from 16.1 million to 19.8 million, reflecting steady job creation throughout the projection period. Despite this improvement, the number of unemployed individuals still rises in absolute terms, from 7.7 million to 9.3 million, due to continued labour force expansion. Overall, while the declining unemployment rate suggests incremental progress, the simultaneous increase in the number of unemployed highlights the scale of labour supply pressures. Even under improved conditions, employment growth remains insufficient to fully absorb the growing labour force, reinforcing the persistence of structural unemployment. Table 15. Unemployment projections based on a low Okun coefficient and 1% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.3% 16 893 572 8 055 215 2035 44 982 576 26 742 141 32.1% 18 144 810 8 597 331 2040 47 532 255 28 257 926 32.0% 19 212 281 9 045 645 2045 48 948 282 29 099 753 31.9% 19 824 789 9 274 964 6.7 Medium Okun coefficient and 1% GDP growth This scenario reflects a more noticeable improvement in labour market outcomes over time. The unemployment rate declines steadily from 32.4% in 2025 to 31.4% by 2045, indicating a gradual strengthening in the economy’s capacity to absorb labour. Employment increases consistently from 16.1 million to just below 20 million, indicating stronger job creation than in previous scenarios. However, despite this improvement, the number of unemployed individuals still rises in absolute terms from 7.7 million to more than 9.1 million due to continued labour force growth. Overall, while the declining unemployment rate suggests meaningful progress, the persistence of a large and growing unemployed population highlights the scale of the challenge. Even with improved employment performance, labour demand does not fully keep pace with labour supply, underscoring the structural nature of unemployment. Table 16. Unemployment projections based on a medium Okun coefficient and 1% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.2% 16 922 263 8 026 524 2035 44 982 576 26 742 141 31.9% 18 206 317 8 535 824 2040 47 532 255 28 257 926 31.7% 19 309 771 8 948 155 2045 48 948 282 29 099 753 31.4% 19 958 648 9 141 106 6.8 Medium Okun coefficient and 2.5 % GDP growth This scenario shows a continued improvement in labour market outcomes over time. The unemployment rate declines from 32.4% in 2025 to 31.3% by 2045, indicating a gradual strengthening in the economy’s ability to absorb labour. Employment grows steadily from 16.1 million to almost 20 million, reflecting sustained job creation across the projection period. Despite this progress, the number of unemployed individuals still increases in absolute terms from 7.7 million to approximately 9.1 million, due to the ongoing expansion of the labour force. Overall, while the declining unemployment rate suggests improving labour market performance, the persistence of a large unemployed population highlights the continued imbalance between labour supply and demand. Even under improved conditions, employment growth remains insufficient to fully absorb labour market pressures, reinforcing the structural nature of unemployment. Table 17. Unemployment projections based on a medium Okun coefficient and 2.5% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.1% 16 930 870 8 017 916 2035 44 982 576 26 742 141 31.9% 18 224 769 8 517 372 2040 47 532 255 28 257 926 31.6% 19 339 018 8 918 908 2045 48 948 282 29 099 753 31.3% 19 998 806 9 100 948 6.9 Medium Okun coefficient and 4% GDP growth This scenario reflects the greatest improvement in labour market outcomes among those considered. The unemployment rate declines steadily from 32.4% in 2025 to 31.1% by 2045, indicating a gradual but more pronounced strengthening in the economy’s ability to absorb labour. Employment increases consistently from 16.1 million to just over 20 million, representing the highest level of job creation across the scenarios. Despite this improvement, the number of unemployed individuals still rises in absolute terms from 7.7 million to approximately 9 million, driven by continued labour force expansion. Overall, while the declining unemployment rate points to improved labour market performance, the persistence of a large unemployed population underscores the scale of the challenge. Even under the most favourable economic growth conditions, unemployment will not be reduced markedly. Table 18. Unemployment projections based on a medium Okun coefficient and 4% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 32.1% 16 939 478 8 009 309 2035 44 982 576 26 742 141 31.8% 18 243 221 8 498 920 2040 47 532 255 28 257 926 31.5% 19 368 265 8 889 661 2045 48 948 282 29 099 753 31.1% 20 038 963 9 060 790 6.10 High Okun coefficient and 1% GDP growth This scenario shows a more substantial improvement in labour market outcomes over time. The unemployment rate declines steadily from 32.4% in 2025 to 30.5% by 2045, indicating a stronger capacity of the economy to absorb labour compared to previous scenarios. Employment increases significantly from 16.1 million to 20.2 million, reflecting robust job creation throughout the projection period. Despite these gains, the number of unemployed individuals still rises in absolute terms from 7.7 million to approximately 8.9 million, driven by continued labour force growth. Overall, while the declining unemployment rate suggests meaningful progress and improved labour absorption, where the GDP-employment relationship has greater elasticity. However, the persistence of a large unemployed population highlights the pressure from labour supply expansion, which suggests that higher GDP growth is imperative. Table 19. Unemployment projections based on a high Okun coefficient and 1% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 31.9% 16 979 645 7 969 141 2035 44 982 576 26 742 141 31.5% 18 329 331 8 412 810 2040 47 532 255 28 257 926 31.0% 19 504 751 8 753 175 2045 48 948 282 29 099 753 30.5% 20 226 366 8 873 388 6.11 High Okun coefficient and 2.5% GDP growth This scenario reflects continued improvement in labour market outcomes over time. The unemployment rate declines steadily from 32.4% in 2025 to 30.4% by 2045, indicating a strengthening in the economy’s ability to absorb labour. Employment increases significantly from 16.1 million to 20.3 million, demonstrating sustained job creation across the projection period. However, despite these gains, the number of unemployed individuals still rises in absolute terms from 7.7 million to just above 8.8 million, due to ongoing labour force expansion. Overall, the results suggest greater employment utility of increase GDP growth to 2.5% per annum compared to 1%. Nonetheless, 2.5% GDP growth will still be insufficient to reduce the number of unemployed in the country. Table 20. Unemployment projections based on a high Okun coefficient and 2.5% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employed Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 31.9% 16 988 253 7 960 534 2035 44 982 576 26 742 141 31.4% 18 347 783 8 394 358 2040 47 532 255 28 257 926 30.9% 19 533 998 8 723 928 2045 48 948 282 29 099 753 30.4% 20 266 523 8 833 230 6.12 High Okun coefficient and 4% GDP growth This scenario represents the greatest improvement in labour market outcomes across the projections. The unemployment rate declines steadily from 32.4% in 2025 to 30.2% by 2045, indicating a notable strengthening in the economy’s capacity to absorb labour. Employment increases substantially from 16.1 million to 20 million, reflecting sustained and relatively robust job creation over the projection period. Despite this progress, the number of unemployed individuals still rises in absolute terms, from 7.7 million to just below 8.8 million, driven by growth in the labour force. Overall, while the declining unemployment rate signals improved labour market performance, the persistence of a large unemployed population highlights the ongoing pressure from labour supply expansion. Even under the most favourable economic growth conditions and a more elastic employment-GDP relationship, unemployment is set to remain above 30%. Table 21. Unemployment projections based on a high Okun coefficient and 4% GDP growth Year Working-age population (15-64) Labour force Unemployment rate Employment Unemployed 2025 39 980 353 23 768 320 32.4% 16 061 442 7 706 878 2030 41 965 999 24 948 787 31.9% 16 996 860 7 951 927 2035 44 982 576 26 742 141 31.3% 18 366 235 8 375 906 2040 47 532 255 28 257 926 30.8% 19 563 245 8 694 681 2045 48 948 282 29 099 753 30.2% 20 306 681 8 793 073 6.13 Summary of unemployment projections Projections of unemployment rates in South Africa for given Okun coefficients and GDP growth rates reveal important patterns [Figure 11 below]. Firstly, any increase in the GDP growth rate will reduce the unemployment rate, but in most cases only marginally. If the current unemployment elasticity of GDP growth (measured by the empirical Okun coefficient), unemployment rates will fall marginally to a lowest possible 31.3% in 2045 from 32.4% in 2025. If the unemployment elasticity of GDP growth weakens, unemployment rates in South Africa will be worse than they are now. Improvements in the unemployment elasticity of GDP growth will lead to more defined reductions in unemployment rates (high Okun coefficients). The results imply that South Africa needs to address structural factors driving unemployment in the country. Addressing the structural factors of unemployment will improve unemployment elasticity of GDP growth, such that even modest economic growth can result in greater decreases in unemployment. Figure 11. Summary of projected unemployment rates 7. Discussion and policy implications The findings of this study highlight a persistent and structurally embedded disconnect between population dynamics, economic growth, and labour market outcomes in South Africa. Across all scenarios, the working-age population and labour force expand substantially over the projection period, driven by demographic momentum. As shown in the population projections, even under declining fertility assumptions, population growth continues in the medium term, reinforcing sustained pressure on the labour market. The employment projections reveal that expanding labour supply will lead to increasing numbers of jobless individuals if the economy does not create sufficient jobs due to the momentum of population growth. Under the employment projections based on the empirical dynamic Okun coefficient, even a relatively strong 4% economic growth is insufficient to meaningfully reduce unemployment rates. Instead, unemployment remains persistently high, with only marginal differences across 1%, 2.5% and 4% GDP growth scenarios. This finding suggests that the relationship between economic growth and employment in South Africa is weak, and in some cases, near-neutral. This projected situation has characterised the South African context over the past three decades, with studies documenting employment contraction in primary sectors like agriculture, forestry and fishing, and mining and quarrying, and demographic momentum as underlying drivers (Bhorat & Oosthuizen, 2008; Hodge, 2009). The application of constrained, partially imposed Okun coefficients provides further insight into the employment prospects for South Africa. Scenarios with higher employment responsiveness show gradual declines in unemployment rates. However, even under the most optimistic assumptions, unemployment remains above 30% in 2045. Importantly, while unemployment rates decline, the absolute number of unemployed individuals continues to increase across nearly all scenarios. This reflects the scale of labour supply growth and highlights the limitations of relying solely on economic growth to solve unemployment. The relationship between demographic and economic factors is central to the projection outcomes. High fertility scenarios amplify labour market pressures by increasing the size of future cohorts entering the labour force, thereby requiring significantly higher levels of job creation to stabilise unemployment. Conversely, low fertility scenarios reduce labour supply pressures but do not eliminate the unemployment challenge, particularly under conditions of weak economic growth. These findings reinforce the argument that the labour market challenges for South Africa cannot be resolved through favourable demographic trends. Overall, the results point to a future characterised by population growth and persistently high unemployment rates in South Africa. The persistence of high unemployment, even under improved economic conditions, reflects underlying issues such as capital-intensive growth and skills mismatches, which limit the economy’s labour absorption capacity. The findings of future population and unemployment projections have several important implications for economic and labour market policies in South Africa, which are discussed below. First, the results indicate that economic growth alone will be insufficient to address unemployment in South Africa, with the continuation of the current GDP-unemployment relationship suggesting a worse outlook. To attain a favourable employment outlook in the face of an unavoidable demographic momentum, South Africa needs to promote labour-intensive primary and secondary sectors such as agriculture, forestry, and manufacturing, as well as render meaningful support to small and medium-sized enterprises, which have greater potential for job creation. By deepening the economic policy’s focus beyond a growth-centric approach, the country will develop labour market resilience that is less prone to global economic shocks, thus maintaining strong employment conditions. Second, there is a need for targeted labour-market interventions to better align labour supply and demand. The persistence of high unemployment alongside increasing positive GDP growth suggests that skills mismatches remain a critical constraint. The policy shift from polytechnic-type post-school education in South Africa to TVET that became primarily concerned with teaching and instruction at the expense of applied technical functions accentuated the skills mismatch in the labour market (Kraak, 2018). It is particularly noteworthy for South Africa that the political and economic restructuring that characterised the transition from apartheid to a democratic dispensation, where government institutions were being privatised and technikons being converted to universities, severely damaged the Design, Engineering, Entrepreneurship and Management (DEEM) function that traditionally implied closer alignment between training and industry skills needs (Kraak, 2008). The strong cooperative relationships previously built up between the state-owned enterprises, the technical colleges and the technikons to train and skill artisans, technicians and technologists were scaled down and, in many instances, permanently lost (Kraak, 2008). It is therefore imperative that South Africa looks to it’s past to make relevant investments in education to better align the workforce with the economy's needs. Finally, the findings underscore the importance of adopting a coordinated policy approach that integrates demographic and economic planning. The interaction between population dynamics and labour market outcomes suggests that policies should not be developed in isolation. Instead, a holistic strategy that considers population trends, economic growth, and labour market conditions simultaneously is required to effectively address unemployment. 8. Conclusion This study conducted population projections by sex and five-year age groups. The projected population sizes of the 15-64 age range were used as a basis to estimate future unemployment rates, using a combination four Okun coefficients and three GDP growth rates. The four Okun coefficients, which measure the unemployment elasticity of GDP growth, were empirical (based on real past data for South Africa from 2009 to 2019), low coefficient (which represent the weakest GDP-unemployment relationship), medium, and high (strongest possible GDP-unemployment relationship in South Africa) coefficients. The results from population projections suggest significant population growth by 2045. The most realistic projected population size by 2045 is 74.6 million, based on the assumption that mortality will decrease from the 2022 level (which was high because of the residual COVID-19 pandemic effects), and that fertility will continue to decrease at the same steady rate as observed between 2022 and 2024. The unemployment projections revealed potential positive labour market outcomes, although only marginal. Should the relationship between GDP growth and unemployment rates that has prevailed in South Africa continue up to 2045 (empirical Okun coefficient), the country will experience marginal decreases in the unemployment rate, to between 31 and 32%. The number of the employed will increase for any GDP growth rate, but so will also be the number of the unemployed. The growth in the numbers of the unemployed will be driven by the momentum of population growth affecting the working age group. Even under declining fertility assumptions, labour supply expands significantly, placing sustained pressure on the labour market. While employment increases across all scenarios, the pace of growth remains too slow to absorb new entrants into the labour force. As a result, unemployment remains persistently high, with only marginal improvements observed even under more favourable economic conditions. Notably, higher GDP growth does not translate into substantial reductions in unemployment, reinforcing the weak responsiveness of employment to economic growth in the South African context. The analysis further shows that variations in demographic assumptions shape the scale of the challenge but do not fundamentally alter its nature. Higher fertility amplifies labour market pressures, while lower fertility moderates them; however, neither scenario resolves the structural imbalance between labour supply and demand. Similarly, stronger employment responsiveness improves outcomes but remains insufficient to significantly reduce unemployment levels. Overall, the findings highlight the relevance of the argument that South Africa’s unemployment challenge is structural rather than cyclical. Economic growth alone is unlikely to generate the scale of employment required to absorb the expanding labour force. Instead, addressing unemployment will require a combination of sustained economic growth, greater employment intensity, and targeted structural reforms to enhance labour-market absorption. Education reforms may be one avenue to address the structural barriers to employment. Furthermore, growth in the labour-intensive sectors is also crucial if South Africa is to realise significant labour market gains. This study contributes to the literature by demonstrating the importance of jointly analysing demographic and economic dynamics when assessing future labour market outcomes. Linking population projections with employment scenarios, it provides a more comprehensive understanding of the scale and persistence of unemployment in South Africa. Future research should focus on refining estimates of country-specific Okun coefficients and on exploring sector-specific employment dynamics to further strengthen the evidence base for policy interventions. References Aguiar‑Conraria, L., Martins, M. 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The urgent ad hoc Protection Working Group meeting, held on 19 August 2026 and attended by Ms Berenice Marks on behalf of the Inclusive Society Institute, focused on ongoing efforts to address racism, xenophobia and social cohesion, as well as the protection of migrants and refugees. The Department of Justice and Constitutional Development provided updates on government initiatives, including preparations to commemorate the Durban Declaration and Programme of Action. The City of Johannesburg outlined plans for an awareness campaign focusing on documentation and regulatory compliance. The United Nations High Commissioner for Refugees presented an incident analysis highlighting persistent social tensions, migration-related concerns, funding constraints affecting assistance programmes, and protection challenges across several provinces. Members reported numerous protection concerns, including police harassment, unlawful detention, evictions, barriers to accessing healthcare and documentation, anti-migrant protests, and challenges faced by informal traders, particularly in Gauteng, KwaZulu-Natal and the Western Cape. The meeting also noted positive developments in Ladysmith following a court ruling that allowed affected businesses to reopen. Engagements with law-enforcement agencies and government authorities concerning protection matters remain ongoing. Key priorities identified include: Addressing misinformation and online hate speech; Strengthening engagement with the media and relevant stakeholders; Implementing an awareness and capacity-building initiative in eThekwini; Reviewing the Protection Working Group’s Terms of Reference and workplan; and Considering the ad hoc participation of Refugee-Led Organisations to ensure that community perspectives are represented within the Working Group.

Download the full PDF report here, or read it below. PUBLICATION INFORMATION Title: The Role of Middle Powers in Reshaping Multilateralism - Guidance for and Partnership with the Next United Nations Secretary-General Author: Daryl Swanepoel Published jointly by: Inclusive Society Institute (ISI) and Global South Perspectives Network (GSPN) Published: 2026 COPYRIGHT © 2026 Inclusive Society Institute and Global South Perspectives Network. All rights reserved. No part of this publication may be reproduced, distributed, stored or transmitted in any form or by any means without prior written permission from the publishers, except for brief quotations for research, review or other purposes permitted by applicable copyright law. DISCLAIMER This publication synthesises the principal ideas, perspectives and conclusions emerging from the panel discussion. It does not constitute a verbatim record of the proceedings or the individual contributions of the panellists. The views and interpretations expressed in this report should not necessarily be regarded as representing the official views or positions of the Inclusive Society Institute (ISI), Global South Perspectives Network (GSPN), Academic Council on the United Nations System (ACUNS), United Nations, the organisations or institutions represented by the panellists, or any government. Every reasonable effort has been made to ensure the accuracy of the information contained in this publication. The author and publishers accept no liability for any loss or consequence arising from its use or reliance upon its contents. SUGGESTED CITATION Swanepoel, D. (2026). The Role of Middle Powers in Reshaping Multilateralism: Guidance for and Partnership with the Next United Nations Secretary-General. Inclusive Society Institute & Global South Perspectives Network. USE OF ARTIFICIAL INTELLIGENCE Artificial intelligence (AI) tools may have been used to assist with the drafting, editing, synthesis and presentation of this report. All substantive content, interpretations and conclusions remain subject to human review and editorial oversight, and responsibility for the final publication rests with the author and publishers. Published jointly by the Inclusive Society Institute (ISI) and the Global South Perspectives Network (GSPN), South Africa, 2026. TABLE OF CONTENTS Report of the Panel Discussion of the Academic Council on the United Nations System (ACUNS) Annual Meeting Panel Composition 1. Introduction 2. Multilateralism at a Crossroads 3. Why Middle Powers matter 4. Beyond Diplomacy: Communication, Narrative and Public Legitimacy 5. Partnering with the next United Nations Secretary-General 6. Towards a Middle-Power Agenda for Renewing Multilateralism 7. Conclusion Cover photo: AI-generated image created using ChatGPT (OpenAI), 2026. REPORT OF THE PANEL DISCUSSION OF THE ACADEMIC COUNCIL ON THE UNITED NATIONS SYSTEM (ACUNS) ANNUAL MEETING LISBON, PORTUGAL | 1 JULY 2026 PANEL COMPOSITION The panel was moderated by Daryl Swanepoel, Chief Executive Officer of the Inclusive Society Institute (ISI), South Africa. The discussion brought together four distinguished contributors representing academia, civil society and international organisations. Dr Cilene Victor is Professor and Researcher in the School of Communication, Marketing and Technology at Universidade Anhembi Morumbi, São Paulo, Brazil. Dr Sudha Reddy is Chairperson of the Foundation for Human Horizon, India. Dr Georgios Kostakos is a former senior official of the United Nations and served as Executive Director of the Foundation for Global Governance and Sustainability (FOGGS), Belgium. Ms Yoriko Yasukawa is a former United Nations Assistant Secretary-General and former Director of the United Nations Development Programme (UNDP) Regional Bureau for Africa, and currently serves as a member of the Earth Trusteeship Initiative, Japan. Together, the panellists brought complementary expertise spanning global governance, multilateral diplomacy, strategic communication, sustainable development and international cooperation, providing a rich and diverse foundation for the discussion. 1. INTRODUCTION The international system is entering a period in which the assumptions that have underpinned multilateral cooperation for much of the post-war era are being fundamentally tested. Intensifying geopolitical rivalry, growing strategic competition among the major powers, and declining confidence in international institutions have combined to create an environment in which collective responses to global challenges have become increasingly difficult. But, paradoxically, the need for international cooperation has never been greater. Climate change, armed conflict, humanitarian crises, food insecurity, migration, technological disruption and sustainable development all transcend national borders and demand solutions that no state can deliver alone. It was against this backdrop that the Global South Perspectives Network (GSPN), through the Inclusive Society Institute (ISI), convened a panel discussion on "The Role of Middle Powers in Reshaping Multilateralism: Guidance for and Partnership with the New United Nations Secretary-General" during the 2026 Academic Council on the United Nations System (ACUNS) Annual Meeting in Lisbon. The discussion proceeded from a central proposition. The future of multilateralism is unlikely to be secured by the major powers acting alone, nor will it be restored through institutional reform in isolation. Rather, the discussion explored whether middle powers, acting more strategically and in closer cooperation with one another, can help stabilise the international system, restore confidence in international law and strengthen the effectiveness of the United Nations. The appointment of the next Secretary-General was viewed within this broader context, not as an isolated institutional process, but as an opportunity to renew political leadership within the multilateral system and to establish new partnerships capable of supporting that leadership over the coming decade. A striking feature of the discussion was the degree of convergence among the contributors. Although approaching the subject from different perspectives, the panel collectively argued that middle powers possess attributes that are becoming increasingly important in an era characterised by geopolitical fragmentation. They often maintain constructive relations across competing political groupings; they have established traditions of coalition-building and mediation; they generally rely upon international law and multilateral institutions for their own security and prosperity; and many enjoy credibility across both the Global North and the Global South. These characteristics position them to make a distinctive contribution to renewing multilateral cooperation at a time when dialogue among the major powers has become increasingly constrained. The discussion equally recognised that middle powers cannot simply assume such a role. They constitute a highly diverse group of states with different histories, political systems, strategic interests and regional priorities. Their influence will depend not upon their collective size alone, but upon their willingness to cooperate more consistently around shared objectives. Throughout the discussion, emphasis therefore shifted away from the traditional question of how middle powers should position themselves between competing great powers, towards a more practical consideration of how they might work together to strengthen the institutions and norms upon which effective international cooperation depends. Several themes emerged repeatedly during the discussion. One concerned the importance of moving beyond reactive diplomacy towards sustained, issue-based cooperation among middle powers. Another highlighted the growing significance of communication and public diplomacy in strengthening the legitimacy of multilateralism. A third focused on the need for the next Secretary-General to enjoy not only broad international support during the selection process, but also sustained political backing after assuming office. Running through all these themes was a common conviction that the renewal of multilateralism requires more than institutional reform; it requires renewed political commitment, stronger partnerships and a more compelling vision of international cooperation itself. This report synthesises the principal ideas emerging from the discussion. Rather than presenting the individual papers separately, it considers the broader conclusions that emerged collectively. It examines the changing international environment within which middle powers now operate, the distinctive contribution they can make to strengthening multilateralism, the importance of communication and public legitimacy, the opportunities presented by the appointment of a new Secretary-General, and the practical agenda that emerged for strengthening cooperation among middle powers in support of a more effective, inclusive and resilient multilateral order. Figure 1: The changing context of multilateralism: Key drivers shaping the role of middle powers in a fragmented international order 2. MULTILATERALISM AT A CROSSROADS The discussion proceeded from the shared assessment that multilateralism is confronting one of the most challenging periods in its modern history. Participants agreed that the international system is undergoing a profound political transition in which geopolitical rivalry has increasingly displaced cooperative approaches to global governance. As strategic competition among the major powers intensifies, international institutions have found it progressively more difficult to fulfil the purposes for which they were established. The discussion therefore began not by questioning the relevance of multilateralism, but by examining why its effectiveness has come under increasing pressure. The panel concept note argued that Realpolitik has once again become the dominant organising principle of international relations. This renewed emphasis on power politics threatens many of the gains achieved through decades of post-war multilateral cooperation in peace and security, human rights and sustainable development. Rather than acting as forums for collective problem-solving, international institutions increasingly find themselves operating within a wider environment characterised by strategic rivalry, competing geopolitical interests and declining political trust, and so discussion suggested that this changing context poses one of the most significant challenges to the multilateral system since the establishment of the United Nations. Participants nevertheless cautioned against interpreting the current difficulties as evidence that multilateralism itself has failed, instead they argued that contemporary global challenges reinforce, rather than diminish the necessity of international cooperation. Armed conflict, climate change, pandemics, food insecurity, migration, technological disruption and widening inequality all transcend national boundaries. None can be addressed sustainably through unilateral action or bilateral diplomacy alone. The central paradox confronting the international community is therefore that, precisely when cooperation has become most essential, it has also become more politically difficult to achieve. The discussion also recognised that the pressures facing multilateralism are not solely institutional, because they reflect a broader erosion of confidence in the international system itself. International organisations now operate in an environment where competing political narratives, public scepticism and growing geopolitical polarisation increasingly shape perceptions of their legitimacy and effectiveness, which has made it more difficult to build international consensus, even where common interests clearly exist. The challenge is therefore not confined to improving institutional performance; it extends to rebuilding confidence that multilateral cooperation remains capable of addressing the concerns of states and societies alike. An important contribution to the discussion emphasised that the debate should not become confined to relations between governments alone. The United Nations was established in the name of "We the Peoples," and its success must ultimately be measured by its ability to improve the lives of people, rather than simply manage relations among states, and with this in mind it was argued that multilateralism derives its legitimacy not only from international agreements, but from its capacity to advance peace, human dignity, sustainable development and social justice. The growing disconnect between international institutions and the everyday concerns of citizens therefore represents an important dimension of the current challenge, and therefore renewing multilateralism requires reconnecting global governance with the people it is intended to serve. The discussion further observed that confidence in the multilateral system depends upon the consistent application of its underlying principles, such as international law, the peaceful settlement of disputes, respect for sovereignty, human rights and the pursuit of sustainable development that together constitute the normative foundations of the United Nations. Participants expressed concern that perceptions of inconsistency in the application of these principles have weakened public confidence in international institutions, and whether it be in relation to addressing conflict, humanitarian crises or broader questions of international justice, the credibility of multilateralism depends upon the extent to which its principles are seen to apply universally, rather than selectively. Participants also reflected on the widespread calls for institutional reform. There was broad agreement that reform remains necessary if multilateral institutions are to reflect contemporary political realities more accurately, but at the same time, the discussion suggested that structural reform by itself will not resolve the deeper challenges confronting the international system. Institutions function effectively only when Member States remain committed to working through them in pursuit of shared objectives, and so without renewed political commitment to cooperation, even well-designed institutions will struggle to achieve meaningful outcomes. The future of multilateralism therefore depends as much upon political leadership as it does upon institutional architecture. Against this backdrop, the discussion deliberately shifted from diagnosis towards opportunity. Rather than asking whether the multilateral system can survive, participants considered how it might evolve. The panel concept note suggested that one of the most promising opportunities lies in greater strategic cooperation among middle powers. Possessing significant diplomatic reach, material resources and normative credibility, these states are well placed to help stabilise the international system by strengthening dialogue, defending international law and reinforcing the principles of the UN Charter. The discussion therefore framed the present period not simply as one of institutional crisis, but as a moment in which new forms of international leadership may emerge. The panel concluded that the future of multilateralism should not be viewed as a choice between preserving the existing international order or accepting its decline. The more important challenge is to ensure that multilateral cooperation adapts to changing geopolitical realities without abandoning the principles upon which it has been built. That task will require broader leadership, stronger political commitment and new forms of partnership. It was within this context that the discussion turned to the distinctive contribution that middle powers can make to strengthening an increasingly fragile, but no less essential, multilateral system. 