South Africa remains one of the most unequal countries in the world. The country’s high-income inequality is driven primarily by extreme differentials in the labour market, where over 30% of the labour force is unemployed and earns zero income (Leibbrandt et al., 2010; StatsSA, 2024). Reducing unemployment is therefore at the heart of South Africa’s social and economic challenges, and is key to lower the level of inequality. 

Coal is an important industry in South Africa and is central in the just transition. Rough estimates of total employment in the coal value chain alone are close to 200,000 – roughly 1.2% of total employment – while the contribution to output sits at 5.4% of growth domestic product (Makgetla et al., 2021). Moreover, the coal industry is highly geographically concentrated and underpins a large share of local and regional economic activity in certain areas, particularly localities within the Mpumalanga province.

In this regard, the potential negative employment impacts of a transition away from coal, and toward low carbon energy production, presents a significant socio-economic challenge for a country still dealing with the vestiges of apartheid. It is thus critical that the risks associated with these potential adverse employment effects are managed to ensure that inequality is not worsened by an unplanned transition.

This project is part of the Extension of the EU-AFD Research Facility on Inequalities. Coordinated by AFD and financed by the European Commission, the Extension of the Facility will contribute to the development of public policies aimed at reducing inequalities in four countries: South Africa, Mexico, Colombia and Indonesia over the period 2021-2025.

This work is also part of AFD's dialogue with the South African authorities on the just transition and the identification of reforms to be implemented to ensure an inclusive transition.

There is currently a limited understanding of how many workers are likely to be affected by a transition away from coal; how these workers vary by age, skill, or income level; what an effective social protection policy package for such workers would involve; how much a given basket of policies is likely to cost; and the financing options available. Yet, these are crucial elements in designing and implementing policies that limit the negative social and economic effects of transition and prevent potential increases in unemployment and inequality.

This project aims to make two primary high-level contributions:

• First, it will count and profile existing workers in coal and related industries using reliable, spatially sensitive microdata. This includes an analysis of employment, wages, and wage inequality;
• Second, it will propose a basket of social protection policies tailored to the identified worker profiles, with attendant modelled cost estimates, and potential financing options. This includes a focus on the wage inequality implications of various policy scenarios that highlight the importance of a just transition in South Africa.

The research project has four main components that will encompass the following analytical areas:

• The utilisation of tax data to accurately identify at-risk employees in coal mining, coal-based electricity generation, and coal-adjacent industries, locating them spatially across the country

This will provide a reliable estimate of the number of direct and indirect coal industry workers at risk of being adversely affected in a shift away from coal.

• The production of detailed gender, age, and earnings profiles of the identified at-risk workers in the sector

This exercise is anchored around worker earnings and will be used to identify sub-groups, or cohorts, of workers who will require different forms of protection and support based on their existing skills, earnings, and age profile. The earnings data will in addition be utilised to examine inequality dynamics within the coal value chain and between coal value chain workers and those employed in mining generally and in the formal economy as a whole.

• Using these worker profiles to provide a framework of suitable policy options for the different cohorts in order to develop a comprehensive social protection response

Policy options would include individually assigned combinations of interventions such as early retirement packages, grants, and skills development. Furthermore, the study will provide a comprehensive overview of the various social protection policies available in South Africa and determine whether they could apply to affected workers.

• Examination of scenarios for declining coal employment and model a series of associate cost estimates for the various policy response options

This includes modelling possible policy scenarios over the full-time horizon of existing employees. The result is a costed picture of the implications of the just transition policy for South Africa’s coal sector, that includes a discussion of potential public finance options. The findings will also shed light on potential inequality outcomes to emerge from different just transition policy scenarios.

You will find below the different research papers related to this project:

In progress

Contact: 

• Anda David, research officer at AFD and scientific coordinator of the Facility

With one of the highest youth unemployment rates in the world, South Africa’s planning for a just transition needs to take into account the vulnerabilities of its youth cohorts, especially those that can be qualified as “not in education, employment or training” (NEET). For example, a recent study conducted in the framework of the EU-AFD Research Facility on Inequalities revealed that the Mpumalanga province, the region with the highest exposure to the coal exit, has had a NEET youth rate of over 37% for the past decade, with almost three-quarters of them living in income-poor households.

