Human Capital and Economic Growth: Evidence from South Africa

Abstract

This study examined the relationship between South Africa's economic growth and the development of human capital during a 20-year timeframe, from 2000 to 2019. Understanding the contribution of human capital to economic growth is crucial for shaping South Africa’s long-term development trajectory. Despite ongoing structural challenges, limited empirical work has quantified how education, health, and research investments have influenced South Africa’s growth performance over the past two decades. This study provides vital evidence to inform policy decisions aimed at strengthening the country’s human-capital base for sustainable economic advancement. Human capital generation and economic growth are intimately related, and in developing nations, financial development is a major factor in the accumulation of human capital and there is a reciprocal link between financial development and human capital, with financial development influencing the generation of human capital driving economic advancement. South Africa's development path 30 years after democracy was established is largely dependent on the growth and absorption of human capabilities. Real Gross Domestic Product (GDP) growth was used as an indication of improvements in human capital in a time series study that was carried out using Python 3.14 and LaTeX data softwares Enrollment rates in primary, secondary, and tertiary education, government spending on research and development, and total government spending on healthcare and education were the considered independent variables. The econometric tests that were used included descriptive statistics, unit root tests, Error Correction Mechanism (ECM), and Ordinary Least Squares (OLS) regression utilising natural logs. The results revealed a positive relationship between human capital and the independent variables, as well as notable increases in human capital throughout the 20-year period. Research and Development (R&D spending and secondary school enrollment were shown to have a beneficial effect on human capital although the numbers were negligible. The overall findings indicate that the development of human capital plays a major role in South Africa's economic growth. The study recommends that South Africa enhance its human capital development capabilities as essential tools for economic growth by focusing on expanding quality access to health and primary education.

Keywords: Human capital, education, health, research and development, unit root, South Africa

DOI: 10.7176/DCS/15-2-09

Publication date: December 30^th 2025