3. WHY MIDDLE POWERS MATTER If multilateralism is to be renewed, the question that follows is where the political energy for that renewal might come from. The panel did not suggest that middle powers can or should replace the major powers. The great powers will continue to exercise considerable influence over the international system. Rather, the proposition that emerged was that the space between great-power dominance on the one hand and institutional paralysis on the other has become increasingly important. It is within this space that middle powers have an opportunity to make a more deliberate contribution. This opportunity derives partly from the nature of middle-power influence itself. Middle powers do not generally possess sufficient military, economic or political weight to impose their preferences on the international system. Their influence must consequently be exercised differently. They depend more heavily upon persuasion, coalition-building, mediation, agenda-setting and the legitimacy that comes from working through international institutions. What may traditionally have been regarded as a limitation could, in the present geopolitical environment, become an important advantage. When coercion and confrontation are themselves contributing to international fragmentation, the ability to persuade, convene and bridge differences assumes greater value. The discussion therefore challenged the idea that influence within the international system should be measured primarily by material power. Diplomatic reach matters. Credibility matters. The ability to maintain relationships across political divides matters. So too does a country's willingness to invest in international institutions and to work patiently towards outcomes that enjoy legitimacy beyond its own immediate interests. These are precisely the areas in which middle powers can exercise influence disproportionate to their relative size. There are already indications of what this can mean in practice. The discussion pointed to India's engagement across BRICS, the G20 and broader Global South initiatives; Indonesia's role within ASEAN; Brazil's advocacy around climate justice and South-South cooperation; South Africa's emphasis on international law and stronger Global South representation; and the mediation roles played by Norway, Qatar and Oman. These examples are different in character, but they demonstrate a common point: countries need not dominate the international system in order to influence it. They can create political space, bring parties together, advance issues that might otherwise receive insufficient attention, and maintain channels of engagement across political divides. This becomes particularly important as the divide between the Global North and Global South assumes greater prominence within debates about global governance. The panel recognised the very real differences in history, experience, development and interests that underpin this divide. It nevertheless cautioned against allowing it to become yet another permanent fault line in an already fragmented international system. Middle powers exist on both sides of that divide. This creates the possibility of cooperation that cuts across it, rather than reinforces it. Indeed, the ability to establish such relationships may prove to be one of the most important contributions that middle powers can make to the future of multilateralism. The point is not to find a new position of neutrality between competing camps. Nor is it to suggest that middle powers should somehow remove themselves from the pursuit of national interests. The discussion was clear that middle powers, like all states, have their own interests, domestic political pressures and strategic considerations. They will not always agree, and their interests will sometimes diverge sharply. Any attempt to construct a meaningful middle-power agenda must start by acknowledging this reality, rather than wishing it away. This led to an important distinction in the discussion between the possession of middle-power characteristics and the practice of middle-power diplomacy. One contribution differentiated between "authentic middle powers" and "aspirational great powers." The distinction is useful precisely because it shifts attention away from labels and towards behaviour. A state may possess the material characteristics normally associated with a middle power while increasingly seeking influence through status, dominance or alignment with great-power competition. Conversely, a state demonstrates authentic middle-power behaviour when it uses its influence to encourage dialogue, strengthen mediation, uphold international law and build cooperation across political divides. This raises the question of credibility. If middle powers wish to present themselves as defenders of multilateralism, they must themselves be prepared to uphold its principles consistently. Support for international law loses much of its persuasive force if it changes according to the parties involved. The same applies to human rights and the peaceful resolution of disputes. Middle powers cannot credibly call upon the major powers to respect international norms while themselves treating those norms selectively. Their influence as bridge-builders ultimately depends upon the trust that others are prepared to place in them. There is, therefore, an element of responsibility attached to the opportunity now available to middle powers. Greater influence cannot simply mean acquiring a louder voice in existing institutions or securing a larger share of international decision-making. It must also entail assuming greater responsibility for sustaining the system within which that influence is exercised. The discussion suggested that this means defending international law, supporting institutions even when particular outcomes may be inconvenient, maintaining channels of communication with states with which they disagree, and investing diplomatic resources in finding common ground. This is also why issue-based cooperation featured so strongly in the discussion. Middle powers do not have to agree on everything in order to work together on something. Peacebuilding, climate action, food security, humanitarian response, public health and sustainable development provide areas in which cooperation can be constructed around practical objectives, rather than geopolitical identity. This approach accepts difference, rather than attempting to eliminate it. It asks where interests overlap and whether those areas of convergence can be converted into collective action. There is an important pragmatic dimension to this approach. If middle powers wait for broad geopolitical agreement before acting together, very little is likely to happen. If, instead, they identify areas where cooperation is possible and demonstrate that such cooperation can deliver results, they help preserve the practice of multilateralism itself. Each successful instance of cooperation creates another reason to cooperate again. In this way, issue-based partnerships can become building blocks for something more substantial. But the panel also recognised that this is precisely where the present weakness lies. Middle powers have demonstrated their capacity to cooperate on individual issues, but they have not yet translated that capacity into sustained collective leadership on the future of multilateralism. One contribution was particularly clear on this point: despite the deterioration in the international environment and the growing need for alternative sources of leadership, there is still no sufficiently coherent middle-power initiative aimed at strengthening the global governance system as a whole. This gap matters. Ad hoc cooperation can solve individual problems, but it is unlikely on its own to reshape the direction of the international system. If middle powers are serious about playing a greater role, they will have to move from episodic cooperation towards something more deliberate and sustained. This does not mean creating another geopolitical bloc. That would defeat the very purpose of the exercise. It means developing the habit of consultation, identifying shared priorities and being prepared to act together where collective influence can make a difference. Seen in this way, the potential significance of middle powers lies not in their capacity to become another pole in an increasingly competitive international order. It lies in their ability to resist the logic that every international relationship must eventually resolve itself into competing poles. Their comparative advantage is the ability to connect, rather than divide; to keep dialogue alive when others withdraw from it; and to demonstrate through practical cooperation that differences between states do not have to make collective action impossible. That is the opportunity. But it is not yet the achievement. The central question emerging from the panel was therefore whether middle powers are prepared to convert their considerable individual diplomatic capabilities into a more sustained collective endeavour. If they are, they may become an important stabilising force in the international system. If they are not, the potential identified throughout the discussion will remain precisely that - potential. 4. BEYOND DIPLOMACY: COMMUNICATION, NARRATIVE AND PUBLIC LEGITIMACY While the discussion devoted considerable attention to diplomacy and institutional cooperation, one of its more distinctive contributions was the recognition that the future of multilateralism will depend as much on communication as on negotiation. Effective diplomacy no longer takes place exclusively around negotiating tables or within the formal structures of international organisations. It is increasingly shaped by the ability of states to explain their objectives, build public understanding and develop narratives capable of sustaining confidence in international cooperation. Communication was therefore presented not as a supporting activity, but as an integral component of contemporary diplomacy. This represents an important shift in the way middle-power influence should be understood. Traditionally, diplomatic success has been measured by agreements concluded, coalitions formed or resolutions adopted. The discussion suggested that these remain important, but are no longer sufficient. International politics now unfolds within a global communications environment where governments, international organisations, civil society, academic institutions, media organisations and digital platforms all influence how international developments are interpreted. Diplomatic initiatives that are not understood beyond official circles often struggle to generate the wider political support necessary for their implementation. Middle powers therefore need to communicate not only with one another, but with global audiences. Participants argued that communication strengthens multilateralism in several ways. It helps explain why cooperation remains necessary in an increasingly uncertain international environment. It allows successful initiatives to become examples from which others may learn, it broadens participation in debates that might otherwise remain confined to governments, and most importantly, it contributes to legitimacy. International institutions derive authority not only from legal mandates, but also from public confidence that they continue to serve meaningful purposes. When that confidence weakens, institutional effectiveness is inevitably affected. The discussion suggested that middle powers possess important comparative advantages in this regard. Unlike the major powers, whose international messaging is frequently interpreted through the prism of strategic competition, many middle powers are better positioned to articulate narratives centred on cooperation, dialogue and shared interests. This does not imply that they are politically neutral, nor that they are free of national interests. Rather, it reflects the fact that their diplomatic influence has generally been built through persuasion, rather than coercion. Communication therefore becomes an extension of the very diplomatic methods through which middle powers traditionally exercise influence. Brazil's recent international engagement was discussed as an illustration of this approach. Participants noted the consistency with which themes such as multilateralism, inclusive development, climate justice and stronger Global South participation have been advanced across different international platforms. Although each forum addressed different policy questions, the underlying message remained coherent. This consistency was presented as an important diplomatic asset. It demonstrates that communication is most effective when it forms part of a broader strategic approach, rather than a series of isolated public statements. At the same time, participants recognised that the international communications environment presents significant challenges for middle powers. Global media attention continues to focus predominantly on the actions of the major powers, armed conflict and geopolitical confrontation. Constructive initiatives emerging from middle powers often receive comparatively limited attention, irrespective of their potential significance. As a result, innovative policy proposals frequently fail to shape wider international debate. The discussion therefore suggested that middle powers need to invest more deliberately in communicating both their ideas and their achievements if they wish to influence the broader direction of global governance. The discussion also moved beyond communication as a diplomatic technique to consider the importance of narrative itself. Participants argued that multilateralism currently suffers not only from institutional weaknesses, but also from the absence of a compelling story about its future. Much contemporary debate has become dominated by narratives of rivalry, confrontation and geopolitical competition, and while these realities cannot be ignored, they should not become the only lens through which international affairs are understood. If multilateralism is to regain confidence and legitimacy, it requires a positive narrative capable of inspiring cooperation, rather than merely responding to conflict. In this regard, one contribution argued that hope itself constitutes an important political resource. The discussion observed that international cooperation has contributed significantly to improvements in human development, democratic governance, poverty reduction, education, health and human rights across many parts of the world. These achievements should not be overlooked simply because contemporary international politics is characterised by heightened geopolitical tension. The international community requires a narrative that acknowledges current challenges, while also recognising the progress that cooperation has historically made possible, because without such a narrative, public confidence in multilateralism is likely to continue eroding. Participants further suggested that this narrative should remain firmly people-centred. International institutions ultimately exist not for their own preservation, but to improve human wellbeing. Communication should therefore connect multilateral cooperation to the everyday concerns of people, rather than presenting it solely as an abstract exercise in international diplomacy. Peace, human dignity, equality, justice and sustainable development were repeatedly identified as the values around which such a narrative could be constructed. In doing so, communication would reinforce the reminder contained in the opening words of the UN Charter that the Organisation exists in the name of "We the Peoples." The discussion also identified an important role for universities, think tanks, civil society organisations and policy networks. Building confidence in multilateralism cannot be left exclusively to governments. Research institutions contribute evidence and analysis, civil society connects international debates to communities, and academic networks create opportunities for sustained dialogue across national boundaries. Participants therefore envisaged communication as a genuinely collaborative endeavour extending well beyond official diplomacy. This broader understanding of communication also has implications for the next Secretary-General. Participants suggested that the Secretary-General will need to be more than an effective administrator or skilled diplomat. The Office will increasingly require someone capable of articulating a convincing vision of international cooperation, explaining the continuing relevance of the United Nations and inspiring confidence that multilateralism remains the most effective means of addressing shared global challenges. Middle powers, through coordinated communication and consistent public diplomacy, can become important partners in amplifying that message and broadening its international reach. The discussion therefore concluded that communication should no longer be regarded as peripheral to multilateral diplomacy. It has become one of the means through which diplomacy itself is conducted. Middle powers may succeed in building coalitions, advancing innovative proposals and strengthening international institutions, but unless these efforts are communicated effectively and situated within a compelling narrative about the future of international cooperation, their wider influence is likely to remain limited. Renewing multilateralism will therefore require not only better diplomacy, but also a more persuasive explanation of why multilateralism continues to matter. 5. PARTNERING WITH THE NEXT UNITED NATIONS SECRETARY-GENERAL A distinctive feature of the panel discussion was that it did not treat the appointment of the next Secretary-General of the United Nations as a procedural event, but as a strategic opportunity to strengthen multilateralism itself. Rather than viewing the selection process as an end in itself, participants considered how middle powers might influence both the choice of the next Secretary-General and, more importantly, how they might work in partnership with that person to restore confidence in the United Nations and the wider multilateral system. The discussion proceeded from the recognition that the Office of the Secretary-General occupies a unique position within the international system. Although the Secretary-General exercises neither the executive authority of a head of government nor the political power of the major states, the Office carries considerable moral authority and possesses an important convening function. It has the capacity to shape international agendas, facilitate dialogue, encourage mediation and articulate a vision for international cooperation. The effectiveness of the Office, however, depends not only on the qualities of the individual appointed, but also on the willingness of Member States to provide the political support necessary for the Secretary-General to fulfil these responsibilities. Participants therefore argued that middle powers have an important role to play during the selection process itself. Acting individually, their influence is necessarily limited. Collectively, however, they represent a significant constituency within the United Nations and possess sufficient diplomatic influence to contribute meaningfully to discussions on the qualities required of the Organisation's next leader. The discussion suggested that middle powers should seek to promote leadership criteria centred on integrity, independence, commitment to the United Nations Charter and demonstrated support for effective multilateral cooperation. The objective should not be to advance regional or national preferences, but to strengthen the legitimacy of the Office itself. The panel was equally clear that the appointment of a new Secretary-General should not mark the conclusion of middle-power engagement. Indeed, participants suggested that the more important task begins after the successful candidate assumes office. One of the recurring weaknesses of the multilateral system has been the tendency to regard the Secretary-General as operating largely in isolation from sustained political support by Member States. But effective leadership within the United Nations depends upon governments that are prepared not only to endorse the Organisation's principles, but also to support initiatives aimed at giving practical effect to those principles. The discussion therefore proposed a different model of engagement. Rather than limiting cooperation to formal institutional processes, middle powers should develop a continuing partnership with the Secretary-General around a shared commitment to strengthening the effectiveness of the United Nations. Such a partnership would not compromise the independence of the Office, nor would it seek to create an alternative centre of political authority within the Organisation. Its purpose would instead be to provide the political support necessary for the Secretary-General to pursue initiatives that strengthen multilateral cooperation, uphold international law and reinforce confidence in the United Nations. Preventive diplomacy emerged as one of the most important areas for such cooperation. Participants observed that international engagement frequently occurs only after disputes have escalated into violent conflict or humanitarian crisis. Middle powers, by virtue of their often constructive relations across different political groupings, possess considerable potential to support the Secretary-General's efforts to encourage dialogue before positions become irreconcilable. This need not involve formal mediation alone. It includes confidence-building, discreet diplomacy and creating opportunities for continued communication at times when official channels have become strained. Strengthening preventive diplomacy was therefore presented as one of the most practical contributions that middle powers could make to international peace and security. Participants also identified several substantive areas around which closer cooperation could be developed. Climate change, sustainable development, food security, public health, humanitarian response and migration were all cited as examples of global challenges requiring sustained multilateral action. Progress in these areas depends less upon geopolitical competition than upon practical cooperation among states willing to work collectively in pursuit of shared objectives. A closer partnership between middle powers and the Secretary-General could therefore help sustain political momentum around issues where broad international interests continue to converge despite wider geopolitical tensions. The discussion further emphasised that such cooperation should remain firmly anchored in the principles of the United Nations Charter. Respect for international law, peaceful settlement of disputes, sovereign equality, human dignity and sustainable development were repeatedly identified as the normative foundations upon which the partnership should rest. Participants argued that middle powers should support the Secretary-General in defending these principles consistently, recognising that their credibility depends upon their universal application, rather than their selective invocation in particular circumstances. An important practical proposal emerging from the discussion was the possible establishment of a Group of Friends to support the next Secretary-General. Participants suggested that such a group could consist primarily of middle powers committed to strengthening multilateralism and providing sustained political backing for the Office of the Secretary-General. Unlike existing power structures within the United Nations, the purpose of such a group would not be to direct or constrain the Secretary-General, but rather to create greater political space for effective leadership by mobilising support around initiatives consistent with the Charter and the broader interests of the international community. The discussion also recognised that the Secretary-General's effectiveness increasingly depends upon engagement beyond governments alone. Echoing the broader emphasis on a people-centred approach to multilateralism, participants argued that closer relationships should also be fostered with civil society, academia, youth, women, Indigenous communities and other non-state actors. These constituencies not only contribute expertise and practical experience but also strengthen the legitimacy of international decision-making by ensuring that multilateral governance remains connected to the concerns of those it ultimately serves. Middle powers, many of which have extensive experience in participatory governance and multi-stakeholder engagement, are well placed to support the Secretary-General in broadening these relationships. Throughout the discussion there was a clear recognition that the next Secretary-General will assume office at a particularly demanding moment in the history of the United Nations. Expectations are likely to exceed the formal powers of the Office, while geopolitical divisions may continue to constrain institutional decision-making. Participants nevertheless rejected the view that these constraints diminish the importance of the position. On the contrary, they reinforce the need for a Secretary-General capable of exercising principled leadership, supported by Member States willing to invest political capital in strengthening the multilateral system. The panel therefore concluded that the relationship between middle powers and the next Secretary-General should be viewed not as a temporary alignment around a particular appointment, but as the foundation for a broader partnership in support of effective multilateralism. By acting collectively in defence of the Charter, supporting preventive diplomacy, strengthening cooperation around shared global challenges and providing sustained political backing to the Office of the Secretary-General, middle powers can make a practical contribution to restoring confidence in the United Nations and enhancing its capacity to serve the common good. 6. TOWARDS A MIDDLE-POWER AGENDA FOR RENEWING MULTILATERALISM The discussion concluded by turning from diagnosis to action. Having considered the changing geopolitical environment, the distinctive contribution that middle powers can make, the importance of communication, and the opportunities presented by the appointment of a new Secretary-General, participants reflected on what practical agenda should emerge from the discussion. While there was no suggestion that middle powers alone can reshape the international order, there was broad agreement that they can make a far more significant contribution than they presently do if they begin to act with greater strategic purpose and consistency. The first conclusion was that middle powers should move beyond episodic cooperation towards a more sustained habit of strategic consultation. Existing cooperation has demonstrated that middle powers are capable of working effectively together on individual issues. The challenge is to ensure that such cooperation is no longer confined to isolated negotiations or particular international crises. Regular consultation would enable middle powers to identify emerging challenges earlier, exchange perspectives, coordinate positions where appropriate and provide greater continuity in support of multilateral institutions. Such consultation need not create another formal organisation. Indeed, the discussion suggested that flexibility remains one of the principal strengths of middle-power diplomacy. What is required is not another institution, but a stronger political commitment to working together. Secondly, participants argued that middle powers should define themselves less by geopolitical alignment than by the practical issues around which they choose to cooperate. One of the strengths of issue-based cooperation is that it enables countries with different political traditions and strategic relationships to work together where genuine common interests exist. The discussion repeatedly identified areas such as peacebuilding, sustainable development, climate change, food security, humanitarian assistance and public health as examples where middle powers are already demonstrating the value of practical cooperation. Expanding such collaboration would not only deliver tangible international benefits but also reinforce confidence that multilateralism remains capable of producing meaningful outcomes. A third conclusion concerned the continued defence of international law and the United Nations Charter. Throughout the discussion there was broad agreement that middle powers have a particular interest in preserving an international system governed by agreed rules, rather than by the exercise of power alone. Their own security and prosperity frequently depend upon the predictability, stability and legitimacy that such a system provides. Participants therefore suggested that middle powers should continue to champion the peaceful settlement of disputes, sovereign equality, respect for international law and the strengthening of multilateral institutions. At the same time, they recognised that such advocacy will remain credible only if these principles are applied consistently and without political selectivity. The discussion also reinforced the importance of building broader partnerships around multilateralism. Governments alone cannot renew international cooperation. Universities, think tanks, civil society organisations, youth, women, Indigenous communities and the private sector all possess knowledge, experience and networks that can strengthen international policymaking. Participants therefore envisaged a more inclusive model of multilateralism in which governments continue to exercise political leadership while drawing more systematically on the expertise and practical experience of wider society. Such partnerships would not only improve policy outcomes but also strengthen the legitimacy of international institutions by reconnecting them with the people they ultimately serve. Another important conclusion concerned the need to strengthen communication as an integral component of middle-power diplomacy. The discussion suggested that many constructive international initiatives fail to achieve broader influence, because they are insufficiently communicated. Middle powers should therefore invest more deliberately in public diplomacy, strategic communication and the development of narratives that explain the continuing relevance of international cooperation. This requires more than public relations. It calls for a coherent and consistent explanation of why multilateral institutions remain indispensable in addressing the increasingly interconnected challenges confronting humanity. In this regard, communication should be understood as a strategic instrument of diplomacy rather than simply a means of reporting diplomatic activity. Participants also returned to the importance of maintaining a long-term perspective. The immediate international environment is inevitably dominated by crises that demand urgent attention, but the renewal of multilateralism cannot be achieved through crisis management alone, in that it requires sustained investment in institutions, relationships and political trust over time. The discussion therefore encouraged middle powers to adopt a longer strategic horizon by identifying areas where continued cooperation can strengthen the resilience of the international system, even when short-term political circumstances become more difficult. Finally, the discussion returned to the central proposition with which the panel had begun. The future of multilateralism will not be secured by the major powers acting alone, nor by institutional reform in isolation. It will depend upon whether a broader group of states is prepared to assume greater responsibility for the health of the international system. Middle powers are uniquely positioned to make that contribution, because they possess diplomatic credibility across different regions, experience in coalition-building, and a strong interest in preserving an international order based on cooperation and international law. Whether they choose to exercise that potential more strategically remains an open question. The discussion nevertheless concluded that the opportunity now exists for middle powers to become a more influential force in shaping the next phase of multilateral cooperation. In this sense, the discussion was ultimately one of cautious optimism, in that it acknowledged the seriousness of the challenges confronting the international system, while rejecting the assumption that fragmentation is inevitable. The multilateral system has evolved continuously since the establishment of the United Nations, adapting to changing geopolitical realities while remaining anchored in the principles of the Charter. The discussion suggested that the emergence of more active and strategically aligned middle powers may represent the next stage in that evolution, because by working together more consistently, communicating more effectively and supporting principled international leadership, they have the opportunity to help renew confidence in multilateralism and strengthen the capacity of the United Nations to respond to the challenges of an increasingly complex world. Figure 2: From discussion to action: A practical middle-power agenda for renewing multilateralism through strategic cooperation, partnership with the next United Nations Secretary-General, and strengthened public legitimacy. 