South Africa heading in the right direction – but it will take time

Although South Africa is progressing in addressing some of its major challenges, reforms will take years to fully achieve their goals.

The International Monetary Fund (IMF) recently lowered its GDP growth projects for South Africa by 0.1% to a measly 0.9% in 2024 – half of the 1.8% expected in October 2023.

Although the IMF did not go into detail about the lowering of the forecast, South Africa has been suffering from several crises around power and water supply and logistics.

Several issues have improved somewhat in recent times, such as load shedding being suspended for several weeks, but these issues are far from over.

Business Leadership South Africa CEO Busiswe Mavuso said that several of the nation’s biggest issues depend on infrastructure, with a desperate need to mobilise investment from the private sector amid the state’s dire finances and the balance sheet constraints of state-owned enterprises.

“I was pleased to see National Treasury’s efforts earlier this month to engage the private sector and others regarding reforms it is making to regulations regarding public-private partnerships (PPPs),” said Mavuso.

“The reforms, which have been a long time coming, will simplify the bureaucracy around developing PPPs, particularly smaller ones.”

“They also make it easier for the state to entertain unsolicited PPPs. That enables the private sector to develop concepts and proposals that we can take to government for partnerships that will solve some of the challenges we face.”

Although South Africa has made a major push over infrastructure over the last five years with the creation of Infrastructure South Africa and the Infrastructure Fund, these efforts have not spurred the infrastructure investment that many had hoped for.

Mavuso said that decentralisation, which will allow businesses and local governments to work together to solve local challenges, is part of the solution.

However, it will take considerable political will and support from the national government to enable all parts of the government to embrace PPPs as a way to solve the nation’s problems.

“The IMF’s global outlook is an important report card for where we are, and the results are sobering,” said Mavuso.

“One of the political challenges of reform is that results can take years to emerge.”

“Indeed, the electricity reforms of a year ago will only result in the end of load shedding in about two years’ time.”

It will take even longer for sustained improvements at the nation’s ports and railways as regulatory changes bed in.

Mavuso said that the performance of other sub-Saharan African countries shows that difficult reforms that have been implemented over many years can culminate in notable economic results.

The IMF’s data showed that South Africa’s GDP growth (0.9%) is far behind the 3.8% in 2024 for sub-Saharan Africa.

Read: Almost R100,000 a day for 14 years – Mike Brown’s insane pay as Nedbank CEO