A skills shortage is directly related to the workforce being unable to meet the demand for labor in an economy; this can also be referred to as “workforce insufficiency” (Richardson, 2007). A skills shortage is harmful to countries and their economies because it impedes economic growth. The skills shortage in South Africa has many roots where it stems from, one of which is the education department. Therefore a skills shortage in relation to the state of a country's financial capital means that it is difficult for the economy to thrive because it does not have the necessary capital (in terms of workers) to grow. Not only is labor one of the four factors of production involved in the business environment, but it is the only factor that connects all other things (Tutor2u.net, 2014). Therefore, without a capable workforce, the economy will remain stagnant. Therefore education becomes an important factor in relation to the skills shortage that holds back the economy because education is the basis of all learning for humans and provides young people (who are the future of the economy) with the skills necessary to keep them in good standing for the rest of their lives. Consequently, the age group in South Africa characterized as “young” includes individuals between the ages of 15 and 35 (Bhorat and Oosthuizen, 2007) and is in the process of life transition, moving from education to the labor market and, hopefully, employment. However this is where the skills shortage in South Africa is evident: young people are both uneducated; leaving a gap in the job market, otherwise the cycle continues and they get educated out of work. This is because South Africa's past has an influence on the current state of...... middle of paper . .....ine into the national tax base as fewer people are able to contribute by paying taxes (Adams, 2006:46). A further constraint to economic growth includes those people who are too ill to work, as they not only represent a loss of economic output (Levinsohn, 2013:98) but also contribute to unproductive public spending which includes direct and indirect costs related to the impact of economic crisis. AIDS virus (Oosteimer, 2004). National finance is therefore negatively affected and the government's ability to finance public spending is weakened (Adams, 2006:46). So the ability to accumulate human capital to grow an economy declines as government spending is cut by unsuccessful welfare and the funds needed to deploy financial capital into the education sector for skills development and future economic growth of this country is seriously compromised (Adams, 2006:46).