There is much to celebrate from the last 21 years in South Africa.

The systematic, legislated exclusion of the majority of South Africans from sharing the country’s wealth resulted in one of the most highly unequal societies world-wide, where race largely determined life chances. There have been notable improvements in access to education, to public health clinics, and to electricity and clean, piped water. All of these efforts are reflected in absolute poverty levels: only 11 per cent of South Africans experienced hunger in 2011, for example, down from a quarter of the population just 10 years earlier.

Yet, for all of the above progress, things have not gone as well as they might have. The foundations of these improvements are shaky. Furthermore, if reforms are not made now, many of the ambitions that the ANC and its supporters had when coming to power in 1994 will remain unrealized, leading to a more cynical and potentially unstable country.

The gains made since 1994 have been accomplished in part through increases in government spending that have strained a narrow tax base. Government expenditure is pushing public debt ratios towards unsustainable margins, approaching 50 percent of gross domestic product. Some estimates put social grants and state jobs together accounting for all government revenue by 2026, assuming average yearly revenue growth of around ten per cent. As then Finance Minister Pravin Gordhan warned in 2013, ‘high levels of government debt put upward pressure on interest rates and can have other effects that undermine growth and investment in the economy’.

The key problem is South Africa’s level of joblessness, which threatens to be the new apartheid, where life chances are determined by access to employment. Since 1994 South Africa has created jobs, just not enough for its growing population. Between 1994 and 2014 the number of employed almost doubled to 15.1 million. Yet, the number of unemployed (as defined broadly) increased even faster from 3.7 million to 8.3 million. In 1994, there were 2.2 people employed for every unemployed person. By 2014, the ratio had fallen to only 1.8. As a result, unemployment, using the expanded definition, has risen from 31.5 per cent in 1994 to almost 36 per cent 20 years later, and to nearly 70 per cent among South Africans under 35 years old.

If the unemployment crisis is not addressed, it will be impossible to lift many millions of people out of poverty. Especially in light of the Arab Spring – fuelled in good part by youths who believed that they had no future – the stability of South Africa cannot be assured given compounding issues of insecurity, unemployment and lack of investment. It is by growing the number of jobs, not increased government spending, that South Africa will thrive.

Our research, involving more than 300 interviews across business sectors and South Africa, highlights three key issues driving high unemployment:

The first of these relates to so far irreconcilable ideological difference. A core group within government has difficultly in accepting the profit motive of business, and yet prefers to lay the blame for the failure of transformation at the door of business and its ‘investment strike’. This constituency has managed to block reforms that might incentivize employers to hire more workers.

Yet, while business must make a profit, employers must also be conscious that part of their long-term strategy regarding thriving in South Africa should revolve around a calculus that firms, too, can take actions beyond what a short-term reading of the profit sheet demands. For instance, we have seen that some employers are able to develop good relations with their workers by paying more and devoting attention to their communities.

A second set of factors relates to structural business challenges globally, towards greater capital and technological investment and economies of scale – essentially greater production efficiencies and fewer people. In South Africa, government’s instinct has been to intervene, to increasingly regulate business. Yet, to compete in the international economy and increase employment, South Africa’s labour market will have to become more flexible, not more regulated.

The employers we speak spoke to on the farms, the mines, and the factory floor repeatedly said that they would bring in more machines if they could not adapt their labour forces to changing market conditions.

At the same time, employers will only hire more workers if they have the skills to help firms compete. While government has stated unequivocally that it does not want a ‘sweatshop’ economy, the chronic failure of South Africa’s education system since 1994 has meant it does not produce the skills at the right price to compete in the global market place.

All this is compounded, third, by greater labour volatility. Despite the existence of the tripartite alliance, South Africa now loses more days to strikes than during the era of anti-government ‘rolling mass action’ in the early 1990s. Improving prospects in manufacturing and other labour intensive sectors will be difficult amidst such industrial unrest.

It is in the ANC’s fundamental interest to turn this situation around. Its electoral prospects will be challenged by a combination of youth and apathy if it cannot deliver jobs especially to the ‘born-free’ generation. Equally, the ANC’s trade union partner, the Congress of South African Trade Unions, with an ageing cohort of members, requires economic and employment growth to refresh their membership.

We did find that South Africa has the entrepreneurs who are capable of building competitive firms and turning the situation around. But extending this beyond a few companies and across sectors will require government and the unions accepting some home truths about growth and employment, and by substituting an environment of confrontation with business for an agenda for competitiveness.

All South Africans should focus on the employment challenge now, least the country face an unmanageable situation in the future.

Dr Mills heads the Johannesburg-based Brenthurst Foundation; Dr Herbst is the CEO-designate of the Newseum in Washington DC. They are the authors of ‘How South Africa Works – and must do better’, which is being launched countrywide by Pan Macmillan this week.

A version of this article first appeared in Business Day.