Since 2019, the National Business Initiative (NBI) has been spearheading a multi-faceted and multi-sector partnership, which focuses on expanding and growing pathways for young people to access Installation, Repair and Maintenance (IRM) occupations. The IRM initiative is strategically aligned to various initiatives of the government to drive inclusive recovery and revitalisation of the economy, particularly in the aftermath of the Covid-19 pandemic. It has subsequently been incorporated as part of the Presidential Youth Employment Intervention (PYEI). The Initiative works on the premise that, by supporting township-based IRM entrepreneurs to strengthen and grow their businesses, and by linking them to localised market opportunities, there will be a concomitant increase in the demand for skilled labour, which could lead to the creation of employment opportunities. Therefore, it is a direct response to the youth unemployment challenge.

Collaborating closely with the NBI, the Centre of Researching Education and Labor (REAL Centre) contributed its expertise to the comprehensive analysis of the four key regions identified in Phase 1 of the IRM skills ecosystem mapping project: Atlantis (Western Cape), Mandeni (KwaZulu-Natal), Mamelodi (Gauteng), and Kathorus (Gauteng). Building upon the success of this initial phase, the REAL Centre will now expand the project's scope to the Nkangala district municipality, which is one of the three districts of Mpumalanga province.

This project is part of the Extension of the EU-AFD Research Facility on Inequalities. Coordinated by AFD and financed by the European Commission, the Extension of the Facility will contribute to the development of public policies aimed at reducing inequalities in four countries: South Africa, Mexico, Colombia and Indonesia over the period 2021-2025.

This work is also part of AFD's dialogue with the South African authorities on the just transition and the reduction of inequalities.

 

This research project will conduct a detailed analysis of the skills ecosystem that could feed into the various initiatives to support local authorities and communities in the Nkangala district, which concentrates the coal-fired power plants that will be closed as a result of just transition policies.

Phase 1 of the project revealed that an IRM skills ecosystem mapping project is crucial for addressing inequality by thoroughly analysing the socioeconomic and demographic profiles of diverse townships in South Africa. 

By identifying specific skill gaps and understanding the challenges faced by Small, Medium, and Micro Enterprises (SMMEs) in these areas, the study can inform targeted interventions aimed at reducing inequality in access to employment and economic opportunities. 

Furthermore, by examining the role of Technical and Vocational Education and Training (TVET) institutions and conducting a comprehensive literature review, the study ensures that proposed interventions are evidence-based and tailored to the needs of the communities studied. 

Ultimately, the study's approach of generating actionable insights in collaboration with stakeholders aims to drive meaningful impact and promote inclusive economic development in underserved regions, contributing to efforts to reduce inequality, to advance the principles of just transition and to foster a more inclusive society.

Building on Phase 1 of the IRM skills ecosystem mapping, researchers will apply the following method:

• They will set the context for the Nkangala district through desktop research and a few selected key informant interviews;
• They will collect primary data and set up fieldwork through stakeholder mapping workshops and key informant interviews to collect data;
• They will then provide an initial narrative on the overarching local skills ecosystem from the site mapping exercise and will draw on the document review and contextual work on the Nkangala district. Drawing on Spours’ (2019) work on ecosystems, they will use three core elements: the dimensions of verticalities, horizontalities and mediation to understand and analyse the skills ecosystem Nkangala district and to guide the cross-site analysis, building on the work undertaken during Phase 1.
  
   

You will find below the different research papers related to this project:

In progress

Contact: 

• Anda David, Research Officer, AFD

Recent studies examining the risks to financial system stability associated with nature degradation have been conducted for countries such as the Netherlands, France, and others. These studies consistently underscore that biodiversity loss can have profound destabilising effects. Such effects may arise either from the collapse of ecosystems and the services they provide to economies (referred to as ‘physical shocks’) or from shifts in behaviour, technology, or regulation linked to ecological transitions (‘transition shocks’).

