In an economic survey of South Africa published today, the economic think-tank also said growth had been too slow and further measures were needed to overcome infrastructure bottlenecks, strengthen the business environment and improve labour markets and ensure further spending can be financed.
The OECD called on the South African government to broaden key tax bases by reducing deductions, credits and exemptions.
This tax reform, it said, would solidify public finances and make the system fairer.
Additionally, the government should reform the labour market to raise employment and income. This could be done by creating a public employment service as a one-stop shop for job seekers, it suggested, making it easier for people to find jobs and for employers to find the right workers.
The OECD noted that costly industrial action had rarely benefited workers and had held South Africa’s economy back. To improve industrial relations and provide better outcomes for both workers and employers, the OECD recommended an increased role for mediation and arbitration.
Angel Gurría, OECD secretary-general, said: “[South Africa’s] National Development Plan sets the direction for reforms needed for a strong and inclusive country. Our survey provides targeted recommendations to reach these objectives.
“Millions of young South Africans are eager to work, and their potential must not be wasted. Their future is precious enough to justify tough reforms and hard spending choices.”