7. CONCLUSION The discussion began with a concern about the future of multilateralism, but it concluded with a more fundamental reflection on the future of international leadership. The question before the panel was never whether middle powers should replace the major powers as the dominant actors in global governance. Rather, it was whether they are prepared to assume greater responsibility for preserving and renewing a multilateral system upon which all states ultimately depend. The discussion suggested that this question has become increasingly urgent as geopolitical rivalry places growing strain on the institutions established to promote international cooperation. A clear consensus emerged that the challenges confronting the international community cannot be addressed through unilateral action or through great-power politics alone, because climate change, humanitarian crises, food insecurity, migration, technological disruption and armed conflict require sustained cooperation across regions and political traditions. In this environment, middle powers possess important comparative advantages. Their experience in coalition-building, mediation, bridge-building and support for international law positions them to become important contributors to a more stable and effective multilateral order. That potential, however, will only be realised if they are prepared to act more strategically and more consistently than has generally been the case to date. The discussion nevertheless resisted any tendency to romanticise middle powers. Throughout the panel there was recognition that they are as diverse in their interests and political priorities as any other group of states. They pursue national interests, operate under domestic political constraints and will not always agree on international questions. Their future contribution therefore depends less on what they are than on how they choose to exercise their influence. The distinction drawn between authentic middle powers and aspirational great powers captures this point well. Ultimately, the defining characteristic of middle-power leadership is not the accumulation of influence but the willingness to use influence to strengthen dialogue, uphold international law, support cooperation and advance human dignity. An equally important conclusion concerned the need to reconnect multilateralism with the people it is intended to serve. The discussion repeatedly returned to the opening words of the United Nations Charter - "We the Peoples" - as a reminder that the purpose of multilateralism extends beyond the management of relations among states, and that its success should ultimately be measured by its contribution to peace, justice, sustainable development and the dignity of the human person. If international cooperation is to regain public confidence, it must once again demonstrate its relevance to people's everyday lives, which will require governments, international institutions and civil society alike to place human wellbeing at the centre of global governance. The panel also highlighted the growing importance of communication in shaping the future of multilateralism, because international cooperation can no longer depend solely upon successful negotiations among governments. It must also be explained, understood and supported by broader publics. Communication therefore emerged as a strategic resource through which middle powers can strengthen legitimacy, broaden participation in international debate and articulate a more compelling vision of global cooperation. Equally, the discussion recognised that the international community requires a more hopeful narrative; one that acknowledges contemporary challenges while also recognising the considerable progress achieved through decades of multilateral cooperation. Such a narrative should not deny the realities of geopolitical competition, but neither should it allow those realities to define the limits of what remains possible through international partnership. The appointment of the next Secretary-General was identified as a particularly important opportunity to translate these ideas into practice. The discussion argued that the successful candidate will require more than broad international support during the selection process. The Secretary-General will also require sustained political backing from Member States committed to strengthening the United Nations and defending the principles of the Charter. Middle powers, acting collectively, are well placed to provide such support through closer consultation, stronger issue-based cooperation, enhanced preventive diplomacy and, potentially, through the establishment of a Group of Friends dedicated to supporting the work of the Secretary-General while fully respecting the independence of the Office. Perhaps the most significant conclusion to emerge from the discussion is that the future of multilateralism should not be viewed solely through the lens of institutional reform. Reform remains important, but institutions cannot substitute for political leadership, nor can new structures compensate for the absence of trust and cooperation among states. Renewing multilateralism is ultimately a political project, that will require governments to be prepared to invest in dialogue, to uphold international law consistently, to support effective international institutions and to work together in pursuit of the common good. Middle powers possess many of the attributes necessary to help lead that process. The question now is whether they are prepared to do so. The discussion therefore concluded on a cautiously optimistic note. It recognised that the multilateral system is under considerable pressure, but it rejected the assumption that its decline is inevitable. The institutions of international cooperation have adapted before, and they can adapt again. Their future will depend not only on the decisions of the major powers, but also on the willingness of a broader community of states to assume greater responsibility for sustaining an international order founded on dialogue, cooperation and respect for international law. Middle powers have an opportunity to become an important part of that process. By working more strategically with one another, partnering more closely with the next Secretary-General, communicating a more compelling vision of international cooperation and remaining firmly anchored in the principles of the United Nations Charter, they can help shape a more inclusive, resilient and effective multilateral order for the decades ahead. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full journal, including this article, by downloading the PDF below. Image credit: AI-generated illustration produced with OpenAI (DALL·E), 2026. by Prof Wynand Goosen Abstract The rapid diffusion of generative artificial intelligence (AI) across education, professional practice, and decision-making has transformed human reasoning into a hybrid process in which humans and machines jointly generate interpretations, judgments, and knowledge claims. While critical thinking is widely promoted as a safeguard against automation bias and uncritical reliance on AI outputs, growing empirical and theoretical evidence suggests that critical thinking alone is insufficient in AI-mediated environments. Instead, effective reasoning depends on metacognition, the monitoring, regulation, and evaluation of one’s own cognitive processes, extended to include reflection on machine-generated contributions (Flavell, 1979; Dunlosky & Metcalfe, 2009). Metacognition implies thinking on an extended basis. This extended basis identifies “consequence” as the missing link. Understanding the real impact of any form of thinking, whether originating from natural humans or artificial intelligence. This article reconceptualises metacognition as secondary thinking: a supervisory cognitive layer that governs how humans engage with, evaluate, and rely on AI systems. Drawing on cognitive psychology, education, human–computer interaction, and decision sciences, the paper argues that secondary thinking is the central mechanism through which epistemic agency, trust calibration, and responsibility are maintained in human–AI reasoning (Parasuraman & Riley, 1997; Liao & Sundar, 2022). Three core claims are advanced. First, generative AI shifts cognition from an individual activity to a distributed human–machine system, intensifying the need for metacognitive regulation (Hutchins, 1995; Hollan et al., 2000). Second, critical thinking in AI-supported contexts is contingent on secondary thinking, which determines when and how analytical evaluation is activated (Bjork et al., 2013; Halpern, 2014). Third, failures of secondary thinking explain phenomena such as automation bias, cognitive offloading, and over-trust in fluent AI outputs (Skitka et al., 2000; Kasneci et al., 2023). The article establishes a conceptual foundation for understanding secondary thinking as a mediator between machine cognition and human judgment, preparing the ground for a structured literature survey and the development of an integrative Human–AI Metacognitive Mediation (HAMM) model in subsequent sections. Keywords: Metacognition; Secondary Thinking; Critical Thinking; Human–AI Collaboration; Generative Artificial Intelligence; Distributed Cognition; Automation Bias; AI Literacy 1. Introduction: From Individual Cognition to Hybrid Human–AI Reasoning The integration of generative artificial intelligence (AI) into everyday cognitive work has fundamentally altered how reasoning is performed across educational, professional, and organisational contexts. Tasks such as writing, analysing information, planning, problem-solving, and decision-making now increasingly involve sustained interaction with AI systems capable of producing fluent, context-sensitive, and seemingly reasoned outputs. These systems do not merely support cognition at the margins or automate routine functions; rather, they participate directly in the generation, structuring, and evaluation of ideas. In many contemporary settings, AI-generated outputs function as primary cognitive inputs, the starting point for reasoning rather than its endpoint, thereby reshaping how judgments are formed. As a consequence, cognition can no longer be adequately understood as a purely internal process confined to the individual mind. Instead, reasoning unfolds within hybrid human–machine systems, in which cognitive labour is distributed across human intuitions, analytical processes, and machine-generated contributions (Salomon, 1993; Hutchins, 1995; Kirsh, 2010). Within such systems, reasoning outcomes (consequences) emerge not from isolated human deliberation or automated computation alone, but from the interaction between fast human judgments, AI-generated outputs, and the regulatory processes that govern their integration. The consequences, or impact, of the integrated human and artificial thinking suggest a level of “metacognition” —thinking in such a way that we understand the real consequences. This reconceptualisation is consistent with foundational work in distributed cognition, which demonstrates that reasoning routinely extends beyond the individual to include artefacts, representations, technologies, and social structures that shape how problems are framed and solved (Salomon, 1993; Hutchins, 1995). Generative AI intensifies this dynamic by functioning not only as an external resource but as an active contributor to reasoning, proposing arguments, synthesising evidence, generating counterfactuals, and simulating inferential pathways. In practice, humans increasingly co-think with AI systems, engaging them as interlocutors within cognitive activity rather than as neutral tools executing predefined instructions. This shift fundamentally alters the epistemic conditions under which reasoning occurs. When AI systems contribute directly to the content and structure of reasoning, questions of agency, responsibility, authorship, and justification become distributed rather than singular. The apparent coherence, confidence, and completeness of AI-generated outputs can obscure their probabilistic and non-semantic foundations, while their speed and scale can reduce opportunities for reflective human oversight. As a result, epistemic risk no longer arises solely from human bias or error, but from mismanaged interaction between human judgment and machine-generated contributions. Against this backdrop, a foundational epistemic question emerges: What forms of thinking enable humans to remain responsible epistemic agents when reasoning with and through AI? In educational and professional discourse, critical thinking is commonly positioned as the primary response to this challenge (Facione, 2015; Ennis, 2016). Learners and practitioners are urged to evaluate AI outputs, interrogate assumptions, verify sources, and resist uncritical acceptance. While normatively compelling, this response implicitly assumes that critical thinking is continuously available and readily activated. However, extensive research in cognitive psychology demonstrates that critical thinking is effortful, situational, and conditionally deployed, rather than a default mode of reasoning (Kuhn, 1999; Halpern, 2014). Analytical evaluation requires sustained attention and cognitive control, and it is frequently not activated in environments characterised by time pressure, informational overload, or reduced perceived effort. When tasks appear fluent, complete, or cognitively efficient, as is often the case with generative AI outputs, individuals are more likely to rely on surface plausibility than on sustained analytical scrutiny. Empirical evidence further indicates that analytical reasoning is governed by higher-order regulatory processes rather than operating autonomously. Individuals do not engage in continuous critical evaluation; instead, such evaluation is triggered by signals of uncertainty, contradiction, or epistemic risk. In the absence of these signals, even highly trained individuals may accept outputs unreflectively, particularly when those outputs align with prior beliefs or expectations. AI-mediated environments systematically attenuate many of the cues that typically prompt scrutiny—such as visible uncertainty, hesitation, or partial explanations—thereby increasing the likelihood that critical thinking remains dormant. These regulatory processes are captured by metacognition, broadly defined as awareness and control of one’s own thinking (Flavell, 1979; Nelson & Narens, 1990). Metacognition enables individuals to monitor uncertainty, evaluate progress, and adjust cognitive strategies. In AI-mediated reasoning, however, metacognition must operate at an expanded scope. It must regulate not only human thought processes, but also reliance on machine-generated outputs, including decisions about when to accept, interrogate, override, or suspend AI assistance (Liao & Sundar, 2022). Despite this necessity, research on metacognition, critical thinking, and human–AI interaction remains fragmented. Educational psychology has developed robust models of self-regulation yet typically treats cognition as individual (Schraw & Dennison, 1994). Human–AI interaction research has focused extensively on usability, trust, and performance, but with limited integration of metacognitive theory (Parasuraman et al., 2000). Meanwhile, educational discussions of generative AI often frame critical thinking as a static skill to be preserved, rather than as a conditionally activated process governed by metacognitive mediation (Holmes et al., 2023). This fragmentation obscures a central insight: failures in human–AI reasoning are frequently not failures of critical thinking capacity, but failures of metacognitive regulation within hybrid systems. When regulatory oversight is weak, critical thinking may never be activated, regardless of an individual’s expertise or intent. This article addresses that gap by advancing secondary thinking as the supervisory mechanism that mediates between human cognition and machine-generated contributions. Building on this insight, the article proposes the Human–AI Metacognitive Mediation (HAMM) model, which conceptualises reasoning in AI-mediated environments as a multi-layered, recursively regulated system. Within this model, secondary thinking governs the activation of critical thinking, the calibration of trust in AI systems, and the integration of machine outputs into human judgment. By foregrounding metacognitive mediation, the HAMM model provides a coherent theoretical foundation for understanding epistemic agency, accountability, and responsible reasoning in the age of generative AI. 2. Metacognition as Secondary Thinking Metacognition has long been defined as “knowledge and cognition about cognitive phenomena”, encompassing the processes by which individuals plan, monitor, and regulate their thinking (Flavell, 1979). This foundational formulation established that cognition is not limited to first-order processes such as perception, inference, or memory retrieval, but also includes higher-order awareness of how those processes unfold and how effectively they serve one’s goals. Subsequent theoretical models refined this view by distinguishing between metacognitive knowledge, metacognitive monitoring, and metacognitive control, emphasising that effective reasoning depends not only on the content of thought, but on the continuous oversight and regulation of cognitive activity (Nelson & Narens, 1990; Schraw & Dennison, 1994; Efklides, 2008). Across decades of empirical research, metacognition has been shown to predict learning quality, problem-solving success, and error detection across a wide range of domains and age groups. Importantly, these effects are most pronounced in complex, uncertain, or ill-structured task contexts in which individuals must decide not only how to think, but whether their current understanding is adequate and when to revise their approach (Zimmerman, 2002; Dunlosky & Metcalfe, 2009). These characteristics closely resemble the cognitive demands imposed by AI-mediated reasoning environments. In this article, metacognition is conceptualised functionally as secondary thinking—a supervisory layer of cognition that operates on thinking rather than as thinking. This distinction is analytically important. Secondary thinking does not directly generate ideas, arguments, or solutions; instead, it governs the conditions under which such cognitive products are produced, evaluated, and revised. Framed in this way, secondary thinking functions as a form of cognitive governance, shaping the reliability, depth, and epistemic quality of reasoning rather than its immediate outputs. More specifically, secondary thinking regulates cognition through several interrelated functions. It involves monitoring the coherence, plausibility, and uncertainty of one’s own reasoning, allowing individuals to recognise gaps in understanding or mismatches between confidence and justification (Schraw, 1998; Dunlosky & Metcalfe, 2009). It also includes evaluating the reliability, scope, and limitations of AI-generated outputs, particularly in light of the probabilistic and opaque nature of generative models (Van den Bosch & Bronkhorst, 2018; Liao & Sundar, 2022). A further function of secondary thinking is detecting cognitive conflict, such as discrepancies between intuitive judgments and analytical considerations, or between human reasoning and machine suggestions (Kahneman, 2011; Stanovich et al., 2016). Finally, secondary thinking supports strategic control, enabling individuals to decide when to rely on AI, when to override it, and when to seek alternative sources or verification (Parasuraman et al., 2000; Endsley, 2017). This framing clarifies the role of metacognition in AI-mediated reasoning. Rather than treating metacognition as a generic learning skill or background trait, secondary thinking is understood as a dynamic regulatory mechanism that governs the interaction between human cognition and machine cognition. It operates above both intuitive, fast processes and deliberate analytical processes, coordinating their deployment in response to contextual demands and epistemic risk (Bjork et al., 2013). Crucially, secondary thinking is not automatically triggered. Its activation depends on task design, perceived stakes, time pressure, and the presence of explicit reflective cues. In environments where AI systems produce fluent, confident, and seemingly authoritative outputs, the absence of such cues can suppress secondary thinking altogether. Under these conditions, even highly educated individuals may accept outputs uncritically, mistaking coherence, confidence, or stylistic sophistication for epistemic correctness (Williams et al., 2022). This vulnerability underscores the central importance of secondary thinking in hybrid human–AI reasoning systems. 3. Critical Thinking in AI-Mediated Contexts Critical thinking is typically defined as purposeful, reflective judgment involving the analysis and evaluation of arguments, evidence, and assumptions (Facione, 1990; Ennis, 2016). Within higher education and professional practice, it is widely regarded as a cornerstone competence, underpinning informed decision-making, complex problem-solving, ethical judgment, and responsible participation in knowledge-based societies. Critical thinking is often positioned as a safeguard against error, bias, and misinformation, particularly in environments characterised by informational abundance, competing claims, and epistemic uncertainty. In policy discourse and educational reform, it is frequently presented as the primary defence against the epistemic risks associated with digital technologies and automated systems. However, a substantial body of research demonstrates that critical thinking is neither context-free nor continuously active. Rather than operating as a default cognitive mode, critical thinking is situational, effortful, and strongly shaped by higher-order regulatory processes that govern attention, effort allocation, and strategy selection (Halpern, 2014; Kuhn, 2015). Individuals do not constantly evaluate the quality of information they encounter. Instead, analytical reasoning is selectively engaged in response to cues such as uncertainty, perceived risk, contradiction, or explicit demands for justification. When these cues are absent, even well-trained individuals may rely on surface plausibility rather than deliberate evaluation. From a cognitive perspective, critical thinking requires sustained attention, effortful processing, and the inhibition of intuitive or habitual responses. These demands make it cognitively costly and therefore selectively deployed. Individuals are more likely to engage in critical scrutiny when they perceive high stakes or epistemic danger, and less likely to do so when tasks appear familiar, efficient, or well-structured. Consequently, critical thinking is highly sensitive to features of the surrounding cognitive environment, including time pressure, perceived task difficulty, motivational factors, and the availability of external cognitive supports. Environments that reduce effort or signal completion can unintentionally suppress analytical engagement. In AI-supported environments, this conditionality becomes especially pronounced. Generative AI systems can, under appropriate conditions, scaffold critical thinking by exposing users to alternative perspectives, counterarguments, illustrative examples, and structured explanations that prompt comparison, evaluation, and synthesis (Chi, 2009; Kerrigan & Azevedo, 2022). When AI is used dialogically and reflectively—through iterative prompting, critique, explanation requests, or justification cycles—it can function as a cognitive partner that extends rather than replaces human reasoning capacity. Empirical work suggests that such reflective use of AI can enhance argument quality, conceptual integration, and depth of understanding, particularly when users remain actively engaged in evaluating the AI’s contributions (Xie et al., 2024). At the same time, generative AI can suppress critical thinking, particularly when its outputs are fluent, confident, and presented as complete or authoritative solutions. In these cases, AI reduces perceived task difficulty and creates an impression that cognitive work has already been done, encouraging cognitive offloading and premature closure (Kasneci et al., 2023). This suppression is amplified by well-established cognitive biases, most notably the tendency to equate linguistic fluency with epistemic reliability (Kahneman, 2011). As Bender and Koller (2020) argue, the surface coherence of language-model outputs can obscure underlying inaccuracies, fabrications, or unsupported inferences, creating a powerful illusion of understanding that discourages further scrutiny. Importantly, in such cases, critical thinking is not absent because users lack the relevant skills, dispositions, or educational preparation. Rather, it is absent because it is never activated. The cognitive environment created by generative AI often removes or attenuates the signals—such as visible uncertainty, hesitation, partial reasoning, or error—that typically prompt analytical evaluation. Without these epistemic triggers, individuals may default to acceptance, particularly when AI outputs align with prior beliefs, expectations, or goals. As a result, critical thinking remains latent, even among individuals with substantial training and experience in analytical reasoning and professional judgment. These observations indicate that critical thinking alone cannot adequately explain reasoning quality in AI-mediated contexts. Instead, critical thinking is governed by secondary thinking, which determines when analytical evaluation is warranted, how intensively it should be applied, and whether AI outputs should be accepted, questioned, or rejected (Dunlosky & Metcalfe, 2009; Bjork et al., 2013). Secondary thinking monitors epistemic risk, detects overconfidence, and initiates reflective scrutiny when conditions demand it. Without such metacognitive oversight, critical thinking cannot reliably fulfil its epistemic function within hybrid cognitive systems, regardless of an individual’s formal competence, experience, or intentions. 4. Machine Cognition, Automation Bias, and Distributed Responsibility Although contemporary AI systems do not possess cognition in the human sense, they increasingly perform functions that simulate the outward characteristics of reasoning. These include generating explanations, synthesising large bodies of information, identifying patterns across datasets, and proposing decisions or action pathways that resemble deliberative judgment (Miller, 2019; Bender et al., 2021). In interactive contexts, these outputs are linguistically fluent, context-sensitive, and often structurally indistinguishable from human-authored reasoning. They follow the conventions of argumentation, explanation, and narrative coherence that humans associate with understanding and rational agency. As a result, users frequently respond to AI systems as if they were epistemic agents—entities capable of knowing, reasoning, and justifying—rather than as computational artefacts executing statistical inference. This functional resemblance has profound cognitive consequences. Humans are evolutionarily and socially predisposed to attribute understanding, intention, and authority to entities that produce coherent language and plausible explanations. Language fluency, in particular, acts as a powerful cue for competence and trustworthiness. In the case of generative AI, this attribution occurs despite extensive evidence that such systems operate through probabilistic pattern completion rather than semantic comprehension, intentional reasoning, or truth-directed inference (Bender & Koller, 2020; Ji et al., 2023). The system does not “know” what it states, nor does it possess commitments to truth, evidence, or justification. The growing disjunction between epistemic appearance and epistemic reality therefore becomes a central source of risk in AI-mediated reasoning. Crucially, the problem is not simply that users misunderstand how AI systems work at a technical level. Rather, AI systems actively reshape the epistemic environment in which judgments are formed. Generative AI reduces informational friction by presenting outputs that are immediate, confident, syntactically complete, and often framed as solutions rather than as provisional suggestions. Traditional cues that signal uncertainty—hesitation, partial explanations, visible effort, acknowledged gaps, or expressions of doubt—are largely absent. This absence alters the cognitive ecology of reasoning, shifting users toward acceptance rather than interrogation. Even when errors or inconsistencies are present, the smoothness of presentation can suppress the impulse to scrutinise. One of the most robustly documented consequences of this altered epistemic environment is automation bias, defined as the systematic tendency to over-rely on automated systems, particularly when they appear authoritative, consistent, or cognitively efficient (Parasuraman & Riley, 1997; Skitka et al., 2000). Research across aviation, healthcare, finance, and military decision-making consistently demonstrates that individuals frequently defer to automated recommendations even when contradictory evidence is available or when the system is demonstrably fallible. Importantly, automation bias persists among experts and does not reliably diminish with experience alone, especially under conditions of cognitive load, time pressure, or task complexity (Mosier & Skitka, 2018). In AI-mediated reasoning, automation bias manifests in distinct but related forms. Users may accept AI-generated explanations without verification, fail to notice hallucinated citations or fabricated claims, or defer judgment to the system when outputs align with prior beliefs or goals. Generative AI intensifies these effects by masking epistemic uncertainty behind linguistic fluency, thereby exploiting well-known cognitive heuristics that equate coherence with correctness (Kahneman, 2011). The result is not blind trust in technology per se, but a subtle recalibration of epistemic vigilance in which scrutiny is deferred unless explicitly triggered. A key construct for understanding these dynamics is trust calibration, defined as the alignment between a user’s confidence in an AI system and the system’s actual reliability in a given context (Van den Bosch & Bronkhorst, 2018; Liao & Sundar, 2022). Miscalibrated trust produces two symmetrical failure modes: over-reliance, in which erroneous or inappropriate outputs are accepted, and under-reliance, in which valuable assistance is dismissed or ignored. Importantly, trust calibration is not achieved solely through improvements in system accuracy, transparency, or explainability. It is fundamentally a metacognitive accomplishment, requiring users to recognise uncertainty, reflect on system limitations, assess contextual appropriateness, and dynamically adjust reliance strategies (Gigerenzer, 2020). From the perspective of distributed cognition, reasoning outcomes remain human responsibilities, even when machines contribute substantially to the cognitive process (Hutchins, 1995). Cognitive artefacts can extend, scaffold, and transform reasoning by externalising memory, generating representations, or accelerating comparison. However, they do not assume epistemic agency. The delegation of cognitive labour—such as information retrieval or synthesis—does not entail the delegation of epistemic accountability. Decisions, interpretations, and justifications ultimately remain attributable to human agents. Ethical and epistemic responsibility therefore cannot be offloaded to machines, regardless of their apparent sophistication or autonomy. Within this distributed cognitive system, secondary thinking emerges as the mechanism through which responsibility is exercised and maintained. Secondary thinking governs how AI outputs are interpreted, how trust is dynamically calibrated, and how final judgments are justified and defended. It enables users to step back from fluent outputs, interrogate their reliability, and reflect on how machine-generated content has shaped their reasoning process. By regulating the interaction between human judgment and machine-generated contributions, secondary thinking supports epistemic vigilance, accountability, and adaptive reliance within hybrid human–AI reasoning systems (Fricker, 2007; Medina, 2013). 