However, these risks extend well beyond the financial sector, particularly in countries from the Global South. How can the macro-financial context be better incorporated into analyses of nature-related risks in emerging economies, where it plays a critical role in the resilience of businesses and institutions? And in the context of climate challenges, how can we better account for the territorial dimension of nature-related risks and conduct spatially explicit assessments?

Focusing on the case of South Africa, this study evaluates the potential effects of either a physical shock (resulting from the degradation of ecosystem services) or a transition shock (arising from measures or innovations aimed at reducing the pressures certain economic sectors place on biodiversity). These effects will be examined across multiple dimensions, including production, income generation, inflation, employment, wages, external balance, and fiscal stability.

Beyond this broad analysis, the method seeks to identify the specific locations of these risks within the region. This spatially explicit approach aims to provide actionable insights for local decision-makers, enabling them to implement well-informed measures for an effective ecological transition.

This study introduces innovative methods for assessing the socio-economic risks associated with nature degradation, grounded in two main contributions:

• Multidimensional analysis of macro-financial and social variables: the study examines the exposure of key macro-financial and social variables to nature-related risks. By using input-output tables extended to include environmental and socio-economic satellite accounts, it identifies how these risks could significantly affect sectors that are directly and indirectly critical to production chains and, consequently, socio-economic stability.
• Granular spatial assessment: at the municipal level in South Africa, the study investigates nature-related vulnerabilities through a more detailed spatial analysis. This approach integrates spatially disaggregated economic data with mapped ecological data to ensure consistency, enabling the identification of specific socio-economic exposures.

Together, these two interconnected approaches emphasize the need for a holistic understanding of nature-related risks. They demonstrate the value of interdisciplinary collaboration between economists and ecologists, aiming to balance the intertwined goals of economic prosperity, social stability, and environmental sustainability.

The study identifies economic sectors potentially exposed to significant risks and provides South African stakeholders with a foundation for conducting deeper analyses to determine the extent and materiality of these risks.

In South Africa, for instance, 80% of the country’s exports and 60% of business loans are heavily reliant on the water supply services provided by ecosystems. Beyond direct exposure, shocks affecting sectors dependent on these ecosystem services can cascade through the industrial network, triggering demand or supply disruptions. While 18% of jobs and 24% of salaries are directly exposed to such risks—particularly in the property and manufacturing sectors—these figures rise to 48% and 56%, respectively, when considering activities indirectly linked through value chains.

Given biodiversity’s strong dependence on geographic factors, it is essential to complement prior analyses with geolocalised studies. These analyses identify the economic activities located in areas where ecosystems and their services are already degraded. For example, when factoring in the location of companies involved in exports, the initial estimate that 80% of South African exports depend on surface water supply decreases to around 23%. This revised figure reflects exports generated by activities reliant on surface water supply and situated in municipalities where this ecosystem service is significantly degraded. In other words, when the geographic degradation of ecosystem services is considered, nearly a quarter of net exports are directly vulnerable to water scarcity.

Find out more: 

• Read the research paper: Socio-economic and spatially-explicit assessment of nature-related risks – The case of South Africa
• Read the research paper: A framework to assess socioeconomic and spatialized nature-related risks: An application to South Africa (Environmental and Sustainability Indicators, 2025)
• Watch the replay of the Research Conversations webinar on the research project, with South African partners

The method has garnered interest and validation from numerous economic and environmental policymakers, highlighting its relevance. Rather than focusing on precise numerical results, the emphasis lies on the orders of magnitude and the identification of economic sectors that are either highly dependent on ecosystem services (exposed to physical risks) or exert significant pressure on biodiversity (exposed to transition risks). These insights are sparking interest and debate.

One of the key outcomes has been fostering dialogue among South African stakeholders who previously had limited interaction, including the South African National Biodiversity Institute (SANBI), the Department of the Environment, the Department of Finance, and the South African Reserve Bank (SARB).

South African stakeholders are now working to translate these technical findings into accessible materials for non-specialist audiences and to facilitate deeper discussions with representatives from sectors identified as either risk-exposed or offering opportunities for resilience and positive socio-economic impacts.

