Urbanization, structural transformation, and rural-urban linkages in South Africa

Summary

South Africa faces many challenges, including modest economic growth and negative structural change, as well as high unemployment and inequality, and persistent poverty. Urbanization over the last two decades is an additional concern. Migration and population growth are highest in metropolitan areas and, even though poverty is more pronounced in rural areas, there are concerns about an “urbanization of poverty”. In response, this paper considers three broad strategies for national development and urban planning. First, invest more in major cities to accommodate migrants and prevent urban poverty from worsening. Second, maintain (or expand) investments in rural areas to provide job and income opportunities for poor rural households that would otherwise migrate to cities. Third, invest in towns and secondary cities, given their supposedly stronger linkages to the rural poor. These three options are examined using an economy-wide model of South Africa’s rural and urban economies.