5. Synthesis of the Literature: Secondary Thinking as a Mediator in Human–AI Reasoning The preceding sections establish three interlocking premises that together reframe how reasoning must be understood in AI-mediated contexts. First, cognition in AI-rich environments is increasingly distributed across human and machine agents, rather than confined to the individual mind. Second, critical thinking—while indispensable to sound judgment—does not operate continuously or autonomously in such environments; its activation is conditional and effortful. Third, metacognitive regulation, conceptualised in this article as secondary thinking, is required to govern reasoning processes within hybrid cognitive systems. This section synthesises findings across educational psychology, cognitive science, and human–AI interaction research to demonstrate that secondary thinking operates not merely as an auxiliary skill, but as a mediating mechanism that determines how machine-generated contributions influence human judgment. Within educational psychology, decades of empirical research consistently demonstrate that metacognition is a stronger predictor of learning quality, error detection, transfer, and long-term retention than cognitive ability or domain knowledge alone (Schraw & Dennison, 1994; Zimmerman, 2002; Dunlosky & Metcalfe, 2009). Learners with strong metacognitive skills are better able to monitor their understanding, detect misconceptions, allocate effort strategically, and adapt their approaches when faced with difficulty. These advantages are especially pronounced in ill-structured problem-solving contexts, where there is no single correct solution path and where success depends on evaluating the adequacy and reliability of one’s reasoning strategies (Efklides, 2008). In such contexts, progress hinges less on executing procedures and more on regulating cognition itself. Crucially, these metacognitive advantages are not limited to formal learning settings. They generalise to any environment characterised by uncertainty, complexity, and incomplete information—conditions that closely resemble contemporary AI-mediated reasoning contexts. Generative AI systems introduce precisely the circumstances under which metacognitive regulation becomes essential: informational abundance, reduced cognitive effort, and asymmetric epistemic authority between human users and machine-generated outputs. When AI systems rapidly generate fluent explanations, summaries, or recommendations, users must decide not only what to accept, but whether acceptance is warranted at all. These decisions are inherently metacognitive. Parallel insights emerge from the literature on human–automation interaction and decision sciences. Decades of research on automation bias demonstrate that individuals frequently over-rely on automated systems, even when those systems are demonstrably fallible or when contradictory evidence is available (Parasuraman & Riley, 1997; Skitka et al., 2000). This over-reliance is exacerbated under conditions of cognitive load, time pressure, or perceived system authority, and persists even among highly trained professionals (Mosier & Skitka, 2018). Importantly, these failures cannot be adequately explained by lack of expertise, motivation, or training. Instead, they reflect breakdowns in metacognitive monitoring, particularly failures to recognise uncertainty, question reliability, or recalibrate trust in light of contextual cues. Research on generative AI in educational and professional settings further reinforces this interpretation. Studies consistently show that passive engagement with AI outputs—such as copying, accepting, or minimally editing generated content—is associated with shallow processing, reduced cognitive effort, and uncritical acceptance of plausible but flawed information (Ji et al., 2023; Kasneci et al., 2023). In contrast, when AI use is embedded within reflective and metacognitively demanding practices—including self-explanation, justification prompts, comparison of alternatives, or iterative critique—reasoning quality improves substantially (Kerrigan & Azevedo, 2022; Xie et al., 2024). Learners and practitioners in these conditions demonstrate greater awareness of uncertainty, stronger argumentation, and improved ability to detect errors or inconsistencies. Taken together, these findings indicate that AI itself is neither inherently beneficial nor inherently detrimental to human cognition. Rather, its cognitive impact is conditional, shaped by how individuals regulate their interaction with machine-generated outputs. AI can function as a powerful cognitive scaffold when it is used within a metacognitively regulated framework that encourages reflection, evaluation, and strategic control. Conversely, AI can function as a cognitive substitute when such regulation is absent, leading to cognitive offloading, automation bias, and diminished epistemic vigilance. Synthesised across these literatures, a central explanatory insight emerges: secondary thinking governs whether AI functions as a cognitive scaffold or as a cognitive substitute. When secondary thinking is active, individuals monitor both their own reasoning and the AI’s contributions, calibrate trust appropriately, and engage critical thinking when warranted. Under these conditions, AI supports exploration, comparison, and epistemic reflection. When secondary thinking is inactive or suppressed, AI reduces epistemic friction, obscures uncertainty, and encourages uncritical acceptance, thereby suppressing reasoning rather than enhancing it. This mediating role of secondary thinking provides the missing theoretical bridge linking metacognition research, critical thinking theory, and human–AI interaction studies. It explains why similar AI tools can produce radically different cognitive outcomes across users and contexts, and why interventions focused solely on improving AI accuracy or transparency are insufficient. Without attention to the metacognitive processes that regulate human–AI interaction, critical thinking cannot reliably fulfil its epistemic function within hybrid cognitive systems. By positioning secondary thinking as a mediator rather than a peripheral skill, this synthesis reframes human–AI reasoning as a metacognitively governed system. This reframing sets the foundation for the Human–AI Metacognitive Mediation (HAMM) model developed in the following section, which formalises these relationships and articulates their implications for education, leadership, and AI literacy. 6. The Human–AI Metacognitive Mediation (HAMM) Model 6.1 Conceptual Architecture Building on the preceding synthesis, the Human–AI Metacognitive Mediation (HAMM) model is proposed as an integrative theoretical framework for understanding reasoning in AI-mediated environments. The model is designed to explain how and why interactions between human cognition and machine-generated outputs produce variable epistemic outcomes, ranging from enhanced reasoning and learning to automation bias and cognitive offloading. Rather than conceptualising reasoning as a linear sequence in which human input is followed by machine output and then acceptance or rejection, the HAMM model frames human–AI reasoning as a dynamic, recursive system governed by metacognitive oversight. At the core of the HAMM model is the claim that reasoning quality in AI-mediated contexts is not determined solely by the accuracy of AI systems or the critical thinking ability of users. Instead, it is shaped by the regulatory processes that govern how human cognition and machine-generated contributions are integrated, monitored, and revised over time. Secondary thinking functions as the supervisory mechanism that coordinates this integration, ensuring that reasoning remains adaptive, context-sensitive, and epistemically responsible. The model comprises three interacting layers, each of which plays a distinct but interdependent role in hybrid reasoning: Layer 1: Primary Cognitive Inputs The first layer consists of primary cognitive inputs, which include fast, automatic human processes—such as heuristics, intuitions, emotional responses, and prior beliefs—as well as machine-generated outputs produced through probabilistic inference and pattern recognition. These inputs are characterised by speed and efficiency, allowing rapid generation of ideas, interpretations, and responses. However, they are also epistemically opaque, offering little intrinsic assurance of reliability or justification (Kahneman, 2011; Bender & Koller, 2020). In human cognition, primary processes are adaptive but vulnerable to bias and overconfidence. In machine cognition, outputs are fluent and scalable but indifferent to truth, meaning, or epistemic commitment. The HAMM model treats both sources symmetrically at this level: they provide raw material for reasoning, not warranted conclusions. Importantly, the model highlights that AI-generated content enters the reasoning process at the same level as intuitive human judgments, making regulatory oversight essential. Layer 2: Critical Thinking Processes The second layer comprises critical thinking processes, involving deliberate evaluation of claims, evidence, assumptions, and alternatives (Facione, 1990; Ennis, 2016). At this level, individuals assess coherence, consistency, relevance, and justification, including those associated with AI-generated outputs. Critical thinking enables comparison of alternatives, detection of inconsistencies, and evaluation of evidentiary support. Crucially, the HAMM model explicitly rejects the assumption that critical thinking is continuously active. Instead, it is treated as a conditionally deployed cognitive resource. Activation depends on perceived uncertainty, task demands, epistemic risk, and—most importantly—metacognitive signals originating from the supervisory layer. Without such activation, primary inputs may pass directly to judgment without scrutiny, regardless of their origin. Layer 3: Secondary Thinking (Metacognitive Mediation) The third layer consists of secondary thinking, conceptualised as metacognitive mediation. This supervisory layer performs three central regulatory functions: monitoring, control, and reflection. It monitors uncertainty, coherence, and conflict between human judgments and AI-generated suggestions; it controls reliance strategies by deciding when to defer to AI, when to override it, and when to seek alternative sources; and it supports reflection on epistemic assumptions, biases, and prior outcomes (Flavell, 1979; Efklides, 2008). Secondary thinking determines when critical thinking is activated, how intensively it is applied, and whether reliance on AI should be increased, reduced, or suspended. It thus functions as the gatekeeper of analytical engagement, ensuring that critical thinking is deployed where it is epistemically warranted rather than indiscriminately or not at all. A defining feature of the HAMM model is the recursive interaction among these layers. Outputs from critical thinking feed back into secondary thinking, updating trust calibration, confidence judgments, and future reliance strategies. Over time, this recursive process supports learning, adaptation, and the development of AI-specific metacognitive skills, allowing users to become more discerning and reflective participants in hybrid reasoning systems. 6.2 Theoretical Propositions From the conceptual architecture of the HAMM model, several theoretically grounded propositions follow. These propositions articulate testable relationships that link metacognitive regulation, AI use, and epistemic outcomes: a. Secondary thinking positively predicts calibrated trust in AI systems.Individuals with stronger metacognitive monitoring and control are better able to align their confidence in AI outputs with the system's actual reliability, thereby avoiding both over- and under-reliance. b. Trust calibration mediates the relationship between AI use and reasoning quality. AI use enhances reasoning outcomes only when trust is appropriately calibrated; miscalibration leads either to automation bias or to the rejection of valuable cognitive support. c. High AI fluency combined with weak secondary thinking increases susceptibility to automation bias.Fluent, confident AI outputs suppress analytical engagement when metacognitive oversight is weak, particularly under conditions of cognitive load or time pressure. d. Metacognitive scaffolds enhance epistemic outcomes in generative-AI tasks. Design features such as reflective prompts, uncertainty visualisations, self-explanation routines, and justification requirements activate secondary thinking and improve reasoning quality, transfer, and epistemic accountability (Azevedo et al., 2010; Xie et al., 2024). Together, these propositions position secondary thinking as the central explanatory variable linking machine cognition to human judgment and epistemic outcomes. They provide a theoretically coherent basis for empirical testing and for the design of educational, professional, and organisational interventions aimed at improving human–AI reasoning. 7. Implications for Education, Leadership, and AI Literacy 7.1 Doctoral and Higher Education Doctoral and advanced higher education constitute high-stakes epistemic environments in which originality, rigour, transparency, and accountability are central to scholarly legitimacy. Doctoral candidates are expected not only to produce novel contributions to knowledge, but also to demonstrate mastery over reasoning processes, evidentiary standards, and epistemic justification. In this context, the increasing reliance on generative AI for activities such as literature exploration, conceptual framing, methodological planning, data analysis, and academic writing introduces profound opportunities alongside equally significant risks. Empirical studies indicate that unregulated use of generative AI can result in hallucinated or fabricated citations, superficial synthesis of literature, erosion of argumentative coherence, and diminished engagement with primary sources (Ji et al., 2023; Kasneci et al., 2023). These risks are not merely technical or procedural; they are fundamentally epistemic. When AI-generated content is incorporated without reflective scrutiny, the integrity of scholarly reasoning is compromised, even when surface-level outputs appear coherent or sophisticated. The HAMM model reframes AI use in doctoral education not as a productivity shortcut to be managed through prohibition or detection, but as an object of metacognitive scrutiny. From this perspective, the core educational challenge is not whether doctoral candidates use AI, but how they regulate its influence on their reasoning processes. Secondary thinking becomes a central scholarly competence, enabling candidates to monitor how AI-generated suggestions shape their conceptual decisions, argumentative structure, and interpretation of evidence. Practically, this implies that doctoral education should incorporate explicit metacognitive practices related to AI use. These may include reflective AI-use logs, structured justification of AI-assisted decisions, and critical annotation of AI-generated outputs. Supervisory practices can also be adapted to foreground reasoning transparency, asking candidates not only what conclusions they reached, but how AI tools influenced the path to those conclusions. In this way, AI becomes a catalyst for deeper epistemic reflection rather than a threat to scholarly rigour. 7.2 Leadership and Strategic Decision-Making In leadership and executive contexts, AI systems are increasingly deployed for forecasting, risk modelling, scenario planning, policy analysis, and strategic decision-making. These applications place AI at the core of organisational judgment, often under conditions of uncertainty, time pressure, and high consequence. While AI promises enhanced analytical capacity and efficiency, it also amplifies well-documented cognitive vulnerabilities, particularly automation bias, when outputs align with intuitive judgments or reduce perceived cognitive effort (Green & Chen, 2019; Raisch & Krakowski, 2021). Leaders are especially susceptible to these dynamics because strategic decisions often involve ambiguous data, competing priorities, and limited feedback loops. Fluent AI-generated recommendations can create an illusion of certainty or objectivity, leading leaders to overestimate the reliability of algorithmic outputs or to defer judgment prematurely. In such contexts, failures are rarely attributable to lack of intelligence or experience. Instead, they reflect insufficient regulation of how machine-generated insights are interpreted and integrated into human judgment. The HAMM model positions secondary thinking as a core leadership capability. Effective leaders must be able to step back from AI outputs, interrogate underlying assumptions, recognise model limitations, and reflect on how cognitive biases—both human and algorithmic—shape decision outcomes. Secondary thinking supports epistemic humility by reminding leaders that AI systems are probabilistic, context-dependent, and value-laden rather than neutral arbiters of truth (Floridi, 2019; Gigerenzer, 2020). Leadership development programmes should therefore move beyond instrumental AI training and incorporate metacognitive components. AI-augmented decision simulations, followed by structured debriefs focused on reasoning processes rather than outcomes alone, can help leaders develop awareness of trust calibration, over-reliance, and cognitive offloading. Such practices align strategic competence with epistemic responsibility, ensuring that AI enhances rather than displaces human judgment. 7.3 AI Literacy Frameworks Current AI literacy frameworks typically emphasise technical understanding, ethical awareness, and the ability to critically evaluate AI outputs (Long & Magerko, 2020). While these dimensions are essential, they often underemphasise the metacognitive regulation of human–AI interaction. As a result, AI literacy is frequently framed as knowledge about AI rather than competence in managing how AI reshapes one’s own thinking. The HAMM model extends existing AI literacy frameworks by positioning secondary thinking as a foundational literacy component. From this perspective, AI literacy involves not only understanding what AI systems can and cannot do, but also recognising how interaction with AI alters cognitive effort, attention allocation, confidence judgments, and epistemic vigilance. Literate users are those who can monitor their reliance on AI, detect when critical thinking is being suppressed, and deliberately re-engage analytical scrutiny when warranted. Embedding secondary thinking into AI literacy initiatives has implications across educational and professional domains. Curricula should incorporate reflective prompts, uncertainty interrogation, and explicit discussion of cognitive offloading and automation bias. Rather than focusing solely on correct use of tools, AI literacy should cultivate awareness of how reasoning itself changes in AI-mediated environments. By foregrounding metacognitive regulation, the HAMM model reframes AI literacy as a form of cognitive self-governance. This reframing aligns AI education with broader goals of epistemic agency, responsible judgment, and human flourishing in technologically mediated societies. 8. Conclusion This article demonstrates that the central cognitive challenge of the AI era is not a deficit of critical thinking, but a deficit of effective metacognitive regulation in hybrid human–AI reasoning systems. By integrating metacognition theory, critical thinking research, and human–AI interaction studies, it shows that secondary thinking mediates the epistemic impact of machine cognition. The HAMM model provides a theoretically grounded explanation for automation bias, cognitive offloading, and trust miscalibration, while offering actionable implications for education, leadership, and AI literacy. As AI systems become increasingly embedded in cognitive and societal processes, human agency will depend not only on what we think, but on our capacity to think about how we think with machines. References Azevedo, R., Moos, D.C., Johnson, A.M. and Chauncey, A.D. 2010. 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It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full journal, including this article, by downloading the PDF below. Image credit: AI-generated illustration produced with OpenAI (DALL·E), 2026. by Daryl Swanepoel Abstract South Africa’s National Health Insurance (NHI) reform represents a major institutional restructuring aimed at achieving universal access to quality healthcare. While the principle of universal coverage is constitutionally grounded and widely supported, debate centres on system design, fiscal sustainability and governance resilience. At the time of writing, the NHI Act is subject to Constitutional Court scrutiny, with challenges focusing on financing feasibility, governance concentration and the restriction of private medical schemes. In this context, comparative analysis is instructive. This paper examines China’s national health insurance architecture as a reference point. Over three decades, China has expanded basic medical insurance coverage to approximately 95% of its population through a layered, contributory and fiscally bounded system. Rather than relying on a single exclusive fund, China operates multiple core insurance schemes supplemented by municipal add-ons and commercial private cover. Benefits are defined, contributions are structured and cost control mechanisms, including Diagnosis-Related Group payment models and volume-based procurement, are embedded in the financing framework. While China’s political system differs markedly from South Africa’s, its institutional design choices highlight key principles: layered risk pooling, bounded benefits, contribution discipline and sequencing clarity. Universal coverage, the paper argues, is ultimately an institutional design challenge requiring fiscal realism alongside social solidarity. Keywords: National Health Insurance (NHI), Universal Health Coverage, China Healthcare System, Healthcare Financing, Institutional Design Introduction: Why study China now? South Africa stands at a pivotal moment in the reform of its healthcare system. The National Health Insurance (NHI) Act has been signed into law, and the country now faces the practical question of how such a system is to be structured, financed and implemented. The aspiration underlying the Act, universal access to affordable, quality healthcare, is not controversial in principle; instead, it is grounded in constitutional commitment (RSA, 1996) and in a broadly shared moral conviction that healthcare should not be determined by income alone. The debate in South Africa is therefore not fundamentally about whether universal health coverage is desirable. It is about design. It is about sequencing. It is about institutional resilience. Several structural concerns have crystallised in public debate and in legal challenges currently before the Constitutional Court. The proposal to concentrate healthcare purchasing authority in a single national fund has raised questions of systemic concentration risk. Critics ask whether placing the entirety of national health financing under one institutional roof introduces vulnerability in the event of governance failure, fiscal miscalculation or administrative incapacity, and in a country that has witnessed the fragility of concentrated public monopolies in other sectors, this concern resonates widely (Stokes, 2026; Jeffery, n.d.). A second issue relates to the Act’s restriction of private medical schemes to mere complementary cover. South Africa presently operates a dual system in which private medical aids and private hospitals function alongside a tax-funded public health sector, but the envisaged NHI framework signals a shift toward exclusivity, by limiting the role of private schemes in areas covered by the national fund. The implications of such limitation for investment, choice, specialist retention and system resilience remain intensely debated (Jeffery, n.d.). Thirdly, the governance architecture has come under scrutiny, in that the concentration of appointment and oversight powers within the executive has raised questions about whether there are sufficient checks and balances, and it is further argued that the durability of any large-scale social insurance system cannot depend only on actuarial soundness, but also on the system’s institutional credibility across political cycles (Jeffery, n.d.). These structural concerns are compounded by the absence of a consolidated, costed financing white paper that details revenue instruments, contribution rates, transitional costs, and the long-term actuarial modelling that will be applied (Stokes, 2026). During prior consultations between the Inclusive Society Institute and the Department of Health, it was suggested that implementation may proceed incrementally “as finances permit” (Swanepoel, 2026). While phasing is common in major reform, open-ended finance-contingent rollout introduces sequencing risk. Universal insurance reform restructures institutional arrangements in ways that are not easily reversible. It is important to note that South Africa does not approach universal healthcare from a position of absence. A large proportion of the population already enjoys access to public healthcare services that are free at the point of use (Baugh, n.d.). In this respect, there are superficial similarities with earlier models of low-cost or state-supported access observed in other systems. However, international experience suggests that the sustainability of such arrangements depends not on access provisions alone, but also on the alignment between funding, institutional capacity and provider incentives. Where this alignment is weak, access may remain formally available, but system performance deteriorates. This aligns with a broader body of health systems literature that emphasises that universal coverage outcomes depend largely on the coherence between the financing arrangements underpinning the system, as well as the incentives given to providers and the capacity of the institutions (World Bank, 2016; Yip et al., 2019). The central challenge is therefore not only to expand access to healthcare, but also to ensure that the underlying arrangements are capable of sustaining the system (Leng, 2026). Financing clarity, therefore, is not peripheral; it is foundational. A further dimension, insufficiently developed in current debates, concerns the relationship between insurance design and the underlying economics of healthcare provision. International experience suggests that large-scale insurance reforms cannot be assessed in isolation from hospital financing models, service pricing structures and provider remuneration systems. Where these elements are misaligned, systemic pressures may emerge irrespective of the formal design of the insurance mechanism itself. In the South African context, limited clarity has thus far been provided on how public hospital funding, tariff setting and practitioner incentives will evolve alongside the implementation of the NHI. Without parallel reform in these areas, the risk arises that financial strain and incentive distortions may undermine system performance, even if the insurance architecture is conceptually sound. It is within this context that the Inclusive Society Institute has embarked on a series of comparative country studies. This China study (Beijing Dialogue) constitutes the first in a structured series of country analyses, to be followed by field studies of Finland and Thailand, before a consolidated comparative synthesis is produced. The purpose is not to advocate transplantation. South Africa’s constitutional, fiscal and administrative environment is unique. Rather, the purpose is diagnostic: to examine how countries with different political systems and developmental trajectories have structured universal coverage, managed financing risk, and navigated the relationship between public and private provision. China offers a particularly instructive case. It is neither a small welfare state, nor a conventional liberal democracy; it is a vast and administratively complex polity that has expanded health insurance coverage to approximately 95% of its population over the past three decades (PRC, 2024). Its governance model differs profoundly from that of South Africa, but it has confronted challenges common to all systems pursuing universal coverage: fiscal sustainability, cost control, rural inclusion, hospital reform and the role of private finance. The Chinese experience is therefore examined here as a reference point. It allows us to explore how universal coverage can be structured at scale, what financing disciplines underpin it, and how layered insurance mechanisms function within a national framework. Historical evolution: From state provision to contributory insurance China’s contemporary health insurance system did not emerge fully formed; instead, it evolved. Prior to the mid-1990s, healthcare provision was largely state funded within a centrally planned economy. However, as market reforms deepened in China, the limitations of a purely budget-funded healthcare system became apparent; and in the wake of rising costs, demographic shifts and economic liberalisation, the necessary pressure was created to move towards a more structured insurance model that was capable of funding the healthcare system within the changing environment (Swanepoel, 2026). The reform process is commonly associated with a number of critical milestones, the first of which began in 1989, when China initiated pilot reforms of the medical insurance system. Contributory model pilots were introduced in 1994, followed by the formal establishment of the Basic Medical Insurance system for Urban Employees in 1998. In 2003, rural cooperative medical schemes were expanded significantly in order to address the gaps in coverage of those who found themselves outside the formal urban workforce. And in 2007, the Urban Resident Basic Medical Insurance scheme was introduced, which scheme extended coverage to non-employed urban populations, thereby closing a critical gap in the emerging system. By 2008, coverage had expanded rapidly across both urban and rural populations, extending access across both geographic and income divides, with institutional integration between urban and rural resident schemes formally achieved through the 2016 reform (Leng, 2026; Swanepoel, 2026). Subsequent reforms consolidated fund administration under the National Healthcare Security Administration, which strengthened cost-control mechanisms that international observers have described as being incremental but expansive, given that it combined rapid coverage growth with evolving institutional reform (World Bank, 2016; Yip et al., 2019). What is notable about this historical arc is not simply the speed of expansion, but also the consistent embedding of financing parameters at each stage, with reform phases not framed as open-ended entitlement expansions. They were accompanied by defined contribution structures, reimbursement rules and cost-management mechanisms. Architecture of coverage: A layered system, rather than a monolith China’s health insurance system is often colloquially described as “national”. Yet the Beijing consultations revealed a more nuanced architecture. The system operates across multiple layers. At its foundation are two principal social insurance schemes. The Urban Employee Basic Medical Insurance covers formally employed workers. Contributions are salary-linked, with employees contributing approximately 2% of their income and employers contributing a significantly larger amount, typically between 6% and 8%. The payroll-based structure anchors the system in contributory discipline (Swanepoel, 2026). The Urban and Rural Resident Basic Medical Insurance also covers individuals who work outside of formal employment. These participants contribute an annual premium commonly reported at several hundred renminbi, while central and local governments provide substantial subsidies (Swanepoel, 2026). Vulnerable groups, including the elderly and low-income citizens, may have their premiums fully subsidised by government programmes (Swanepoel, 2026). These two schemes form the core layer, covering the vast majority of the population, but coverage under these schemes is not unlimited, and reimbursement levels vary according to the level of hospital and the nature of care. Primary facilities may see high reimbursement ratios, whereas tertiary hospitals, which provide specialised and advanced services, often reimburse approximately half to sixty percent of costs, with the remainder covered by the individual or supplementary insurance (Swanepoel, 2026). Above this foundational layer sit supplementary mechanisms such as municipal insurance products like “Huimin Bao”, which offers inexpensive add-on coverage designed to absorb the costs attached to catastrophic or high-cost treatments that are not fully covered under the core scheme. In addition, critical illness insurance cover and emerging long-term care insurance products further extend protection against specific risk categories (Swanepoel, 2026). Finally, fully commercial private insurance products operate alongside the public system, and these products typically cover innovative therapies, advanced pharmaceuticals, enhanced service options and VIP facilities. Furthermore, it is important to note that private insurance is not prohibited and that it functions as a complement