Furthermore, the South African Reserve Bank, in collaboration with the Agence Française de Développement (AFD), is applying this method to assess the financial sector's exposure to nature-related risks across member countries of the Southern African Development Community (SADC). The Development Bank of South Africa (DBSA) has also begun using this approach to evaluate the exposure of its own portfolio. Future iterations and enhancements of the method are anticipated as its use expands.

• Paul Hadji-Lazaro, Ecological Macroeconomist at AFD
• Julien Calas, Research Officer on Biodiversity, AFD
• Antoine Godin, Economist, Head of AFD Macroeconomic Modelling Unit
• Andrew Skowno, National Biodiversity Analysis Coordinator at SANBI
• Pamela Sekese, Geospatial Consultant

In many African countries, older people still represent a very small share of the population (3% in sub-Saharan Africa and 5.6% in North African countries). For a long time, they have been largely overlooked by public policies, which have focused instead on the most urgent needs of economic, social, and health development — primarily targeting children and young adults.

However, the number of older people is increasing — not only in absolute terms but soon also in relative terms, with aging projected to occur more rapidly than in other regions. The challenge now is to design and implement appropriate public policies to support this demographic shift, particularly in the areas of health and social protection.

New forms of coverage and protection are emerging — or becoming essential — such as cash transfers, which complement family-based solidarity systems, free healthcare and services for older adults, the expansion of so-called universal pension and retirement schemes, and more broadly, private support systems on which most older people on the continent must still rely.

This research project provides a framework for understanding population aging and related public policies across the African continent, from a comparative perspective. It examines the aging process, its associated challenges, the public policies addressing it, and the institutional frameworks in various countries, focusing on emblematic case studies that reflect diverse situations (South Africa, Cameroon, Cape Verde, Kenya, Morocco, and Senegal). The project also includes targeted analyses based on recent data, highlighting the contributions of demographic research to issues of health and social protection (notably pensions) for older adults.

The project resulted in a valuable overview for policymakers in AFD’s partner countries, contributing to broader reflections on the conditions under which different public policy models may or may not be replicated across the African continent.

The project is based on a comparative analysis of secondary demographic data drawn from existing sources — including research papers, reports, and scientific literature. By presenting the different trajectories of demographic transitions, it offers an overview of aging across the continent, including its timing and context, and explores the associated challenges for both national and local public policies. It highlights regional, national, and subnational variations in aging, in order to identify the areas that are either most advanced in this process or experiencing the fastest pace of change.

Focused case studies on a selection of countries representing different situations provide a systematic critical review along the following lines:

• a socio-demographic and health overview;
• a description of the institutional framework and public policies in place;
• a critical analysis of the social and health-related challenges of the aging process;
• and an exploration of how aging is transforming family structures — particularly regarding intergenerational transfers, migration patterns, and women’s labor participation.

The research project led to the following publications:

• The publication of the research paper “Africa Facing Its Aging Population: What Are the Challenges for Public Policy?” (in French, June 2024);
• The release of “How can healthcare for older people in sub-Saharan Africa be improved?” (April 2024);
• The publication of “Health Statistics on Older Adults in Sub-Saharan Africa: A Literature Review” (in French).

In July 2023, a webinar from the Research Conversations series presented the project’s initial findings (in French only):

Africa is expected to face the challenge of an aging population in the coming decades. The first and foremost challenge lies in expanding social protection coverage, which is currently the lowest in the world: only 17% of the population is covered. This low rate is partly due to the predominance of the informal economy, which hinders the development of a contributory social protection system — particularly in rural areas. There is now a pressing need to strengthen public policies aimed at expanding social protection to a broader share of the population, both in rural and urban areas.

However, the evolution of social protection systems — particularly in health and pensions — rests on several key pillars that remain uncertain and have historically been prerequisites for their expansion:

• First, the effective collection and use of tax revenues to finance social protection;
• Second, the promotion of stronger links between pension and health coverage;
• And finally, sustained economic growth driven by a development model — historically industrial and manufacturing-based — that enabled the establishment of such public policies.

Yet in Africa, this economic model, centered on formal employment, has not taken root. Moreover, the impacts of climate change are raising fundamental questions about this development path, making it even more difficult to design and implement aging-related public policies — just as they are becoming increasingly necessary.