Pursuing investment-led growth makes sense politically because it promotes the perception that our public and private sector leaders are collaboratively engaging with global investors. However, international investment managers have many options, and they aren’t impressed by our government’s economic or foreign relations policies.If we import a billion dollars worth of merchandise, the rand equivalent is owned offshore. Those rand can be used to buy products or services made in South Africa, or they can be invested in rand-denominated assets. If what we sell internationally is sufficiently competitive, exports will increase to pay for our imports. It is when this doesn’t happen that the net level of foreign investment in South Africa increases.A nation’s savings equal its investments plus net exports. Boosting foreign investment inflows therefore requires a current account deficit, reflecting imports growing faster than exports. This path worsens unemployment by favouring foreign production over local job-creating output. Thus, investment-led growth models are poorly suited to South Africa’s needs and circumstances. The core problem is that our economy is not globally competitive and our savings rate is very low due largely to rampant unemployment amid pervasive poverty. There are no paths toward greater prosperity that don’t prioritise raising our workforce’s productivity. Yet, as current policies entrench one of the world’s highest youth unemployment rates, our workforce productivity will remain very low for a long time. Having only a tiny sliver of our young adults adding value to exports further reflects our economy’s lack of competitiveness and a very low productivity growth trajectory. The mistake is to focus on attracting capital rather than prioritising workforce participationOur prospects for spurring growth through unleashing significantly higher domestic consumption are undermined by ultra-elevated youth unemployment alongside low workforce productivity and high levels of household debt. As these constraints will persist for decades, there are no plausible paths on which to pull ourselves up by our bootstraps. We absolutely must engage with the global economy much more effectively.The mistake is to focus on attracting capital rather than prioritising workforce participation. The one “export” sector which employs a large number of South Africans on commercially determined terms — unlike the automotive sector, which is highly distorted by regulations that drive up costs for South African consumers in order to preserve union jobs — is international tourism. This isn’t strictly an export, but it is a near equivalent.Several years ago, the Western Cape’s economic development agency, Wesgro, started lobbying major global airlines to add flights to Cape Town. This was not a capital mobilisation exercise. There is no need for the planes to be owned and operated by South African entities. The quantum of capital employed — and destroyed — by SAA per employee highlights the implausibility of overcoming South Africa’s unemployment crisis by prioritising capital mobilisation.The service sector will increasingly dominate the creation of jobs, and many new service-sector jobs will be digital. Most of the lower-skilled entry-level digital jobs, which can be done from anywhere, will migrate to Africa, as labour is cheaper here — nearly half of the world’s underemployed and unemployed young workers are African. A poorly educated 15-year-old with initiative can compete effectively in this environment.Starlink is to digital jobs in rural Africa what planes are to tourism jobs. It would be absurd for our government to decide to launch satellites to compete with Starlink. Nor was it prudent to revive SAA. We should be focusing on the job creation potential while ignoring who owns Starlink or the international planes that land at our airports.Our per capita domestic purchasing power has been stagnating for nearly two decades while our unemployment rate has ratcheted ever higher. This makes clear that mobilising capital to invest in more retail possibilities won’t lead to normal workforce participation.The politically manageable path with the most growth potential involves providing dispensations free from regulations which undermine competitiveness for value-added exporters. The merits of this path would be more obvious if we stopped deluding ourselves about the potential for investment-led growth.• Hagedorn is an independent strategy adviser.