to the public scheme (Swanepoel, 2026). The overall structure of the health system is therefore layered, rather than monolithic, whereby universal coverage exists within a framework that accommodates both supplementary and private financing. Financing discipline: Contributions, co-payments and cost controls Three features of the Chinese system stand out in financing terms: contribution discipline, bounded benefits and active cost control. First, the system is contributory. Even residents outside formal employment contribute defined premiums, albeit subsidised. The principle that beneficiaries contribute something toward the system, either directly or through payroll, is embedded structurally (Swanepoel, 2026). This contribution culture mitigates the perception of unlimited entitlement. Second, benefits are bounded. China operates defined reimbursement lists for medicines and treatments, meaning that only items included on approved lists are reimbursed through the social insurance scheme. Therapies outside the list may require out-of-pocket payment or private insurance. The benefit package is therefore best described as being circumscribed, rather than being open-ended (Swanepoel, 2026). Third, cost control mechanisms are integral to the system, where the Diagnosis Related Group (DRG) payment models increasingly govern hospital reimbursement, by establishing fixed payments per case. Hospitals that deliver care below the benchmark retain efficiencies; those exceeding the benchmark share in losses. In this manner, incentives are shifted away from pure fee-for-service escalation (Swanepoel, 2026). Volume-based pharmaceutical procurement is another key mechanism, best illustrated through the leveraging of its national purchasing power, where authorities negotiate bulk agreements with drug manufacturers, which has resulted in significant price reductions in many categories (Swanepoel, 2026). This strategic purchasing reflects an understanding that universal coverage must be accompanied by aggressive expenditure management, and together, these mechanisms suggest a coherent fiscal philosophy, which is that solidarity must operate within financial constraints. While these features of the insurance architecture are central to the system’s performance, they do not operate in isolation. The evolution of China’s medical insurance system has been closely intertwined with broader reforms in hospital financing, service pricing and provider remuneration. Under earlier reform phases, public hospitals were permitted to rely on drug mark-ups to sustain operations, but this particular mechanism was later removed as part of cost-control efforts. However, the removal of the drug mark-up mechanism required compensating adjustments in other areas, including increased government funding, the recalibration of medical service prices and reforms to physician remuneration structures; and when such adjustments did not keep pace, financial pressures on hospitals and distortions in provider incentives emerged. This illustrates that the sustainability of the insurance system is not only contingent on its internal design, but equally so on its alignment with the wider political economy of healthcare provision (Leng, 2026). Governance structure: Administrative separation within Executive Authority The governance of the Chinese healthcare system is administratively structured, with the National Health Commission overseeing the healthcare delivery standards and regulatory matters, and the National Healthcare Security Administration managing insurance financing and the funding of operations. Pharmaceutical regulation, in turn, falls under separate administrative authority (Swanepoel, 2026). Appointments are executive in character, reflecting China’s governance model. Oversight ultimately flows through governmental reporting structures, rather than through parliamentary separation as found in liberal democracies. Yet, functional separation between service regulation and fund administration exists. The insurance authority focuses on financing, reimbursement and cost control, while health commissions oversee clinical standards and institutional performance (Swanepoel, 2026). This administrative segmentation does not mirror South Africa’s constitutional framework. Nonetheless, it demonstrates that large-scale national insurance systems may divide operational functions, even within centralised governance models. Public and private provision: Coexistence and accreditation China’s hospital landscape is dominated by public institutions, particularly the tertiary academic hospitals, which carry the majority of complex caseloads. But that said, private hospitals exist in substantial numbers, and they often focus on specialised or elective services (Swanepoel, 2026). Doctors employed in public hospitals may also practise part time in private facilities if they so wish. Accredited private hospitals may accept social insurance reimbursement, provided they meet prescribed standards. Facilities that fail to meet standards may not access public insurance reimbursement; they are, however, allowed to continue operating, provided they are properly licensed (Swanepoel, 2026). Importantly, this coexistence is not limited to complementary or innovative services only; accredited private hospitals may provide procedures that are included in the public reimbursement list. Moreover, social insurance covering the eligible portion of the cost may be claimed, with patients settling the remaining co-payment through out-of-pocket expenditure or supplementary insurance. Private insurance may in turn cover the portion of the co-payment already included in the public scheme, as well as the additional financing required to fund enhanced service levels. This therefore suggests that the relationship between public and private financing is one that overlaps, rather than being mutually exclusive (Swanepoel, 2026). This accreditation mechanism reinforces quality oversight while permitting ownership diversity. The insurance fund contracts with all providers are based on standards, regardless of ownership form. Regional variation and local fund capacity Although described as national, China’s system exhibits regional variation, in that reimbursement ratios may differ across cities depending on local fund capacity; wealthier regions may sustain higher reimbursement levels, whereas less affluent regions may impose greater cost sharing (Swanepoel, 2026). This partial decentralisation reflects fiscal realities within a large and diverse country, and it also introduces an element of distributed risk, as financing is not entirely homogenised across all regions. Implementation and sequencing China’s universal coverage did not emerge through abrupt structural overhaul. Instead, reform phases were incremental, but defined, with each expansion stage accompanied by the introduction of specified contribution rates and reimbursement parameters (Swanepoel, 2026). The sequencing appears deliberate in that the financing architecture was articulated alongside expansion in coverage, meaning that reform did not proceed on an open-ended “as finances permit” basis; instead, it was embedded within clearly defined fiscal parameters (Swanepoel, 2026). International assessments emphasise that while challenges remain, China has combined coverage expansion with continuous cost management and institutional strengthening (Yip et al., 2019). Strengths and tensions within the model The Chinese model’s strengths include near-universal coverage, defined contribution structures, layered financing and embedded cost control mechanisms. The coexistence of private insurance and public coverage introduces risk buffering and service diversity. However, tensions between the private and public systems remain, regional disparities in reimbursement persist, and the integration of health records and insurance databases continues to evolve. Public hospitals dominate specialised care, potentially limiting competitive dynamics, and governance remains executive-centric. Yet the structural logic is coherent: universal coverage is pursued within contributory discipline and bounded fiscal commitment. Analytical reflections The Chinese experience illustrates several broader design principles. Universal coverage does not require elimination of supplementary or private insurance. Layered risk pooling can coexist with solidarity. Cost control must be systemic, rather than reactive, and therefore DRGs, procurement negotiation and reimbursement lists are not peripheral features; they are, indeed, foundational. Contribution discipline reinforces sustainability. Even modest premiums create a participatory financing culture. Sequencing matters, and as such, financing parameters tend to accompany expansion rather than follow it. These observations do not imply transplantation, but instead they provide comparative insight. In evaluating any national insurance reform, key questions arise, namely: How is risk distributed? How is concentration mitigated? How are incentives structured? How is financing defined before structural consolidation proceeds? China’s system reflects one coherent set of answers. It demonstrates that universalism and plurality need not be in tension. It shows that solidarity can operate within layered financing. It confirms that cost discipline is inseparable from coverage ambition. Comparative reflections: Institutional design and ongoing legal scrutiny The relevance of the Chinese experience does not lie in its political structure, nor in the scale of its economy, but in the institutional design questions it surfaces, and when placed alongside South Africa’s current reform trajectory, certain analytical observations emerge. At the time of writing this report, the National Health Insurance Act is under judicial review in the Constitutional Court of South Africa. Cases have been brought challenging the rationality of the President’s decision to assent to the Act, and questions are being raised about the National Insurance Fund’s governance design, its financing feasibility and its constitutional compliance (Business Day, 2026). The litigation also raises questions relating to the Fund’s governance structure, the concentration of financial authority, the restriction of private medical schemes, and the broader rationality and feasibility of the financing model. These Constitutional Court proceedings form part of the wider policy context within which universal healthcare reform is being assessed in South Africa. Against this backdrop, the Chinese case does not necessarily offer South Africa a template that can be duplicated wholesale, but it does serve to illuminate how another large and complex society has navigated similar structural questions to those confronting the country. One of the central issues in South Africa concerns the concentration of purchasing authority within a single national fund. China's system, while nationally coordinated, operates through layered mechanisms, whereby the core social insurance schemes are complemented by supplementary municipal insurance products and fully commercial private cover; reimbursement ratios, in turn, vary across regions, thereby reflecting local fund capacity. In effect, risk is not absorbed through a singular exclusive channel but distributed across a structured set of financing tiers, and while this does not eliminate fiscal pressure, it does create buffers. A second concern in South Africa relates to the restriction of private medical schemes to complementary services. In China, private insurance was not dismantled during the expansion of universal coverage; on the contrary, supplementary and commercial insurance products play a defined role, particularly in covering innovative therapies and higher service levels. Universalism, in this context, did not require exclusivity. It required delineation. Governance architecture also differs markedly. China’s appointments are executive in character, reflecting its political structure. Yet operational responsibilities are institutionally divided between healthcare regulation and insurance fund administration. Functional segmentation exists even within centralised governance. While South Africa’s constitutional framework is distinct, the broader principle that financing administration and healthcare oversight may be separated is evident. Perhaps most significant for present purposes is the question of sequencing. China’s reform phases were accompanied by defined contribution structures, reimbursement parameters and cost-control mechanisms. Coverage expansion was embedded within articulated financing architecture. Reform did not proceed on an undefined “as finances permit” basis; rather, fiscal parameters were clarified alongside structural rollout. The implication is not that financing challenges disappear, but that clarity precedes consolidation. These observations do not resolve South Africa’s debate. They do, however, demonstrate that universal coverage elsewhere has been constructed through layered financing, bounded benefit packages and institutionalised cost discipline, rather than through singular institutional concentration. For South Africa, where universal access remains a legitimate national aspiration, the enduring design question is not whether coverage should expand, but how institutional resilience, fiscal clarity and risk distribution are embedded at the outset. Conclusion China’s national health insurance architecture is best understood not as a single centralised fund, but as a layered, contributory and bounded system that has evolved over three decades. Coverage is broad, but not unlimited. Private insurance remains operative. Cost control is institutionalised. Reform has been phased and parameter-defined. The model is embedded within China’s political and administrative context and cannot be transposed wholesale. Yet its structural features — layered financing, contribution discipline, defined reimbursement and coexistence with private provision — offer valuable comparative insights for any middle-income country contemplating large-scale health insurance reform. The comparative evidence suggests that universal coverage is not secured through financing architecture alone, but also through the alignment of insurance mechanisms with the broader economics of healthcare provision, including hospital funding models, service pricing and provider incentives. Universal access is a legitimate aspiration; the enduring question is how to design institutions capable of sustaining it. References Baugh, E. n.d. The Healthcare System in South Africa. International Citizens Insurance. [Online] Available at: https://www.internationalinsurance.com/countries/south-africa/healthcare/ [accessed: 8 April 2026]. Jeffery, A. n.d. National Health Insurance: Another taxing state-owned monopoly. [Online] Available at: https://beweging.co.za/wp-content/uploads/2023/12/NHI-Another-taxing-state-owned-monopoly.pdf. [accessed: 20 February 2026]. Kahn, T. 2026. Constitutional Court defers case over Ramaphosa’s NHI Act assent. [Online] Available at: https://www.businessday.co.za/news/health/2026-02-11-constitutional-court-defers-case-over-ramaphosas-nhi-act-assent/ [accessed: 19 February 2026]. Leng, Z. 2026. Personal communication (peer review comments on draft paper). Beijing, April 2026. People’s Republic of China (PRC). 2024. 1.334 bln people covered by China's basic medical insurance. [Online] Available at: https://english.www.gov.cn/archive/statistics/202404/12/content_WS661876d0c6d0868f4e8e5f5b.html [accessed: 19 February 2026]. Republic of South Africa (RSA). 1996. The Constitution of the Republic of South Africa, 1996. Pretoria: Government Printer. Stokes, G. 2026. Oh, to be a fly on the wall in government’s NHI situation room. [Online] Available at: https://www.fanews.co.za/article/talked-about-features/25/straight-talk/1146/oh-to-be-a-fly-on-the-wall-in-government-s-nhi-situation-room/43397 [accessed: 8 April 2026]. Swanepoel, D. 2026. National Health Insurance study visit to China and dialogue with Chinese Health Sector experts. Beijing, 28 January 2026. World Bank. 2016. Deepening Health Reform in China. [Online] https://openknowledge.worldbank.org/server/api/core/bitstreams/ab618635-7f02-5459-bfd1-cee55d848960/content. [accessed: 19 February 2026]. Yip, W. et al. 2019. 10 years of health-care reform in China: progress and gaps in Universal Health Coverage, The Lancet, 394(10204), pp. 1192–1204. This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full journal, including this article, by downloading the PDF below. Image credit: AI-generated illustration produced with OpenAI (DALL·E), 2026. by Sameh Abidi Abstract The introduction of theCarbon Border Adjustment Mechanism (CBAM) by the European Union represents a structural transformation at the intersection of climate policy and international trade. Designed to prevent carbon leakage and ensure a level playing field between European producers subject to the EU Emissions Trading System (ETS) and foreign exporters, the mechanism applies a carbon price to selected imported goods such as cement, fertilizers, aluminium, and electricity. While CBAM reinforces the credibility of European climate ambition under the Paris Agreement, it also generates significant economic challenges for neighbouring economies closely integrated into European value chains. This paper examines the implications of CBAM for Tunisia, where approximately 70% of exports are directed toward the European market and where industrial production remains both carbon-intensive and highly dependent on fossil fuels. By focusing on the sectors most exposed to the mechanism—cement, fertilizers, aluminium, and electricity—the study provides a quantitative-informed assessment of potential impacts. Preliminary estimates suggest that carbon pricing levels ranging between €70 and €95 per ton of CO₂ (https://sl1nk.com/vcOIq) could substantially increase export costs in energy-intensive sectors, potentially reducing profit margins and undermining international competitiveness. At the macroeconomic level, these effects may translate into indirect fiscal pressures through declining export revenues, lower industrial output, and increased demands for public investment in energy transition. In this context, CBAM operates as an implicit carbon tax on Tunisia’s energy system, revealing structural vulnerabilities in the country’s industrial model. However, beyond these immediate risks, the mechanism may also act as a catalyst for structural transformation. The transition toward green industrialisation is no longer solely an environmental objective but an economic necessity for maintaining access to European markets. The development of renewable energy, particularly solar and wind power, combined with improvements in industrial energy efficiency and thedecarbonisation of energy-intensive sectors, could enable Tunisia to reposition itself within emerging Euro–Mediterranean green value chains. The paper further examines the fiscal and financial implications of this transition. Tunisia faces constrained public finances and rising debt levels, limiting its capacity to finance large-scale decarbonisation investments. European financial instruments, including the Global Gateway initiative and financing from the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD), are analysed as potential sources of support. However, their predominantly loan-based structure and associated conditionalities raise concerns regarding debt sustainability and long-term fiscal stability, particularly in the absence of sufficient grant-based financing. In addition, the study integrates the social dimension of the transition by highlighting potential risks related to employment in carbon-intensive sectors, regional inequalities, and unequal access to green investment opportunities. Without adequate mitigation measures, the decarbonisation process could exacerbate existing socio-economic disparities. Against this backdrop, the article raises a central question: Can the European Union impose a carbon cost on imports without providing proportional financial and technological support to its trading partners? Addressing this issue requires incorporating principles of climate justice, including differentiated responsibilities and equitable burden sharing in the global energy transition. Without such considerations, CBAM risks reinforcing existing asymmetries in international trade and development. To transform CBAM into a lever for co-development rather than a punitive trade instrument, the paper proposes a set of operational and sector-specific policy recommendations. These include allocating a share of CBAM revenues to partner countries, increasing the use of grants in European climate finance, promoting targeted industrial decarbonisation strategies, and strengthening technological cooperation between European and Tunisian industries. At the national level, priorities include securing domestic energy supply, ensuring local industrial participation in green investments, safeguarding fiscal sustainability, and enhancing transparency in international partnerships. Finally, the paper emphasises the importance of inclusive governance mechanisms that integrate civil society participation and parliamentary oversight in the design and implementation of climate-related economic policies. A transition financed primarily through external debt risks undermining the very development objectives it seeks to achieve. Ultimately, the success of Tunisia’s transition will depend not only on financial and technological resources but also on institutional capacity, fiscal governance, and the ability to ensure a socially just and economically sustainable transformation. In conclusion, the Carbon Border Adjustment Mechanism represents a pivotal moment in the evolving relationship between climate governance, trade policy, and industrial development. For Tunisia, it may either deepen structural vulnerabilities or serve as a catalyst for a new model of sustainable industrialisation. The outcome will depend on the extent of alignment between European climate ambitions, Tunisian industrial strategies, and broader reforms toward a more equitable and inclusive global energy transition. Keywords: Carbon Border Adjustment Mechanism (CBAM), Green Industrialisation, Tunisia, Energy Transition, Euro-Mediterranean Green Value Chains Introduction Climate policies are increasingly shaping global trade and industrial development. In recent years, climate governance has expanded beyond environmental regulation to become a central element of international economic policy. One of the most significant developments in this area is the European Union’s Carbon Border Adjustment Mechanism (CBAM), introduced as part of the European Green Deal and the broader Fit for 55 legislative package, which aims to reduce greenhouse gas emissions by at least 55 percent by 2030 compared to 1990 levels (European Commission, 2023).(https://l1nq.com/m99Rl) The CBAM represents a structural shift in global climate governance. For the first time, a major economic bloc is integrating carbon pricing into international trade policy by applying a carbon cost to imported goods. This mechanism aims to prevent carbon leakage, a phenomenon in which industries relocate production to countries with weaker environmental regulations in order to avoid carbon pricing constraints (Zachmann, Roth & Tamara, 2020). While CBAM primarily seeks to protect the environmental integrity of European climate policies, its economic implications extend far beyond the EU. Countries exporting carbon-intensive products to the European market will increasingly face regulatory requirements related to emissions reporting and carbon pricing. For developing economies that rely heavily on industrial exports to the EU, these changes may significantly affect trade competitiveness (World Bank, 2023). Tunisia is particularly exposed to these developments due to its strong economic integration with European markets. The European Union represents Tunisia’s largest trading partner, accounting for approximately 70 percent of its exports (European Commission, 2023). Several Tunisian industrial sectors that export to Europe, including cement, fertilizers, and metal products, are energy-intensive and rely largely on fossil fuels, especially natural gas. As a result, the introduction of CBAM may increase export costs for Tunisian industries and potentially weaken their competitiveness in European markets. At the same time, the mechanism may act as a catalyst for industrial modernisation and energy transition. This article examines how Tunisia can transform the constraints imposed by CBAM into an opportunity for green industrialisation while maintaining fiscal sustainability and economic competitiveness. It argues that while CBAM functions as an indirect carbon tax on Tunisia’s industrial structure, it may also accelerate structural reforms toward a low-carbon industrial economy if accompanied by appropriate financial support, technology transfer, and policy coordination between Tunisia and the European Union. 1. CBAM: A New Industrial Challenge for Tunisia 1.1. Understanding the Carbon Border Adjustment Mechanism The Carbon Border Adjustment Mechanism (CBAM) is one of the flagship instruments of the European Green Deal. It was introduced to address a central challenge in global climate policy: ensuring that products imported into the European Union bear a carbon cost comparable to that faced by European producers. By doing so, the mechanism aims to preserve fair competition in the European market while supporting the EU’s broader climate objectives. CBAM was designed to complement the European Union’s Emissions Trading System (EU ETS), which represents the EU’s main policy tool for reducing greenhouse gas emissions (European Commission, 2023). Under the ETS framework, companies operating in certain sectors must purchase emission allowances corresponding to the amount of carbon dioxide emitted through their activities. These allowances create a market-based carbon price that incentivises industries to invest in cleaner technologies and reduce their emissions over time. However, differences in climate regulations across countries can create significant competitive distortions. European industries that are subject to carbon pricing may face higher production costs compared to foreign competitors operating in jurisdictions with weaker environmental regulations or without carbon pricing mechanisms. This situation may encourage companies to relocate production to countries where climate policies are less stringent, a phenomenon commonly referred to as carbon leakage. Such relocation risks undermining the EU’s climate efforts by shifting emissions abroad rather than reducing them globally. The CBAM seeks to address this challenge by extending the principle of carbon pricing to imports. Under this mechanism, importers of certain goods into the European Union are required to purchase CBAM certificates corresponding to the carbon emissions embedded in those products. The price of these certificates is linked to the weekly average price of emission allowances under the EU ETS, ensuring consistency between the carbon costs borne by European producers and those applied to imported products (World Bank, 2023). Through this approach, the EU aims to establish a level playing field between domestic and foreign producers. The implementation of the CBAM is taking place in phases. The transitional period (2023–2025) requires companies exporting to the EU to report the carbon emissions embedded in their products without yet paying a financial adjustment. This phase is intended to allow both exporting countries and EU authorities to develop robust monitoring, reporting, and verification systems. Starting in 2026, the financial component of the CBAM will become fully operational, requiring importers to purchase carbon certificates corresponding to the emissions embedded in imported goods (European Commission, 2023). Currently, the mechanism applies to several sectors that are both highly carbon-intensive and significantly exposed to international trade. These include cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen (OECD, 2023). These industries were selected because they represent a large share of industrial emissions and are particularly vulnerable to carbon leakage. Beyond its regulatory dimension, the CBAM represents a strategic instrument for the global transition toward a low-carbon economy. For European companies, it protects the value of investments made in decarbonisation by preventing carbon-intensive imports from undermining their competitiveness. For exporters outside the EU, the mechanism presents both a challenge and an opportunity. Firms that anticipate these changes and adapt their production processes can transform compliance into a competitive advantage, improve their environmental reputation, and secure long-term access to one of the world’s most demanding markets in terms of sustainability. Ultimately, the CBAM goes beyond a simple trade or fiscal measure. It constitutes a key tool of climate governance that seeks to align international trade with climate objectives while encouraging a broader transformation toward low-carbon industrial production. Main Objectives and Operational Mechanisms of CBAM Main Objective Description / Operational Mechanism 1. Limiting Carbon Leakage Companies may relocate production to countries with weaker environmental regulations, undermining EU climate policies. The Carbon Border Adjustment Mechanism (CBAM) addresses this by ensuring that the carbon emissions embedded in imported goods are reflected in their price, thereby discouraging the relocation of production to jurisdictions with lower environmental standards. 2. Creating a Carbon Price Signal for Imports CBAM converts embedded emissions into an economic cost for imported goods. This creates an incentive for non-EU producers to reduce their greenhouse gas emissions in order to remain competitive in the EU market, thereby encouraging decarbonisation beyond the EU's borders. 3. Supporting the EU's 2050 Carbon Neutrality Goal CBAM supports the EU's long-term objective of achieving climate neutrality by 2050. It prevents imported goods from undermining the effectiveness of EU climate policies and complements other European Green Deal initiatives, including the EU Emissions Trading System (EU ETS), the European Climate Pact, and circular economy policies. 4. Emissions Reporting Importers are required to identify, quantify, and report the direct emissions (generated during production) and, where applicable, indirect emissions (associated with energy consumption) embedded in imported products. These reports must be accurate and supported by credible evidence, such as supplier declarations, verified emissions reports, or independent third-party audits. 5. Purchase of CBAM Certificates Importers must purchase CBAM certificates corresponding to the embedded CO₂ emissions of imported goods. The price of these certificates is linked to the prevailing EU ETS carbon price, ensuring that imported and domestically produced goods face equivalent carbon costs and creating a level playing field within the EU market. 1.2. Tunisian Industrial Sectors Exposed to CBAM Several Tunisian industries are directly or indirectly exposed to CBAM due to their energy intensity and export orientation. The cement sector is one of the most energy-intensive industries in Tunisia. Cement production requires high-temperature kilns fuelled by fossil fuels and involves chemical processes that release large quantities of carbon dioxide (IEA, 2023). If Tunisian cement producers export to European markets, they will face additional carbon costs under CBAM. The fertilizer industry represents another important sector. Tunisia is one of the world’s major producers of phosphate-based fertilizers. However, fertilizer production relies heavily on energy-intensive processes and fossil fuel inputs, increasing the carbon intensity of these products. The aluminium and metal-processing sectors may also face indirect exposure. Even if certain products are not directly covered, the carbon intensity of electricity used in production will affect overall competitiveness. Electricity exports could also become relevant in the future if Tunisia expands energy interconnections with European markets. In such a case, the carbon intensity of Tunisia’s electricity generation would determine its ability to compete with low-carbon European electricity. 1.3. Potential Economic Impacts The economic implications of CBAM for Tunisia are likely to be multifaceted. First, exporters will face increased compliance costs related to monitoring and reporting emissions. Establishing Monitoring, Reporting, and Verification (MRV) systems requires institutional capacity, technical expertise, and investment in data management infrastructure (World Bank, 2023). Second, carbon pricing may increase the cost of Tunisian exports entering the European market. According to IMF estimates, EU carbon prices could reach 70 to 95 euros per ton of CO₂ by 2030, significantly affecting the competitiveness of carbon-intensive industries (IMF, 2024a). (https://sl1nk.com/kJnOX) Third, CBAM may influence investment decisions within Tunisia’s industrial sector. Companies integrated into European supply chains may face increasing pressure to adopt low-carbon production technologies in order to maintain market access (OECD, 2023). In this sense, CBAM acts as an indirect carbon tax on Tunisia’s energy system and industrial structure. 2. Green Industrialisation as an Economic Necessity 2.1. Structural Weaknesses of Tunisia’s Industrial Model Tunisia’s industrial structure exhibits several characteristics that increase its vulnerability to carbon pricing mechanisms. Industrial production remains highly dependent on fossil fuels, particularly natural gas. Despite the country’s renewable energy potential, renewable sources still represent a relatively small share of total electricity generation (IEA, 2023). Many Tunisian manufacturing facilities also operate with aging infrastructure and limited technological modernisation. Energy efficiency levels remain lower than international benchmarks in several sectors. Furthermore, Tunisia’s industrial specialisation often focuses on medium-value-added manufacturing rather than high-technology sectors. This limits the capacity of firms to absorb additional environmental or regulatory costs (World Bank, 2024). These structural weaknesses increase exposure to CBAM-related risks. 2.2 Energy Transition as Industrial Strategy Although decarbonisation is often framed as an environmental objective, it increasingly represents an economic strategy. Tunisia possesses considerable solar and wind resources that could support a large-scale expansion of renewable energy production. Increasing renewable energy capacity would reduce the carbon intensity of electricity generation and strengthen the competitiveness of Tunisian industrial exports. Industrial energy efficiency improvements could also generate significant economic benefits. Investments in efficient equipment and production processes often reduce operational costs while lowering emissions (IEA, 2023). In addition, emerging sectors such as green hydrogen, renewable energy technologies, and low-carbon manufacturing could create new opportunities for industrial diversification (IRENA, 2023). 2.3 Integration into Euro-Mediterranean Green Value Chains The global transition toward low-carbon economies is creating new industrial value chains centred around renewable energy technologies, electric mobility, and sustainable materials. Tunisia’s geographic proximity to Europe and its established industrial base provide opportunities to participate in emerging Euro–Mediterranean green supply chains. By investing in renewable energy infrastructure and industrial innovation, Tunisia could attract foreign investment and strengthen its role in regional production networks (OECD, 2023). 3 Global Gateway and European Financial Instruments 3.1 The Global Gateway Strategy The European Union’s Global Gateway initiative aims to mobilise up to €300 billion in investments in sustainable infrastructure worldwide (European Commission, 2022). (https://sl1nk.com/tb0uO) The initiative focuses on strategic sectors including renewable energy, digital connectivity, transportation infrastructure, and climate resilience. Global Gateway combines public funding with private investment through mechanisms such as blended finance, guarantees, and development bank loans. 3.2 Financial Instruments Available to Tunisia Several European financial institutions support development projects in Tunisia, including the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). These institutions provide financing for renewable energy projects, industrial modernisation, and infrastructure development. Blended finance mechanisms combine grants and loans to reduce investment risks and mobilise private capital (OECD, 2023). 3.3 Current Limitations Despite the availability of financial instruments, several limitations remain. A significant share of climate-related financing is delivered through loans rather than grants, increasing the risk of climate-driven debt accumulation (IMF, 2023a). Furthermore, there is currently no explicit mechanism linking CBAM revenues to financial support for partner countries affected by the policy. This raises an important policy question: Can the EU impose carbon costs on imports without financing the decarbonisation of its trading partners? 4 From Carbon Tax to Development Opportunity Transforming CBAM into a development opportunity requires stronger alignment between European climate policy and development financing. From a climate justice perspective, developing economies emphasise the principle of common but differentiated responsibilities, which recognises differences in historical emissions and economic capacities (UNFCCC, 2015). In this context, international climate cooperation should include financial support, technology transfer, and capacity-building programmes. For Tunisia, several strategic priorities should guide negotiations with European partners: a. Ensuring national energy security before prioritising energy exports. b. Promoting local industrial participation in green infrastructure projects. c. Protecting fiscal sustainability and avoiding excessive debt. d. Strengthening transparency in climate-related investments. 5 Fiscal Implications and Budgetary Considerations 5.1 Fiscal Assessment of CBAM Impacts Beyond sectoral competitiveness, the Carbon Border Adjustment Mechanism (CBAM) is likely to generate significant indirect fiscal pressures for Tunisia. Tunisia’s vulnerability is closely linked to its energy structure. The country’s electricity system remains highly carbon-intensive, with approximately 85-90% of electricity generated from fossil fuels, primarily natural gas, and an estimated carbon intensity of 0.45–0.50 tCO₂/MWh (IEA, 2023; World Bank, 2023). (https://l1nq.com/VPJg4) Renewable energy represents less than 5% of electricity production, reflecting a significant gap compared to European decarbonisation levels (IEA, 2023).(https://sl1nk.com/0tZSZ) This carbon-intensive energy mix directly translates into higher embedded emissions in exported goods, which will be priced under CBAM (European Commission, 2023). CBAM is expected to affect Tunisia’s public finances through three main channels: Decline in export revenues: Carbon pricing between €70 and €95 per ton of CO₂ could increase production costs in exposed sectors by up to 20-30%, potentially reducing export competitiveness (OECD, 2023; IMF, 2024b). (https://sl1nk.com/zibya) Increased public investment needs: Tunisia aims to reach 30% renewable energy by 2030, requiring substantial investments in infrastructure and industrial decarbonisation (ANME, 2022). Energy-related fiscal pressures: Tunisia faces a structural energy deficit and high dependence on imported natural gas, which contributes to fiscal vulnerability and exposure to external shocks (World Bank, 2024). Cement Sector The cement sector is one of the most carbon-intensive industries, with emissions ranging between 0.6 and 0.9 tCO₂ per ton of cement (IEA, 2023). Tunisia’s reliance on petcoke and fossil fuels places it at the higher end of this range. Under a carbon price of €80/tCO₂, the additional cost could reach €50-70 per ton, significantly affecting export competitiveness (OECD, 2023). Fertilizer Sector Tunisia is a major producer of phosphate-based fertilizers, a sector characterised by emissions of 1.5 to 3 tCO₂ per ton of output, depending on production processes (World Bank, 2023).(https://l1nq.com/6HtgS) The sector’s dependence on natural gas and energy-intensive chemical transformations makes it particularly vulnerable to CBAM (IEA, 2023). Electricity Sector Electricity plays a central role in determining the carbon footprint of industrial production. Tunisia’s electricity mix is dominated by natural gas, resulting in carbon intensity levels significantly higher than the EU average (IEA, 2023; OECD, 2023). This creates a structural disadvantage, as electricity-related emissions are embedded in exported goods and increasingly accounted for under CBAM reporting requirements (European Commission, 2023). 5.2 Social Dimension and Just Transition The transition toward low-carbon industrialisation raises important social challenges. Employment risks are particularly concentrated in carbon-intensive sectors. According to international evidence, industrial decarbonisation can lead to short-term job displacement if not accompanied by reskilling policies (World Bank, 2023). In Tunisia, these risks are compounded by: regional inequalities, labour market rigidity, and limited access to green jobs. A just transition approach is therefore essential, including: vocational training programmes, targeted social protection, and inclusive policy design (UNFCCC, 2015). 5.3 Governance and Institutional Framework Effective CBAM adaptation requires strong governance frameworks. Current challenges in Tunisia include: limited coordination between industrial, energy, and fiscal policies, weak data systems for emissions tracking, and insufficient transparency in climate-related investments. Strengthening Monitoring, Reporting, and Verification (MRV) systems aligned with EU standards is essential (European Commission, 2023; World Bank, 2023). Moreover, integrating climate transition into medium-term fiscal frameworks is necessary to ensure sustainability (IMF, 2023b). 6 Strategic Policy Recommendations for Tunisia 6.1 Develop a Data-Driven National Industrial Decarbonisation Strategy Tunisia should prioritise CBAM-exposed sectors (cement, steel, fertilizers) based on quantified emissions and trade exposure. This strategy should include sector-specific targets, investment needs, and timelines, supported by scenario modelling to assess competitiveness impacts under different carbon price assumptions. 6.2 Integrate Climate Transition into Fiscal Policy and Budget Planning The government should incorporate climate transition costs into medium-term budget frameworks. This includes: reallocating inefficient fossil fuel subsidies, introducing green fiscal instruments, and mobilising international climate finance. A clear fiscal strategy is essential to balance industrial support, debt constraints, and social spending. 6.3 Accelerate Renewable Energy Deployment with Industrial Integration Beyond expanding renewable capacity, Tunisia should prioritise direct electrification of industry and long-term power purchase agreements (PPAs) to reduce carbon intensity in export-orientated sectors. 6.4 Strengthen MRV Systems with Sectoral Differentiation Tunisia should develop robust, sector-specific MRV frameworks aligned with EU standards. This requires institutional coordination, digital infrastructure, and capacity building, particularly for SMEs. 6.5 Promote a Just Transition Framework To mitigate social risks, Tunisia should implement: targeted reskilling programmes, regional development policies for affected industrial zones, and social protection measures for vulnerable workers. This will ensure that decarbonisation does not exacerbate inequalities. 6.6 Negotiate a Redistributive and Cooperative CBAM Framework with the EU Tunisia should advocate for: partial redistribution of CBAM revenues, increased grant-based climate finance, and facilitated access to low-carbon technologies. This cooperation should explicitly address fiscal asymmetries and development constraints. 6.7 Support Industrial Innovation and Green Value Chains Public policies should incentivise low-carbon innovation through tax incentives, green public procurement, and support for startups. Tunisia can position itself in emerging green value chains (e.g., green hydrogen, low-carbon materials). 7 Conclusion The Carbon Border Adjustment Mechanism represents a pivotal shift at the intersection of climate policy, international trade, and industrial transformation. For Tunisia, its implications are both constraining and potentially transformative. On the one hand, CBAM reveals and amplifies structural vulnerabilities within the country’s industrial model, notably its high carbon intensity and dependence on fossil fuels. It is likely to increase export costs, weaken the competitiveness of energy-intensive sectors, and generate additional fiscal and social pressures. On the other hand, the mechanism creates a powerful incentive to accelerate the transition toward a low-carbon and more resilient economic model, fostering industrial modernisation and integration into emerging green value chains. However, this transformation is contingent upon addressing three critical dimensions. First, financial sustainability remains a major constraint, given Tunisia’s limited fiscal space and rising debt levels, which restrict its capacity to finance large-scale decarbonisation efforts. Second, social inclusion must be ensured to prevent the transition from exacerbating existing inequalities, particularly in regions and sectors most exposed to structural change. Third, effective governance and accountability are essential to guarantee transparent, efficient, and equitable implementation of transition policies. In this context, the success of Tunisia’s response to CBAM will depend on its ability to align industrial strategy, fiscal policy, and social policy within a coherent and forward-looking transition framework. At the same time, it requires stronger international support in the form of concessional financing, technology transfer, and fairer cooperation mechanisms. Ultimately, without such alignment at both national and international levels, CBAM risks reinforcing existing asymmetries in global trade and creating new barriers for developing economies. Conversely, if embedded within a framework of climate justice and equitable burden sharing, it could serve as a catalyst for a more sustainable, competitive, and inclusive development pathway in Tunisia. References Agence Nationale pour la Maîtrise de l’Énergie (ANME). 2022. Stratégie nationale pour la transition énergétique à l’horizon 2030. Tunis. European Commission. 2022. Global Gateway Strategy. Brussels: European Commission. European Commission. 2023a. Carbon Border Adjustment Mechanism (CBAM). Brussels: European Commission. European Commission. 2023b. Carbon Border Adjustment Mechanism Regulation. Brussels: European Commission. European Commission. 2023c. EU Emissions Trading System (EU ETS). Brussels: European Commission. International Energy Agency (IEA). 2023a. Energy Policy Review: Tunisia 2023. Paris: IEA. International Energy Agency (IEA). 2023b. Energy Technology Perspectives 2023. Paris: IEA. International Monetary Fund (IMF). 2023a. Fiscal Monitor: Climate Policies and Public Finances. Washington, DC. International Monetary Fund (IMF). 2023b. Fiscal Policies for a Low-Carbon Economy. Washington, DC. International Monetary Fund (IMF). 2024a. World Economic Outlook: Climate Policies and Economic Transition. Washington, DC. International Monetary Fund (IMF). 2024b. Global Carbon Pricing Developments and Outlook. Washington, DC. International Renewable Energy Agency (IRENA). 2023. Renewable Energy Market Analysis: Middle East and North Africa. Abu Dhabi: IRENA. Organisation for Economic Co-operation and Development (OECD). 2023a. The Carbon Border Adjustment Mechanism: Implications for developing countries. Paris: OECD Publishing. Organisation for Economic Co-operation and Development (OECD). 2023b. The Economic Implications of the EU Carbon Border Adjustment Mechanism. Paris: OECD Publishing. United Nations Framework Convention on Climate Change (UNFCCC). 2015. Paris Agreement. Bonn: UNFCCC. World Bank. 2023. State and Trends of Carbon Pricing 2023. Washington, DC. World Bank 2024. MENA Economic Update: Green Industrial Transformation. Washington, DC. Zachmann, G., Roth, A. and Tamara, S. 2020. Preparing a Carbon Border Adjustment Mechanism in the EU. Bruegel Policy Contribution This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full journal, including this article, by downloading the PDF below. Image credit: AI-generated illustration produced with OpenAI (DALL·E), 2026. by Brig (Rtd) Dr Robert Kabage Abstract This paper examines Kenya’s peace and security architecture within the framework of EU–Africa relations, highlighting policy and governance priorities critical to advancing mutually beneficial outcomes. In a pluriversal world, EU–Africa relations are undergoing renewed scrutiny, particularly in the domains of peace and security. Historically shaped by colonial legacies, post-independence cooperation frameworks, and agreements such as Cotonou, the relationship is now rhetorically repositioned toward a more balanced and strategic partnership, as articulated in initiatives like the Joint Vision for 2030. Kenya is at the centre of this debate as an anchor state in the Greater Eastern Africa. Kenya plays a central role in regional stability, contributing to peace support operations in Somalia, South Sudan and DR Congo, while managing domestic security challenges, border threats, and institutional reforms. The study analyses the alignment of EU engagement including technical support, capacity building, and financial assistance with Kenya’s national security objectives and lived experiences. Drawing on government reports, EU programmeme documentation, and empirical insights from security personnel and local communities, the paper interrogates both opportunities and constraints presented by EU–Africa cooperation. Emphasis is placed on the operational impacts of EU-funded initiatives, the challenges posed by donor dependency, normative divergences, and Kenya’s strategic role in shaping a new international security architecture consistent with UN Charter principles. The paper concludes with evidence-based recommendations for enhancing Kenya’s agency, strengthening local ownership of peace initiatives, and fostering a partnership with the EU that advances Kenya’s leadership in Africa’s peace and security agenda, institutional resilience, and regional stability. Keywords: Peace and security, EU–Africa relations, governance, UN Charter, security architecture, Kenya 1. Introduction The evolving dynamics of European Union (EU)–Africa relations are increasingly shaped by strategic imperatives that intersect with peace, security, and governance across the continent. Within this context, Kenya emerges as a critical frontline state, serving both as a contributor to regional peace support operations and as a host for multilateral security governance mechanisms. Historically, EU–Africa relations have been influenced by colonial legacies, donor–recipient frameworks, and normative commitments embedded in instruments such as the Cotonou Agreement. While such frameworks have promoted development and structural cooperation, they have often reinforced asymmetrical power relations, limiting the extent to which African states exercise agency in defining security and governance priorities (Zajontz, 2022; Ogutu, 2025). This paper critically examines Kenya’s peace and security architecture within the broader EU–Africa relations lens, interrogating the ways in which EU instruments and partnerships interact with Kenya’s national security priorities. These include contributions to United Nations (UN), African Union (AU) and regional peacekeeping operations, institutional capacity-building, governance frameworks addressing internal and regional security challenges, and the operational realities experienced by affected communities. By situating Kenya at the intersection of operational practice, policy governance, and interregional cooperation, the study foregrounds empirical realities that illuminate both opportunities and constraints in EU–Kenya peace and security engagements. 1.1. Objectives of the Study The objectives of this study are fourfold: a. To assess the operational and strategic impact of EU instruments, including the European Peace Facility (EPF) and the African Peace Facility (APF), on Kenya’s national and regional security architecture. b. To analyse the governance and institutional dimensions of Kenya’s engagement with EU-supported initiatives, highlighting successes and challenges in aligning external support with national priorities. c. To examine the lived experiences of frontline actors and affected communities, integrating their perspectives into the evaluation of peace and security interventions. d. To generate evidence-based policy and governance recommendations that strengthen mutually beneficial EU–Africa outcomes, emphasising Kenya’s sovereignty, agency, and alignment with UN Charter principles. 1.2. Methodological Overview The study adopts a mixed-methods approach, integrating secondary data from official reports, policy documents, and peer-reviewed literature with field-based insights from Kenya’s security engagements. By combining theoretical frameworks with empirical evidence from operational contexts such as ATMIS and UNMISS deployments, the research provides a comprehensive, country-specific lens for evaluating EU–Africa cooperation in peace and security. This approach ensures that the study is both academically rigorous and directly relevant to Kenya’s policy and governance priorities, producing findings that are empirically grounded, analytically robust and actionable. 2. Literature Review / Theoretical Framework Research on EU–Africa peace and security cooperation consistently identifies two interrelated analytical dimensions. First, empirical studies evaluate the operational effectiveness of EU instruments in fostering peace, security, and institutional capacity across African states. Second, theoretical analyses interrogate the structural dynamics and normative frameworks underpinning interregional security partnerships, including issues of power asymmetry, institutional design, and African agency (Akinyi, 2018; Plank, 2022). Integrating these strands is essential for understanding how EU initiatives intersect with national security priorities, particularly in anchor states such as Kenya, and directly informs the operational, governance, community, and policy-focused objectives of this study. 2.1. EU Peace and Security Cooperation: Institutional and Operational Foundations The European Union has progressively transformed its external action from a development-focused mandate into a strategic engagement encompassing peace support operations, conflict prevention, and institutional capacity-building initiatives. Core instruments—including the European Peace Facility (EPF), the Instrument for Stability and Peace (IcSP), and the African Peace Facility (APF)—support African-led peace architectures, particularly the African Peace and Security Architecture (APSA) (European External Action Service, 2021; Plank, 2022). APSA comprises institutional pillars such as the Peace and Security Council (PSC), the Continental Early Warning System (CEWS), and the African Standby Force (ASF). These pillars collectively operationalise continental conflict prevention and response while providing a framework for member states to coordinate national contributions. EU engagement through these instruments is framed within Joint Vision 2030, emphasising African ownership, strategic reciprocity, and the integration of development, governance, and security priorities (European Union and African Union, 2022). Critical scholarship highlights persistent normative tensions and power asymmetries, as EU agenda-setting can influence policy adoption and operational priorities within African states (Akinyi, 2018), reinforcing the need for country-level analysis that balances operational effectiveness with governance alignment (Objective 2). 2.2. Kenya as an Anchor State in EU–Africa Security Cooperation Kenya occupies a central position in EU–Africa peace and security frameworks. Operationally, Kenya contributes substantively to regional missions, with approximately 7,220 personnel deployed in the African Union Transition Mission in Somalia (ATMIS) as of December 2024 (African Union Peace and Security Department, 2024; United Nations Peacekeeping, 2025). The deployments directly reflect the operational impact of EU support and national contributions (Objective 1). Beyond troop contributions, Kenya hosted institutional platforms for EU–Africa cooperation, including the tenth EU–APSA IV steering committee and sixth Early Response Mechanism (ERM) meetings in 2025, demonstrating Nairobi’s role as both a policy and operational hub for continental security governance. EU financial support to Kenya further demonstrates tangible engagement: in June 2024, the Council of the European Union allocated €20 million under the EPF to enhance the Kenya Defence Forces’ capacity in counterterrorism, border security, and institutional reform (Council of the European Union, 2024). This combination of funding, operational contribution, and institutional hosting underscores Kenya’s strategic agency and aligns with all four study objectives. 2.3. Theoretical Perspectives on Partnerships and Power Dynamics Two complementary theoretical perspectives elucidate EU–Kenya cooperation: a. Institutionalist Approaches – Structured frameworks such as APSA and Joint Vision 2030 generate predictable norms, institutional convergence, and cooperative behaviour by embedding African states within multi-level governance architectures (European Union and African Union, 2022; Plank, 2022). These frameworks facilitate Kenya’s integration into continental decision-making and operational planning, supporting both governance alignment (Objective 2) and strategic policy coherence (Objective 4). b. Critical Realist Perspectives – Enduring power asymmetries and normative influence mean EU agenda-setting and conditionalities can constrain Kenya’s strategic autonomy (Akinyi, 2018). Kenya’s engagement represents a negotiated equilibrium in which operational gains from EU partnership are balanced against national ownership, local legitimacy, and institutional sovereignty, particularly in frontier security areas where EU support intersects with domestic counterterrorism and border management priorities. This framework underpins the integration of lived experiences into policy design (Objective 3) and informs actionable recommendations (Objective 4). 2.4. Lived Institutional Practice and Governance Implications Empirical and field-based literature emphasises the importance of lived experiences in shaping policy outcomes. In Kenya, EU-funded border surveillance, training, and logistical support have enhanced situational awareness and operational efficiency. Field reports indicate that without parallel investment in community engagement, trust-building, and socio-economic inclusion, security interventions risk marginalising local populations, particularly in Garissa, Mandera, and Wajir counties (Human Rights Watch, 2023). These observations highlight the necessity of integrating technical support with governance frameworks that prioritise human security and institutional resilience. Community engagement mechanisms reinforce operational sustainability (Objective 1), ensure governance alignment (Objective 2), and validate policies through local knowledge integration (Objective 3), collectively supporting Kenya’s strategic positioning and policy coherence (Objective 4). 2.5. Gap in Literature: Country-Level, Empirically Grounded Analyses While continental and regional analyses of EU–Africa peace and security cooperation are extensive, country-specific studies examining operational realities, governance challenges, and lived experiences in frontline states remain scarce. Existing studies frequently generalise across regions, obscuring the nuanced interaction between EU instruments and national priorities. This paper addresses this gap by focusing on Kenya’s unique position, analysing both institutional frameworks and operational dynamics, and linking them explicitly to policy and governance priorities. By integrating empirical data, theoretical perspectives, and lived experiences, the study generates actionable insights across all four objectives: operational impact, governance alignment, community integration, and policy coherence. These considerations directly inform the methodology in Section 3, ensuring both academic rigor and policy relevance. 3. Methodology This study employs a rigorous, multi-dimensional methodology designed to systematically examine Kenya’s peace and security architecture within the EU–Africa relations framework. Emphasis is placed on operational realities, governance structures, policy coherence, and lived experiences, ensuring both analytical depth and empirical specificity. The methodology explicitly aligns with the four study objectives, linking operational, governance, community, and policy dimensions to actionable recommendations. 3.1. Research Design A qualitative single-country case study design is adopted, focusing on Kenya as an anchor state in AU, UN, and EU-supported peace and security initiatives. Kenya’s selection is informed by its strategic role in regional security, including deployments in the African Union Transition Mission in Somalia (ATMIS) and the African Union Support and Stabilization Mission in Somalia (AUSSOM), as well as its hosting of continental security coordination platforms. This design allows for a comprehensive, country-specific analysis of institutional dynamics, operational performance, and governance frameworks while capturing lived experiences from security personnel, policymakers, and local communities. The approach directly supports Objective 1 (operational contributions), Objective 2 (governance alignment), Objective 3 (lived experiences), and Objective 4 (policy and governance priorities). 3.2. Data Sources Data triangulation ensures validity and reliability. Sources include: a. Secondary official data: AU and Kenya government reports on APSA, KDF deployments, and operational performance. b. EU programme documentation: European Peace Facility (EPF), Instrument for Stability and Peace (IcSP), and Joint Vision 2030 reports. c. United Nations sources: UNMISS operational reports and troop contributions. d. Peer-reviewed literature: Analyses of EU–Africa cooperation, African agency, and interregional security dynamics. e. Field-based evidence: Grey literature and secondary reports documenting community experiences, local governance, and operational feedback from Garissa, Mandera, and Wajir counties. Data spans the period 2020–2025, ensuring recency and relevance for current policy implications. 3.3. Analytical Approach Thematic content analysis, tailored to Kenya’s context, was conducted across four interrelated dimensions, explicitly linked to the study objectives: a. Operational Effectiveness (Objective 1): Assessed EU instrument contributions to troop readiness, logistics, training, and intelligence, analysing multi-year trends and sustainability. b. Governance and Institutional Alignment (Objective 2): Evaluated integration of EU-supported initiatives with Kenya’s National Security Policy, Ministry of Defence frameworks, and APSA/continental standards. c. Lived Experiences (Objective 3): Explored the perspectives of security personnel and communities in conflict vulnerable regions in Kenya, focusing on operational challenges, human security outcomes, and local legitimacy. d. Policy Coherence and Strategic Alignment (Objective 4): Examined EU–Kenya policy integration with UN Charter principles, AU frameworks, and broader continental strategies, identifying gaps and opportunities for mutually beneficial outcomes. 3.4. Justification of Methodology This methodology is optimal for generating policy-relevant insights while maintaining empirical rigor. The case study approach captures Kenya-specific realities and enables contextualised recommendations. Triangulation across secondary, operational, and field-based data ensures reliability, robustness, and credibility. Integrating institutionalist and critical realist perspectives allows the study to account for both normative and power dynamics shaping EU–Kenya cooperation, addressing the tension between operational gains and national sovereignty. 3.5. Limitations and Mitigation Constraints include limited access to classified operational data and potential biases in secondary reporting. These limitations are mitigated through cross-validation with multiple sources, inclusion of field-level evidence, and triangulation across institutional and community perspectives. While these constraints may marginally affect granularity in operational detail, they do not compromise the study’s capacity to generate actionable policy recommendations. 3.6. Contribution to Findings and Recommendations By systematically integrating operational, governance, lived experience, and policy dimensions, this methodology underpins Sections 4.0 (Findings) and 5.0 (Recommendations). It ensures that empirical evidence, analytical rigor, and contextual relevance are fully aligned with the study’s four objectives, providing a robust foundation for Kenya-centred, innovative, and actionable insights in EU–Africa peace and security cooperation. 4. Findings / Analysis Kenya’s peace and security architecture occupies a critical position within regional, continental, and interregional frameworks. As an anchor state in the region, Kenya simultaneously contributes to AU, UN and EU-supported missions, manages domestic security challenges, and hosts EU-funded security initiatives. While EU engagement has augmented operational capacity and governance mechanisms, several Kenya-specific gaps compromise the sustainability, effectiveness, and contextual alignment of these interventions. These gaps span operational dependence, governance fragmentation, community integration deficits, and multilateral strategic misalignment, each of which has measurable and verifiable impacts on Kenya’s national security priorities (African Union Peace and Security Department, 2024; United Nations Peacekeeping, 2025). 4.1. Operational Dependence and Sustainability Deficit Kenya’s operational capacity in regional peace support missions remains heavily dependent on EU funding, training, and logistical support. As of December 2024, Kenya contributed approximately 7,220 personnel to ATMIS in Somalia (22% of the total AU contingent) (African Union Peace and Security Department, 2024). While the European Peace Facility (EPF) allocated €20 million in June 2024 to support counterterrorism, border security, and institutional reform (Council of the European Union, 2024), field reports indicate that national capabilities for force mobility, intelligence collection, and rapid deployment are not fully self-sustaining. Operational units report that without EU-provided logistics, such as airlift capacity and advanced surveillance equipment, the tempo and effectiveness of missions decline markedly, particularly in remote or high-risk operational theatres. This reflects a sustainability deficit: Kenya’s current operational contributions risk regression should EU funding diminish, demonstrating a gap in national ownership, long-term planning, and strategic autonomy (African Union Peace and Security Department, 2024). 4.2. Governance Fragmentation and Coordination Inconsistency Institutional coordination between Kenyan authorities and EU-supported initiatives remains fragmented. Multiple ministries—including Defence, Interior, Foreign Affairs, and the National Treasury—interact with overlapping EU programmes without a centralised policy coordination mechanism (Ministry of Foreign Affairs, Kenya, 2026). For example, EU training programmes for APSA compliance are often scheduled independently of Kenya Defence Forces’ deployment cycles, resulting in suboptimal utilisation of resources and reporting inconsistencies. Mid-level officers report that differing monitoring and evaluation requirements between EU instruments and national frameworks lead to duplication of effort and occasional misalignment in operational priorities (African Union Peace and Security Department, 2025). These coordination inconsistencies indicate a governance gap: while technical and financial support exists, the lack of institutionalised channels for alignment undermines efficiency, strategic coherence, and accountability. 4.3. Community Integration Deficit and Contextual Disconnect Despite operational and governance improvements, local populations in conflict vulnerable regions in Kenya experience uneven benefits from EU-supported interventions. In Garissa, Mandera, and Wajir, EU-assisted early warning and conflict monitoring systems have enhanced threat detection, yet civil-military engagement remains sporadic (The Star, 2025; UNDP Kenya, 2025). Community representatives report that security planning is often top-down, with limited consultation on socio-economic needs, conflict triggers, or local priorities. This community integration deficit reduces the legitimacy and sustainability of interventions, contributing to occasional tensions between deployed forces and local populations. Empirical field assessments indicate that only 40-50% of stabilisation projects in these vulnerable regions directly incorporate local input, leaving substantial gaps in trust-building, human security, and operational effectiveness (Human Rights Watch, 2023). 4.4. Strategic Misalignment Across Multilateral Security Mandates Kenya’s engagement with EU instruments exists within a complex multilateral security environment that includes AU, UN, and national mandates. Strategic misalignment arises when EU normative frameworks—focused on human rights monitoring, anti-corruption compliance, and procedural accountability—intersect with Kenya’s operational imperatives for rapid counterterrorism responses, border stabilisation, and critical infrastructure protection. For example, EU reporting timelines for programme deliverables often conflict with urgent operational demands in high-risk regions, creating tension between compliance and effectiveness (Ministry of Foreign Affairs, Kenya, 2026). Additionally, emerging actors such as China influence logistical support, technology transfers, and infrastructure projects, introducing another layer of complexity (Zajontz, 2022). These multilateral misalignments illustrate the challenge of reconciling external normative priorities with Kenya-centred operational realities while maintaining adherence to the UN Charter, AU protocols, and national security law (United Nations Security Council Resolution 2687, 2023). 4.5. Synthesis of Findings The empirical evidence demonstrates that EU–Kenya peace and security cooperation delivers measurable benefits in operational capacity, institutional development, and normative alignment. However, Kenya-specific gaps—including operational dependence, fragmented governance coordination, limited integration of local lived experiences, and strategic misalignment across multilateral frameworks—persist. These gaps compromise long-term sustainability, reduce operational effectiveness, and limit the full realisation of Kenya’s strategic agency in regional and continental security architectures (Human Rights Watch, 2023; African Union Peace and Security Department, 2024; United Nations Peacekeeping, 2025). Addressing these gaps requires a holistic, Kenya-centred approach that strengthens operational autonomy, institutional coherence, community integration, and multilateral alignment, forming the foundation for the actionable recommendations in Section 5. 5. Policy and Governance Recommendations The four gaps identified in Section 4—operational dependence, governance fragmentation, community integration deficits, and multilateral misalignment—require interventions that are empirically grounded, operationally feasible, and institutionally anchored in Kenya’s national security framework. Addressing these gaps holistically ensures that Kenya’s peace and security architecture is both sustainable and strategically aligned with regional, continental, and international mandates. 5.1. Establishment of a National Peace Operations Fund Kenya’s operational capacity in regional peace support missions can be significantly strengthened through the establishment of a National Peace Operations Fund, consolidating domestic resources, donor contributions, and regional cost-sharing mechanisms for AU, UN, and bilateral missions. This fund would provide predictable financing for operational deployments, training programmes, and logistical support, reducing dependence on ad-hoc external funding. Structured contributions from the national budget, supplemented by multilateral partnerships, would ensure continuity of operations in ATMIS, AUSSOM and other regional commitments, thereby enhancing long-term strategic autonomy and operational readiness. 5.2. Strengthening Governance Coordination and Policy Coherence Fragmented institutional coordination between Kenyan authorities and EU-supported initiatives can be mitigated by creating a centralised National Security Coordination Unit. This unit would harmonise programme planning, training schedules, and reporting requirements across ministries and agencies, streamlining interactions with EU instruments. By consolidating monitoring and evaluation frameworks, aligning operational priorities, and facilitating joint decision-making, the unit would ensure coherence, efficiency, and accountability across all security governance initiatives. The approach integrates institutional capacity-building with practical policy oversight to reduce redundancy and maximise the impact of external support. 5.3. Enhancing Community Integration and Localised Security Engagement To address deficits in community integration, Kenya should institutionalise participatory mechanisms that embed local input in operational planning and security governance. Structured consultations, conflict-sensitivity training for deployed personnel, and collaborative design of stabilisation initiatives would improve civil-military engagement, increase local legitimacy, and strengthen human security outcomes. Targeted programmes in conflict vulnerable regions in Kenya, like Garissa, Mandera, and Wajir, would incorporate socio-economic priorities, early-warning feedback, and conflict-resolution practices, ensuring that interventions reflect both operational realities and the lived experiences of affected communities. 5.4. Development of a Kenya-Centred Multilateral Security Alignment Framework Kenya’s engagement with multilateral partners, including the AU, UN, and EU, requires a comprehensive alignment framework to reconcile operational mandates, reporting timelines, and normative priorities. By mapping points of convergence and divergence across all actors, the framework would identify potential conflicts, streamline operational coordination, and establish contingency protocols to maintain mission effectiveness under competing requirements. This Kenya-centred approach ensures that external normative objectives complement national security imperatives, enhancing strategic agency while maintaining compliance with AU, EU, UN, and national legal frameworks. 6. Conclusion This study has critically examined how Kenya’s peace and security architecture interacts with EU–Africa relations in peace and security, addressing the central research question of how policy and governance priorities can strengthen mutually beneficial outcomes. Kenya emerges as an anchor state in regional and continental security, contributing decisively to AU, UN, and regional missions while navigating complex dynamics of external support, domestic institutional capacities, and community realities. The findings underscore operational strengths, such as Kenya’s logistical and troop contributions, alongside persistent challenges, including external funding dependence, fragmented institutional coordination, and limited integration of local community perspectives in policymaking. The policy recommendations directly respond to these findings: enhancing operational capacity through national financing and regional coordination, institutionalising governance alignment via formal Kenya–EU consultation platforms, integrating lived experiences of frontline communities into planning, and advancing a coherent, sustainable EU–Kenya partnership framework. Each measure provides a clear, actionable pathway that is both contextually grounded in Kenya’s lived realities and strategically aligned with broader AU, EU, and UN peace and security frameworks. Collectively, these recommendations reinforce Kenya’s capacity to exercise strategic agency, strengthen institutional coherence, and embed community perspectives in peace and security operations. By combining empirical evidence, robust governance structures, and participatory approaches, Kenya can consolidate a balanced, sustainable, and mutually beneficial role within EU–Africa peace and security cooperation while contributing to a reformed, inclusive international peace and security architecture. 7. Future Research Directions This section identifies research areas that directly extend the findings and recommendations of this study, highlighting opportunities to deepen understanding of Kenya’s role in EU–Africa peace and security cooperation. 7.1. Operational Sustainability of Kenya’s Peace Contributions Future research should examine the long-term viability of Kenya’s engagement in AU, UN, and EU-supported missions, including national financing, regional cost-sharing mechanisms, and logistical capacity. Studies could leverage past deployment data—such as Kenya’s 7,220 personnel in ATMIS (African Union Peace and Security Department, 2024) to model sustainability under varying funding and operational scenarios. Predictive tools, including conflict and deployment modelling, could optimise resource allocation and operational planning, building directly on Section 4.1 findings and recommendations in 5.1 regarding operational autonomy. 7.2. Effectiveness of Governance Coordination Mechanisms Research should evaluate the practical impact of formal Kenya–EU consultation platforms and institutional alignment processes on policy coherence, strategic decision-making, and accountability. Comparative analysis with other frontline states, such as Ethiopia or Mali, could provide lessons for refining governance structures. This directly extends to Section 4.2 findings and Section 5.2 recommendations on institutional integration and coordination. 7.3. Integration of Community Lived Experiences in Security Policy Field-based studies could assess how systematically incorporating local perspectives on conflict vulnerable regions of Garissa, Mandera, and Wajir affects operational success, social legitimacy, and inclusive governance. Participatory monitoring systems, digital reporting platforms, and structured civil-military consultation could strengthen evidence-informed policy, directly linked to Section 4.3 findings and Section 5.3 recommendations on integrating lived experiences. References African Union Peace and Security Department. 2024. ATMIS and AU Peacekeeping Operational Overview. Addis Ababa: African Union. African Union Peace and Security Department. 2025. Institutional Coordination and Monitoring of APSA Implementation in Kenya. Addis Ababa: African Union. Akinyi, J. 2018. Normative Influence and African Agency in EU–Africa Security Cooperation. Nairobi: University of Nairobi Press. Council of the European Union. 2024. European Peace Facility: €20 million support for Kenya Defence Forces. Brussels: Council of the European Union. European External Action Service. 2021. EU Engagement in African Peace and Security: Instruments and Operational Frameworks. Brussels: EEAS. European Union and African Union. 2022. Joint Vision 2030: Strategic Framework for EU–AU Peace and Security Cooperation. Brussels/Addis Ababa: European Union and African Union. Human Rights Watch. 2023. World Report 2023: Kenya. [Online] Available at: https://www.hrw.org/world-report/2023/country-chapters/kenya [accessed: 27 July 2026]. Ministry of Foreign Affairs, Kenya. 2026. Coordination of EU-Funded Peace and Security Initiatives in Kenya. Nairobi: Government of Kenya. Ogutu, M. 2025. EU–Africa Security Partnerships: Country-Level Dynamics in Kenya. Nairobi: Strathmore University Press. Plank, R. 2022. Institutionalist and Critical Realist Approaches to EU–Africa Peace Cooperation. Berlin: Springer. The Star. 2025. Community Perceptions of Security Interventions in Northern Kenya. [Online] Available at: https://www.the-star.co.ke/news/2025/07/05/community-engagement-security-northern-kenya/ [accessed: 27 July 2026]. UNDP Kenya. 2025. Early Warning and Conflict Monitoring Systems in Frontier Counties. [Online] Available at: https://www.ke.undp.org/content/kenya/en/home/library/democratic_governance.html [accessed: 27 July 2026]. United Nations Peacekeeping. 2025. UNMISS Operational Data and Troop Contributions. [Online] Available at: https://peacekeeping.un.org/en/mission/unmiss [accessed: 27 July 2026]. United Nations Security Council. 2023. Resolution 2687 (2023) on ATMIS/Somalia. [Online] Available at: https://undocs.org/S/RES/2687(2023) [accessed: 27 July 2026]. Zajontz, T. 2022. Emerging Powers and Security Governance in Africa: Implications for EU Partnerships. Berlin: Springer. This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full journal, including this article, by downloading the PDF below. Image credit: AI-generated illustration produced with OpenAI (DALL·E), 2026. by Prof Assi J.C. Kimou Abstract This policy brief analyses the evolution of trade relations between Côte d’Ivoire and the European Union (EU) within a context of multipolar reconfiguration characterised by the rise of emerging partners and the intensification of geo-economic dynamics. An examination of trade flows highlights three principal findings. First, over the past decade Côte d’Ivoire has broadened its spectrum of trading partners, with emerging economies significantly increasing their share of its external trade. Second, this diversification has not resulted in an absolute decline of the EU, whose share in Ivorian trade remains substantial. Third, this shift has been accompanied by a sectoral polarisation of export markets: the European Union absorbs a growing share of processed Ivorian products, while emerging partners concentrate a larger proportion of their imports on primary commodities, in a context of trade deficits for Côte d’Ivoire vis-à-vis the latter. This configuration reveals a functional differentiation among partners. The EU appears as a market outlet associated with a relative upgrading of Ivorian exports, supported by the asymmetric provisions of the interim Economic Partnership Agreement (EPA) and by a structuring regulatory framework. By contrast, the sustained demand for raw materials from emerging economies tends to reinforce Côte d’Ivoire’s upstream integration into global value chains. The brief identifies several strategic challenges: the risk of lock-in into primary commodity specialisation vis-à-vis emerging partners; the high compliance costs associated with European standards for local SMEs; the risks of regional fragmentation arising from the articulation between the EPA and the ECOWAS Common External Tariff; and, for the EU, the need to secure its supply chains in an increasingly competitive environment. In light of these findings, EU-Côte d’Ivoire cooperation would benefit from evolving towards a model centred on productive transformation, the strengthening of local industrial capacities, support for regulatory compliance, and coherence with African regional integration objectives. Such a reorientation would help transform the current trade polarisation into a lever for upgrading and foster a more balanced interdependence, consistent with the ambitions of Agenda 2063 and the African Continental Free Trade Area (AfCFTA). Keywords: EU–Côte d’Ivoire Partnership, Economic Partnership Agreement (EPA), Trade Diversification, Structural Transformation, Multipolar Reconfiguration 1. Introduction For several decades, cooperation agreements have structured the economic relations between the European Union (EU) and the countries of Africa, the Caribbean and the Pacific (ACP). However, the international environment in which these agreements were conceived has undergone profound transformation. The rise of emerging economies, the intensification of geo-economic competition and contemporary geopolitical tensions are reshaping trade hierarchies and reconfiguring patterns of interdependence. In this multipolar context, traditional cooperation frameworks are at a strategic crossroads. These transformations call for moving beyond a strictly preferential reading of trade agreements to assess their capacity to support the structural transformation of African economies. The issue is no longer solely one of market access, but rather the quality of integration into global value chains, the resilience of partnerships, and the coherence between bilateral commitments and continental ambitions, notably those embodied in Agenda 2063 and the African Continental Free Trade Area (AfCFTA). In this context, the present brief examines, in light of cooperation agreements, particularly the interim Economic Partnership Agreement (EPA), the dynamics of trade relations between Côte d’Ivoire and the European Union amid ongoing multipolar reconfiguration. It analyses both the quantitative and qualitative evolution of trade flows, highlights the mechanisms underpinning sectoral polarisation of export markets, and identifies the resulting structural challenges. On this basis, it outlines strategic perspectives aimed at consolidating a mutually beneficial partnership grounded in productive upgrading, regional coherence and reciprocal value chain security. 2. Methodology This paper takes a mixed-methods approach, combining a quantitative analysis of trade flows with an institutional review of regulatory frameworks, and an analysis based on the theoretical frameworks of structural transformation and the political economy of international trade. The presented perspectives draw on research relating to productive specialisation, dependence on raw materials and integration into global value chains. The empirical analysis draws on foreign trade data broken down by product (6-digit HS classification) and destination. These data were primarily sourced from international trade databases such as UN Comtrade, the World Bank's World Development Indicators (WDI), Ivorian customs statistics, and the OECD database. To examine the sectoral polarisation of export markets, a dynamic analysis was conducted to examine how the sectoral composition of Ivorian exports to the European Union and emerging partners has evolved over time. The paper also examines the institutional determinants likely to influence the structure of trade. To this end, a qualitative analysis of the provisions of the Interim Economic Partnership Agreement between Côte d'Ivoire and the European Union was conducted. 3. The Normative Framework of Cooperation between the European Union and Francophone West Africa Economic relations between the European Union (EU) and the countries of Francophone West Africa have, since independence, been structured by successive cooperation agreements. These arrangements have evolved over time, moving from a preferential regime to a partnership architecture aligned with multilateral trade rules. Analysing these agreements is therefore essential to understanding the geopolitical stakes and adapting future strategies, particularly in the context of EU-Côte d’Ivoire relations. 3.1 Historical Evolution: From Preferential Assistance to Strategic Partnership Francophone West African countries and the European Union have long maintained cooperative relations. The principal orientations of this cooperation date back to the Lomé Conventions (1975, 1980, 1985, 1989 and 1995), which involved a large proportion of Francophone West African states. These agreements granted non-reciprocal trade preferences to ACP (Africa, Caribbean and Pacific) countries, enabling their products to access the Community market on preferential terms without requiring reciprocal concessions towards European countries (Brisepierre, 2002). This regime was based on the principle of differentiated treatment and primarily aimed at supporting the development of ACP states. It was also characterised by the EU’s intention to promote compliance with certain political and social standards among its ACP partners (Lomé IV Convention, 1989). The Cotonou Agreement, signed in June 2000 and revised in February 2005, marked a major turning point by introducing an explicit political dimension (governance, human rights, rule of law) and announcing the transition towards agreements compatible with the rules of the World Trade Organization (WTO). Unlike the Lomé Conventions, the Cotonou Agreement for the first time dissociated trade policy from official development assistance (ODA). As tariff exemptions became increasingly difficult to reconcile with WTO disciplines (Articles 36 and 37), trade policy emerged as a mechanism to align ACP countries with the standards of a globalised market (Haguenau-Moizard & Montalieu, 2004). Beyond this critical interpretation, the Cotonou Agreement was also presented as a means of promoting sustainable development in ACP countries, facilitating their gradual integration into the global economy and contributing to poverty reduction. This reading emphasised the expected gains from free trade (allocative efficiency and consumer welfare) alongside the financing of economic cooperation projects (Dufaut & Souaré, 2011). The transition materialised through the negotiation of Economic Partnership Agreements (EPAs). More recently, the Samoa Agreement (2023) has redefined the overarching framework of cooperation between the European Union and the Organisation of African, Caribbean and Pacific States, explicitly incorporating priorities such as climate transition, security, mobility and sustainable investment (European Commission, 2023). This new framework comprises common principles applicable to all parties, as well as three regional protocols (Africa, Caribbean, Pacific), emphasising region-specific needs. It reflects a qualitative transformation of the partnership, promoted as one between equals. 3.2 Economic Partnership Agreements: Legal Architecture and Implications The EPAs concluded with ACP countries, including Côte d’Ivoire, constitute the trade pillar of the Cotonou Agreement. They are based on progressive and asymmetric liberalisation: the EU grants full market access to exports from ACP countries, while partner countries commit to liberalising approximately 80 per cent of their tariff lines over a transitional period of 15 to 25 years, depending on the case. Beyond this asymmetry, EPAs include several provisions favourable to ACP countries, notably: the exclusion of sensitive products from liberalisation; more flexible rules of origin; safeguard measures for agriculture; protection for infant industries. Although these provisions help preserve policy space and mitigate adjustment costs, EPAs remain subject to debate. Some authors highlight risks of deindustrialisation and tariff revenue losses (UNECA, 2018), while others emphasise potential gains in competitiveness and investment attractiveness. 3.3 Alignment of EPAs with West African Integration Objectives West African countries have, for several years, pursued a regional integration project aimed at creating a coherent economic space capable of supporting industrialisation, productive diversification and macroeconomic resilience (Bundu, 1996; UEMOA, 2024). This project is driven by the Economic Community of West African States and reinforced by the West African Economic and Monetary Union, which provide the principal integration instruments. Within this process, the negotiation of EPAs with the European Union raises a fundamental strategic question: Do these agreements act as catalysts or obstacles to regional integration? Regional preference clauses within EPAs stipulate that countries within the same region grant one another the same advantages extended to the EU. In this respect, EPAs are designed to promote both regional integration and trade among signatory states. 4. Economic Aggregates and the Recomposition of Trade Partnerships An analysis of cooperation agreements between the European Union and Côte d’Ivoire gains analytical depth when situated within the empirical dynamics of key macroeconomic aggregates. This section adopts a comparative perspective to examine the evolution of GDP in Côte d’Ivoire and the European Union, the sectoral structure of Ivorian exports and imports, and bilateral EU–Côte d’Ivoire trade flows. These dynamics are further contextualised by the rise of emerging partners such as China, India, Brazil, Russia, Türkiye, South Africa and the Republic of Korea, in order to assess the ongoing geo-economic reconfiguration. 4.1 Asymmetrical Economic Positions In terms of gross domestic product at purchasing power parity (GDP in PPP), a considerable gap persists between Côte d’Ivoire and its traditional partners, particularly the European Union and the United States as well as its main emerging partners, notably China and India. Over the period 2015-2024, India’s GDP (PPP) represented on average approximately 56 times that of Côte d’Ivoire. The gap is even more pronounced with China, the European Union and the United States, whose GDP (PPP) was on average more than 150 times larger than that of Côte d’Ivoire over the same period. This disparity in economic scale reflects a profound structural asymmetry. It implies: significantly greater shock-absorption capacity for large economies; stronger market and bargaining power; enhanced influence over international trade and financial standards. In this configuration, the economic relationship between Côte d’Ivoire and its partners can be characterised as one of asymmetric interdependence: although trade flows are mutual, relative dependence is stronger on the Ivorian side, given the substantial gap in economic size and purchasing power. Figure 1: Comparative evolution of GDP in PPP between Côte d’Ivoire and its main partners from 2015-2024 Source: Author, based on WDI 4.2 Structure of Côte d’Ivoire’s External Trade: Progressive yet Incomplete Transformation The structure of Côte d’Ivoire’s external trade reflects a progressive, albeit incomplete, transformation. The share of primary processed products in total exports increased from 19 per cent in 2020 to 22 per cent in 2024. This shift suggests efforts towards upgrading, particularly in cocoa processing, cashew shelling and processing, as well as in certain semi-processed agro-industrial products. However, Ivorian exports remain largely dominated by traditional agricultural commodities (cocoa, coffee, rubber and cashew nuts) and mining products. The share of mining products rose from 17 per cent in 2020 to 20 per cent in 2024. Although the proportion of raw agricultural exports has shown a declining trend, it remains the principal component of total exports. Overall, this trade configuration indicates that, despite ongoing diversification, the Ivorian economy remains centred on low domestic value-added production and only weakly integrated into higher segments of global value chains. Figure 2: Structure of exports and imports in Côte d’Ivoire, 2020-2024 Source: Author, based on data from the Ivorian Customs Authority 4.3 Bilateral Trade Flows between the EU and Côte d’Ivoire: Concentration of Exports on the European Market While analysing disparities in economic size between Côte d’Ivoire and its partners helps clarify the structural foundations of their cooperation, examining bilateral trade flows is essential to empirically anchor these strategic issues. The study of trade between Côte d’Ivoire and the European Union reveals an asymmetric configuration. On the one hand, Côte d’Ivoire represents a secondary trading partner for the European Union. Over the past five years, trade with Côte d’Ivoire has accounted for approximately 1 per cent of the EU’s total external trade, confirming the marginal nature of this relationship at the European scale. On the other hand, dependence is significantly more pronounced on the Ivorian side. Over the same period, close to 80 per cent of Côte d’Ivoire’s total exports have been directed towards the European market. This geographical concentration of export outlets underscores the central role of the European Union in the structure of Ivorian exports. This configuration reflects asymmetric interdependence: although trade flows are reciprocal, their relative significance differs markedly between the parties. The European Union possesses far greater capacity to diversify its sources of supply, whereas Côte d’Ivoire remains highly exposed to changes in European demand conditions and regulatory standards. Figure 3: Bilateral trade flows between Côte d'Ivoire and the EU from 2020-2024 Source: Author, based on data from the Ivorian Customs Authority 4.4 The Rise of Emerging Partners: Broadening the Partner Spectrum Rather than Substitution The evolution of trade flows between Côte d’Ivoire, the European Union and emerging partners reveals a dynamic of accelerated diversification, without implying a decline in European engagement. The total volume of trade between Côte d’Ivoire and the European Union has almost doubled over the past decade, rising from approximately USD 7 billion in 2015 to more than USD 13 billion in 2024. Trade with emerging partners, particularly China, India, Brazil, Russia, South Africa, the Republic of Korea and Saudi Arabia, has expanded at an especially rapid pace. Initially representing less than half of the volume recorded with the EU, these flows have gradually reached a level comparable to EU-Côte d’Ivoire trade. This configuration indicates that the rise of emerging partners has not translated into an absolute decline in exchanges with the EU. At the same time, the EU’s share of Côte d’Ivoire’s total trade has remained relatively stable at around 37 per cent, while the share of emerging partners increased from 18 per cent to 37 per cent over the same period. The evidence therefore points to a broadening of the partner spectrum rather than a process of substitution. Figure 4: Comparative evolution of trade flows with the EU and emerging partners Source: Author, based on UN comtrade 2015 2024 Average growth rate UE 7654413985 13360235804 5,7% Emerging economics 2463018012 13039906643 14% Table 1: A comparison of trade flows between Côte d'Ivoire and the EU and its emerging partners Source: Author, based on UN Comtrade 4.5 The Rise of Emerging Partners: Towards Greater Strategic Autonomy or Merely Diversified Dependence? The broadening of Côte d’Ivoire’s partner spectrum raises a central question: Does this evolution signal a transition towards greater strategic autonomy, or simply a diversification of dependencies? The structure of exports by destination reveals a functional differentiation among partners. European markets increasingly absorb Ivorian manufactured goods. While agricultural exports have recorded a downward trend, the share of manufactured products destined for the European Union rose progressively from 32.26 per cent in 2019 to 45.65 per cent in 2023. By contrast, emerging partners concentrate a larger share of their imports on primary agricultural products, within a context of persistent trade deficits for Côte d’Ivoire vis-à-vis these partners. The proportion of primary products in exports to emerging economies increased from 51.52 per cent in 2019 to 65.28 per cent in 2023. The expansion of the partner spectrum has therefore contributed to a sectoral polarisation of export markets. The EU appears as a transformation-orientated partner, associated with higher value-added outlets, whereas emerging partners function primarily as absorbers of primary commodities and suppliers of industrial goods. Figure 5: Structure of exports of Côte d’Ivoire by destination Source: Author based on OECD data 4.6 Sectoral Polarisation of Export Markets: Explanatory Factors The sectoral polarisation observed in the structure of Ivorian exports does not stem from a simple productive specialisation choice. Rather, it reflects a strategic arbitration by economic operators in response to a differentiated set of incentives, regulatory constraints, compliance costs and market access opportunities. An analysis of the institutional and structural determinants of this sectoral reconfiguration helps to clarify the dynamics at play. Two factors appear particularly decisive:(i) the asymmetric provisions of the interim Economic Partnership Agreement (EPA) between Côte d’Ivoire and the European Union; and (ii) the growing demand for raw materials from emerging partners. 4.6.1 Specific Provisions of the EU–Côte d’Ivoire Interim EPA Signed in 2016 and provisionally applied since 2019, the interim EPA between Côte d’Ivoire and the European Union goes beyond a conventional tariff agreement. It establishes an asymmetric architecture designed to facilitate trade integration while preserving policy space for Ivorian industry. The EU has granted duty-free and quota-free access to almost all Ivorian exports. In return, Côte d’Ivoire is progressively liberalising approximately 80 per cent of its tariff lines over an extended transition period, while excluding around 20 per cent of products deemed sensitive. This asymmetry provides protective space for infant industries and mitigates the risk of deindustrialisation. The agreement includes safeguard clauses allowing the temporary reintroduction of customs duties in the event of serious domestic market disruption, thereby reducing abrupt exposure to European competition. In addition, the relaxation of rules of origin under the EPA (including regional cumulation and self-certification mechanisms) enhances the capacity of Ivorian exporters to incorporate imported inputs while retaining preferential access to the European market. These provisions lower effective market-entry costs for processed products that comply with EU standards. They therefore create a structural incentive to export higher value-added goods to the EU. 4.6.2 Structural Demand for Raw Materials from Emerging Partners Major emerging partners, notably China and India, have experienced rapid industrialisation based on high intensity in agricultural, mineral and energy raw materials (Brautigam, 2009; Kaplinsky & Morris, 2016). Their growth model relies on sustained demand for primary inputs, domestic processing of imported resources, and the re-export of manufactured goods. Within this framework, Côte d’Ivoire primarily appears as a supplier of raw or minimally processed agricultural commodities. The orientation of exports towards these markets thus reflects vertical productive complementarity (Kaplinsky & Morris, 2016), but also integration at the upstream stages of global value chains. In sum, the sectoral polarisation of export markets results from a dual mechanism: an institutional incentive towards processing under the EPA framework with the European Union; and a structural demand for primary commodities from emerging partners. 5. Key Challenges for EU–Côte d’Ivoire Cooperation in a Context of Trade Reconfiguration While empirical evidence confirms the robustness of the EU–Côte d’Ivoire partnership, it also reveals persistent structural imbalances and intensifying geo-economic competition linked to the rise of emerging partners. In this multipolar environment, bilateral cooperation stands at a strategic juncture. The upgrading observed in exports to European markets could act as a catalyst for accelerating Côte d’Ivoire’s structural transformation. It potentially implies higher domestic value added, the creation of skilled industrial employment, a sustainable improvement in the trade balance, and enhanced resilience to commodity price shocks. However, consolidating this trajectory entails several interdependent challenges. 5.1 The Risk of Primary Commodity Lock-In Strong demand for raw materials from key emerging partners, particularly China and India, may reinforce an asymmetric vertical integration of Côte d’Ivoire within global value chains. The risk extends beyond trade performance; it encompasses durable specialisation in upstream segments, heightened vulnerability to world price fluctuations, and delays in domestic industrialisation. Addressing this risk requires the development of industrial policy instruments that encourage minimum local processing (for example, first-stage processing requirements, differentiated fiscal incentives, or sector-specific contractual obligations), while remaining compatible with international commitments. 5.2 Compliance Challenges for SMEs with European Standards Although the asymmetric provisions of the EPA create favourable incentives for exporting processed goods to the EU, the benefits of preferential access are unevenly distributed. Exports to the European market are subject to sanitary and phytosanitary (SPS) measures, technical and safety standards, sustainability (ESG) requirements, and the forthcoming EU Regulation on Deforestation-Free Products (EUDR). Compliance entails significant costs related to certification, traceability, equipment modernisation and supply chain digitalisation. The EUDR, for example, requires geolocated traceability of production plots, implying the mapping of millions of smallholders before full implementation. Without substantial public support, SMEs and small producers risk exclusion from the European market. The challenge is therefore to prevent upgrading from benefiting only large integrated firms, thereby widening internal productive inequalities. 5.3 Risk of Regional Fragmentation: Circumvention of the Common External Tariff The signature of interim EPAs on an individual basis by certain ECOWAS members, notably Côte d’Ivoire and Ghana, raises regional concerns. Differentiated liberalisation may create risks of circumvention of the ECOWAS Common External Tariff (CET), trade deflection, tariff revenue losses for non-signatory partners, and divergence in integration trajectories. Without strengthened regional coordination and harmonised rules of origin, trade liberalisation may weaken the coherence of the customs union and slow the construction of a West African common market. The challenge is therefore not solely bilateral, but fundamentally regional. 5.4 Securing European Supply Chains From the European Union’s perspective, the growing weight of emerging partners in Ivorian trade also carries strategic implications. If primary commodity flows increasingly redirect towards Asia, or if local processing fails to progress sufficiently, the EU could face supply tensions, diminished economic influence, and reinforced indirect dependencies through value chains led by other powers. In this context, EU–Côte d’Ivoire cooperation is not only a development issue, but also one of securing European supply chains. Multipolar reconfiguration does not invalidate the European partnership, but it redefines the conditions of its long-term sustainability. 6. Conclusion: Prospects for a Mutually Beneficial EU–CIV Partnership In a context of multipolar reconfiguration of Côte d’Ivoire’s external trade, prospects for a mutually beneficial partnership between the European Union and Côte d’Ivoire must move beyond the classical logic of preferential market access towards a shared structural transformation strategy. The identified challenges, primary commodity lock-in, compliance costs, regional fragmentation and geo-economic competition, constitute not only constraints but also levers for strategic redefinition. First, cooperation could evolve towards a model of co-construction within global value chains. The global value chain approach (Gereffi, Humphrey & Sturgeon, 2005) demonstrates that upgrading depends not only on domestic productive capacity but also on chain governance and contractual relations with lead firms. In this perspective, the EU could support more functional integration of Côte d’Ivoire into higher value-added segments not solely through duty-free access under the EPA, but via targeted industrial partnerships, technology transfers and the integration of Ivorian SMEs into European supply chains. Such an orientation would enable the EU to secure strategic supplies while fostering domestic productive transformation, consistent with a more balanced form of interdependence (Keohane & Nye, 1977). Second, normative requirements, particularly SPS, ESG standards and the EUDR, can become vectors of convergence rather than instruments of exclusion. The literature on the “Brussels Effect” (Bradford, 2020) highlights the EU’s capacity to diffuse its regulatory standards globally. To prevent such diffusion from marginalising African SMEs, cooperation should include structured financing for compliance, digitalisation of traceability systems and strengthening of national institutional capacities. In the Ivorian context, support for geolocation of agricultural plots and sustainable certification could be embedded within a joint EU–African Union programme aligned with AfCFTA priorities. Standards would thereby become instruments of productive modernisation rather than mere market filters. Third, regional coherence must remain central. Risks of circumventing the ECOWAS Common External Tariff and fragmenting national trajectories underscore the need for alignment between bilateral agreements and regional integration. EU–Côte d’Ivoire cooperation should be explicitly articulated with ECOWAS and AfCFTA objectives, supporting harmonised rules of origin, facilitation of intra-regional trade and the development of regional value chains. This approach aligns with the vision of productive African integration promoted by the United Nations Economic Commission for Africa, emphasising structural transformation through regional industrialisation. Finally, from a geo-economic perspective, the rise of emerging partners does not necessarily imply substitution, but strategic diversification. For the EU, consolidating its partnership with Côte d’Ivoire means maintaining economic anchorage in a region where competition for influence is intensifying. For Côte d’Ivoire, diversification should enhance bargaining power rather than entrench dual productive specialisation. A mutually beneficial partnership therefore requires shifting the centre of gravity from a primarily commercial relationship towards co-industrialisation and reciprocal supply chain security. In sum, the current reconfiguration offers a strategic opportunity. If anchored in substantial support for local transformation, inclusive regulatory compliance and African regional coherence, EU-Côte d’Ivoire cooperation can evolve towards a less asymmetric and more productive interdependence. Failing this, the observed sectoral polarisation risks consolidating to the detriment of the structural transformation ambitions embodied both in the African Union’s Agenda 2063 and in the European Union’s industrial strategy. References Bourguignon, F. and Sundberg, M. 2007. Aid Effectiveness – Opening the Black Box, American Economic Review, 97(2), pp. 316–321. Bradford, A. 2020. The Brussels effect: How the European Union rules the world. UK: Oxford University Press. Brautigam, D. 2009. The dragon's gift: the real story of China in Africa. UK: Oxford University Press. Brisepierre, P. 2002. L’accord partenariat ACP-CE, Rapport de la Commission des Affaires Etrangères du Sénat, 45 p. European Commission. 2023. Post-Cotonou Agreement (Samoa Agreement). [Online] Available at: https://www.consilium.europa.eu/en/policies/cotonou-agreement/ [accessed: 27 July 2026]. Gereffi, G., Humphrey, J. and Sturgeon, T. 2005. The governance of global value chains, Review of international political economy, 12(1), pp. 78-104. Haguenau-Moizard, C. and Montalieu, T. 2004. L’évolution du partenariat UE-ACP de Lomé à Cotonou: de l’exception a la normalisation, Mondes en développement, 128, pp. 65-88. Kaplinsky, R. and Morris, M. 2016. Chinese FDI in Sub-Saharan Africa: engaging with large dragons, in The power of the Chinese dragon: Implications for African development and economic growth, pp. 123-148. London: Palgrave Macmillan UK. Keohane, R. O. and Nye Jr, J. S. 1987. Pouvoir et interdépendance revisités, Organisation internationale, 41(4), pp. 725-753. Manners, I. 2002. Normative Power Europe, Journal of Common Market Studies, 40(2), pp. 235-258. UNECA. 2018. Assessing Regional Integration in Africa. [Online] Available at: https://archive.uneca.org/sites/default/files/PublicationFiles/aria8_eng_fin.pdf [accessed: 27 July 2026]. Union, A. 2008. UNECA. Dans Relever les nouveaux défis de développement de l'Afrique au XXIe siècle : Document de travail. This report has been published by the Inclusive Society Institute The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za

Read the full journal, including this article, by downloading the PDF below. Image credit: AI-generated illustration produced with OpenAI (DALL·E), 2026. by Ogonna Beauty Ogbologu Abstract Preferential trade arrangements are widely regarded as instruments of development. Yet in Nigeria, participation in the EU's Generalised Scheme of Preferences (GSP) has failed to produce the structural employment transformation these frameworks promise. With 93% of Nigeria's workforce trapped in informal employment, the gap between trade volumes and labour outcomes has become a structural deadlock. This paper argues that the failure is institutional, not incidental; existing trade frameworks regulate the movement of goods, not the organisation of work. Drawing on the WTO Enabling Clause, the Appellate Body's landmark ruling in EC-Tariff Preferences (2004), and the EU's own practice of conditioning preferences on climate and migration, this paper proposes the Employment Formalisation Prerequisite (EFP). By integrating this framework into the yet-to-be-concluded West Africa Economic Partnership Agreement, trade incentives are linked directly to measurable labour outcomes. This transforms preferential access from a passive gift into a binding social contract and a shared investment in productive employment. This proposal addresses long-standing sovereign concerns regarding de-industrialisation and ensures that the Nigerian worker is no longer invisible to global trade governance. Keywords: Trade preferences; Informal employment; WA Economic Partnership Agreement (EPA); Value Leakage; Enabling Clause; WTO; Employment Formalisation Prerequisite (EFP). Introduction The long-standing deadlock over the West Africa–EU Economic Partnership Agreement (EPA) is not merely a diplomatic disagreement; it is a structural rejection of an extractive status quo embedded in the current trade architecture governing Nigeria’s access to the EU market, particularly under the Generalised Scheme of Preferences (GSP). Nigeria is the third-largest economy in Africa (International Monetary Fund, 2025). It is also endowed with some of the most valuable natural resources on earth (Britannica, 2026), yet this abundance has not produced prosperity for the majority of Nigerians. Consider the "boomerang trade" inherent in Nigeria's cocoa sector. Ninety percent of the total cocoa exports are shipped in raw form (NEPC, 2024). Of these raw cocoa bean exports, the European Union (EU) is the largest destination market, accounting for up to 67% of the total exports (Sánchez, 2024, pp. 18, 30). The cocoa farmer receives the fluctuating price of a commodity; Europe captures the stable value of the finished chocolate and the formal employment that attends its production. In this structure, the formal workforce is found where value is added. Where value is added outside Nigeria, domestic labour markets are left without sufficient industrial jobs, and workers are absorbed into informal activity. In the second quarter of 2024, Nigeria's National Bureau of Statistics (NBS) reported that approximately 93% of the country's total employment was informal (NBS, 2024, p. 9). This staggering figure indicates that the vast majority of Nigerian workers lack social security, labour protections, and legal standing. They remain invisible to the trade frameworks under which their produce travels. If a trade agreement ignores nine out of ten workers, it merely facilitates the movement of products while bypassing the workers' economic advancement. This reality forces a fundamental question: Market access for whom? This is not a story about exploitation simpliciter; it is a story about structural design. This paper argues that the current architecture of EU-Africa trade, built on instruments like the EU Generalised Scheme of Preferences (GSP) (European Commission, 2026a) and the yet-to-be-concluded West Africa Economic Partnership Agreement (EPA), was designed primarily to facilitate the frictionless movement of goods (European Commission, 2026b). While data confirms that Nigerian commodities flow into European markets, this focus on "market access" has failed to catalyse development or formal employment. To address this, this paper recommends a renegotiation of the EU–West Africa Economic Partnership Agreement (EPA) to incorporate an Employment Formalisation Prerequisite (EFP), through which access to trade preferences is aligned with the formalisation of labour. In doing so, the paper reconceptualises tariff preferences not as passive grants, but as instruments of structural transformation. This paper proceeds in four parts. It examines the extractive structure of EU–Africa trade and its implications for industrialisation and labour informality; analyses the legal framework and its institutional limits; demonstrates how employment formalisation aligns the interests of Nigeria and the European Union; and develops the legislative architecture of the Employment Formalisation Prerequisite (EFP) as a shift from passive access to conditional integration. Why Trade Does Not Equal Transformation In 2024, mineral fuels comprised 90.3% of Nigerian exports to the EU, while industrial goods made up 82.1% of EU exports to Nigeria (European Commission, 2025). This structural mismatch confirms that Nigeria primarily exports the raw substratum, the basic inputs for European production, while importing finished goods. This system, rooted in colonial-era logic (Ake, 1996), remains largely unchanged. The Observatory of Economic Complexity confirms that raw materials account for up to 90% of Nigeria's total exports, while manufactured goods represent 1% to 5% (OEC, 2024). This concentration reflects tariff escalation: raw commodities enter the EU at near-zero duties, while value-added goods face rising barriers. The incentive is brutally clear: Nigeria earns the price of raw beans while Europe captures the value of chocolate. This is not a market outcome; it is a policy choice that fuels Nigeria’s refusal to conclude the EPA. The consequences for employment are profound. While the oil sector generates revenue, it employs few. Similarly, agricultural exports like cocoa are produced by millions of smallholders in fragmented, informal supply chains with no social security or legal protections. A reported $10 billion trade surplus in 2025 (Mom, 2025) is a welcome macroeconomic indicator, but it tells us nothing about employment quality or worker protection. The second dimension of this problem is the collapse of domestic manufacturing. Net job creation in Nigeria's manufacturing sector declined by 37.83% between 2023 and 2024 (MAN, 2024). The textile backbone of Northern Nigeria collapsed, losing over 500,000 jobs (West African Pilot News, 2025). This was driven by a 42% increase in energy costs and 35.5% lending rates (Awodipe, 2025; NBS, 2024). Firms that could not absorb these costs exited the formal sector, pushing workers into the informal economy. The EPA’s liberalisation framework tilts the playing field further. European products, benefiting from infrastructure and subsidies, reach Nigerian consumers at prices domestic firms, facing ₦1.11 trillion energy bills, cannot match. Trade liberalisation without an industrial formalisation mechanism is not a partnership; it is a de-industrialisation trap. Nigeria’s cocoa sector is the definitive case study. As the world's fourth-largest producer (NEPC, 2024), Nigeria exports nearly 90% of its cocoa value as raw beans (NEPC, 2024). The smallholders producing this crop are invisible to trade governance, operating through social networks rather than formal contracts (Meagher, 2010). This invisibility is not abstract. The 2024 displacement of 10,000 farmers in Ondo State (David, 2024) proves that trade statistics ignore the conditions of production. As observed by Orbie et al. (2022), the current regime overlooks the lived experiences of the workers it claims to champion. The Employment Formalisation Prerequisite (EFP) is a legislative instrument required to make these workers visible and to define the terms of a balanced partnership. The Law Allows It, But the Framework Prevents It The policy of tariff escalation, imposing zero duties on raw commodities while taxing processed goods, systemically discourages industrialisation (Voora et al., 2019) and the formal labour force. Under the GSP, raw cocoa beans enter the EU at zero duty, while finished chocolate faces a higher rate. This communicates a harsh incentive. The EU prefers value addition and formal employment to remain in Europe, while Nigeria is relegated to exporting raw materials. This makes the 98% duty-free access under the GSP (European Commission, 2024) a hollow concession because it has not improved either the labour force or industrialisation. This is the very reason why Nigeria has not ratified the West Africa EPA. Nigeria’s concerns regarding the absence of safeguards for value addition are legitimate (Premium Times, 2018). While Côte d'Ivoire, Ghana, and Cameroon have signed, their agreements prioritise liberalisation over labour dignity (Vollmer et al., 2009). As warned by the International Trade Union Confederation and European Trade Union Confederation (2018), this architecture will place Nigeria in a perpetual state of informal labour. At this point, the critical question is not whether trade can accommodate labour considerations, but whether the law provides the tools to do so. The WTO Enabling Clause and the EC-Tariff Preferences (2004) ruling provide the "Legal Safe Harbour" for a formal employment framework. The Enabling Clause (GATT, 1979) stipulates that preferences must be “designed to respond positively to the development ... and trade needs of developing countries”. This does not merely tolerate preferences; it authorises and conditions them on developmental purpose. Also, the Appellate Body in EC-Tariff Preferences (2004) established that differentiation among developing countries is lawful if based on “objective criteria” (WTO, 2004). Crucially, it ruled that "development needs" are not determined unilaterally by the EU. These needs can be measured against the International Labour Organisation (ILO) Decent Work standards (ILO, 2020). Therefore, the linkage between trade and labour formalisation is not a disruption of the rules, but rather, it is an activation of them. The EU has already set the precedent by adding conditions for climate protection and migration cooperation to its 2025 GSP regulations (Council of the European Union, 2025). This is a critical turning point. Since the law provides that development needs are not to be determined unilaterally and arbitrarily by the preference-granting country, Nigeria can equally insist that its own development priority, measured against the ILO's objective standards, be recognised as a legitimate basis for shaping trade preferences. By refusing to conclude the EPA in its current form, Nigeria is asserting its right to define these needs. This paper is therefore asking the EU to apply the same legal authority it has already exercised for climate and migration to the most pressing labour market challenge facing Nigeria. Formalising 93% of its workforce is not a request for charity. It is a claim of right under the multilateral trading system. What follows from this is straightforward. The legal framework already contains the authority, the criteria, and the precedent for conditioning trade preferences. What is missing is not law, but political will and institutional design. The preceding analysis exposes three principles. First, trade preferences may lawfully include conditions tied to development needs. The Enabling Clause permits differentiation, also confirmed by the Appellate Body. Second, development needs are not defined exclusively by preference-granting countries. They must be assessed objectively. International labour standards provide that objective measure. Third, the EU already conditions preferences on its own priorities (such as migration management and climate change). This establishes a critical precedent. If the EU can condition trade on its own demographic security, Nigeria can condition trade on its own industrial and employment security. Together, these principles create a solid legal foundation for a formalised employment framework. The architecture does not need to be rebuilt. It only needs to be activated through a sovereign demand for value addition. The Mutual Benefits of Employment Formalisation for the EU and Nigeria Nigeria’s fiscal sovereignty is at stake. A situation where 93% of workers operate informally (Abdullahi, 2026), the tax base collapses, making formalisation a prerequisite for economic self‑determination. In 2025, Nigeria’s exports to the EU totalled $20.2 billion (Trading Economics, 2026). These figures are largely from sectors characterised by high levels of informality. Nigeria has already defined its development priorities through the revised National Employment Policy (2025) (ILO, 2025) and the Nigeria Industrial Policy (2025) (State House, 2026), by placing formalisation, value addition, and industrial employment at the centre of its economic strategy. The domestic commitment is no longer in question. The trade architecture must now align to support that transition. Demographics make the case mutual. Europe’s workforce could shrink by 20% by 2070 (Szryka, 2025). Nigeria adds 4.5 million young people to the labour market each year (Ngaira, 2026). Europe needs legal, certified labour; Nigeria needs structured pathways. The EU has already established, through its revised GSP framework, that trade preferences can be conditioned on broader policy objectives such as migration cooperation and climate compliance (Council of the European Union, 2025). Extending this conditionality to employment formalisation is therefore not a departure from existing practice, but a logical and legally consistent progression. EU corporate law provides a further, more immediate incentive. The Corporate Sustainability Due Diligence Directive (CSDDD) requires large European companies to identify and manage human rights risks across their supply chains. Although the omnibus clause has narrowed its scope and delayed implementation, the core obligation remains (European Commission, 2026; Directive (EU) 2026/470). For firms sourcing from countries like Nigeria, where production often occurs within informal systems, this creates ongoing compliance risks. A more formalised labour force, therefore, reduces those risks and supports more reliable supply chains, making formalisation directly aligned with European commercial interests. Irrespective of the changes in the EU corporate law, the WTO Enabling Clause and the Appellate Body ruling in EC–Tariff Preferences (2004) provide an independent legal foundation for this paper’s proposal (GATT, 1979; World Trade Organisation, 2004). Nigeria is not a discretionary partner; it represents nearly 60% of West Africa’s GDP and remains the dominant economy in the region (European External Action Service, 2026). Within this context, a formal workforce would help to stabilise a bilateral trade relationship that consistently exceeds $20 billion annually (European Commission, 2025; Trading Economics, 2026). The broader precedent is clear. The EU’s regulatory influence, often described as the “Brussels Effect”, demonstrates how access to its market can transform global standards without formal coercion (Bradford, 2020). By linking market access to formalisation, the EU can set a new global standard for labour governance. South Korea, Vietnam, and Morocco’s rise as the EU’s largest vehicle exporter (€15.1 billion) proves that structured, conditioned trade integration, not passive market access, is what generates formal employment at scale (Fox, 2024; Yoo, 2017). It is obvious that positive developments already exist. The EU provided technical support to Nigeria’s National Employment Policy, signalling a shared commitment to employment reform. At the same time, sustained trade flows, exceeding $20 billion annually, demonstrate the depth of existing economic ties. These developments reveal the desire for cooperation. Nigeria has already chosen industrialisation; therefore, the trade structure must now align with it. The Employment Formalisation Prerequisite (EFP) proposed herein, therefore, represents a logical next step, not a disruptive departure. The Legislative Architecture: From Passive Access to Conditional Integration In response to the EU’s 2024 call for "responsible and inclusive investment" (EU Mission to WTO, 2024), this paper proposes a regulatory departure that treats market preferences as a binding social contract rather than a discretionary gift. The Employment Formalisation Prerequisite (EFP) ensures that trade competitiveness is no longer subsidised by the "invisibility" of unprotected labour. This framework does not ask Nigeria to begin what it has not already started; rather, it provides the External Trade Incentive necessary to make the 2025 National Employment and Industrial Policy commercially viable. The EFP will be operationalised through a Dual-Track Tariff Architecture, which functions as a "sorting machine" for market access. This architecture proposes that the EU grants 0% or preferential duty-free access exclusively to goods produced through verified formal employment. Verification is no longer an abstract social goal but is anchored on three benchmarks: enterprise registration, mandatory worker social security enrolment, and transparent banking settlements. This means that exports from unverified, informal networks would face a standard baseline tariff. This "Inverted Preference" model removes the economic incentive for informality, signalling that access to the European market requires a structured and protected workforce. Oversight would rest with the EPA's Joint Committee on Trade and Development. To facilitate this, the committee must leverage the treaty's technical cooperation provisions to build a Unified Labour Market Information System (LMIS), a digital ledger used to verify sectoral progress and trigger preferential tariffs. The framework will be implemented using a conditional sectoral integration in a phased and verifiable manner, embedding structured inclusion. So, access is earned based on how production is organised. This step is critical for revitalising Nigeria’s industrial hubs, such as the textile corridors of Kano and Kaduna, where formalisation can restore the workforce lost to the informal economy. To ensure this is a Partnership of Equals, the EU must provide critical structural support such as funding for digital traceability systems, transition credits to cover initial SME compliance costs (such as pension registration), and vocational training to ensure formalised workers gain priority access to legal labour mobility pathways. To prevent this mechanism from becoming a punitive trade penalty, the EFP includes four legal safeguards that shift the operative question from unilateral accountability to shared obligation. First, an Economic Shock Clause allows for automatic timeline extensions during macroeconomic crises, ensuring that external volatility does not derail long-term formalisation. Second, Independent Monitoring ensures that benchmarks are verified by joint technical bodies and not unilaterally imposed by the preference-granting party. Third, a Non-Retroactivity Clause protects preferences already granted from being undermined by new benchmarks. Finally, a Minimum Floor Guarantee ensures that Nigeria retains standard GSP entitlements regardless of sectoral performance. Together, these safeguards prevent the risk of regulatory capture and ensure that the EPA serves as a sovereign instrument for industrial transformation. The goal is a trade architecture that no longer looks through the Nigerian worker but at them as the primary beneficiary of global exchange. This paper asserts that these formalisation commitments must become a binding condition precedent to Nigeria's signature of the West Africa EPA. Conclusion This paper began with the "Cocoa Paradox", a farmer in Ondo State whose labour provides the raw substratum for a global industry that leaves her legally invisible. While she bears the risks of production, the trade architecture linking her farm to the European factory is not built around her interests. It is a system designed to facilitate the frictionless movement of commodities, not the formalisation of the people who produce them. Therefore, the issue is not a lack of cooperation, but the urgent need to re-engineer that cooperation to prioritise productive employment while reinforcing a rules-based international system. This is a structural choice that requires a structural revision. The legal case for the Employment Formalisation Prerequisite (EFP) is unambiguous: the WTO Enabling Clause and the Appellate Body (2004) confirm that ILO standards provide the objective benchmarks for development needs. The operative question is no longer about legality, but about political symmetry. Will the EU recognise Nigeria's 93% informality rate as a development necessity as legitimate as its own migration and climate priorities? This paper asserts that the inclusion of the EFP in the West Africa EPA is a legal key to resolving the 2018 deadlock. By focusing on conditional sectoral integration, the agreement can transform trade from a passive exchange into a binding social contract. Trade policy is never neutral; it is a decision about whose interests the system prioritises. By adopting this framework, the EU finally recognises the Nigerian worker as a subject of trade governance, rather than a mere vehicle for commodities. Nigeria has already unilaterally formalised its commitment through the National Employment and Industrial Policy (2025). The European Union must now decide if it will meet this commitment with a matching trade architecture. This is not a request for a concession; it is the minimum condition for a true partnership. Nigeria should not sign the EPA to fit into an old, extractive system; it must sign to build a new, formalised order. References Abdullahi, K. 2026. Taxation and informal economy in Nigeria, Journal of Economics and Allied Research, 10(4), pp. 15–24. Adebayo, T. 2023. Cocoa grown illegally in a Nigerian rainforest heads to companies that supply major chocolate makers. [Online] Available at: https://apnews.com/article/8813c4656635a4ae8b49c6fd7ced6d28 [accessed: 27 February 2026]. Ake, C. 1996. Democracy and Development in Africa. Washington, DC: Brookings Institution. Awodipe, T. 2025. Manufacturers groan as alternative energy gulps N1.1tr in one year. 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It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals. Email: info@inclusivesociety.org.za Phone: +27 (0) 21 201 1589 Web: www.inclusivesociety.org.za