South Africa is set for its best year in over a decade – but it needs to do better
South Africa is expected to see its best economic performance in over a decade in 2025, but it still needs to do more to ensure greater access to social services.
The Bureau for Economic Research (BER) recently increased its growth outlook for South Africa in 2025 to 2.2% – well ahead of the South African Reserve Bank’s (SARB’s) 1.5% and the International Monetary Fund’s (IMF’s) 1.2%.
This is also above other baseline expectations, leaning into a more “upside” view of the economy in the years to come.
The BER said that the improvement in the growth forecast is due to the anticipated easing of the nation’s logistics woes and the expected economic reforms by the Government of National Unity.
National Treasury is also committed to stabilising debt and debt service costs, with the government spending about R1 billion per day to service debt.
The BER highlighted the Treasury and the President’s joint initiative, Operation Vulindlela, which is speeding up reforms across the country.
The 2.2% growth rate would be the fastest growth rate in over a decade, excluding 2021, which saw a significant rebound from the Covid-19 pandemic-induced recession of 2020.
Although South Africa avoided a recession in 2023 with a growth rate of 0.6%, the economy is only expected to grow by roughly 1.0% in 2024.
As South Africa’s population grows at about 1.5% each year, the economy is not keeping up. The population is thus getting poorer.
Business Leadership South Africa CEO Busisiwe Mavuso said the improved growth outlook is the result of the reform efforts of the last few years.
These reforms have largely resulted in the end of load shedding, allowed skilled immigrants into the country, and are now helping with the nation’s port and rail backlogs.
“And yet there is clearly much more to do that could ultimately move us closer to the 5% per year growth level that would enable a real difference in the welfare of our people,” said Mavuso.
She noted that TotalEnergies’ exit from its offshore gas fuels, Brulpadda and Luiperd, after investing $400 million (R7.3 billion) in the discoveries, reflected negatively on the country.
The French petroleum giant said that it was too difficult to develop economically and monetise the resources for the South African market.
“While the company did not say it, I am sure that ongoing regulatory uncertainty is a major contributor to that difficulty. Since TotalEnergies’ discovery, there has been a series of dramatic flip-flops over regulating the gas sector,” said Mavuso.
The current Upstream Petroleum Resources Development gives the state the right to a 20% interest in new projects at the exploration and production phases. It will also allow the Minister to order companies to sell a percentage of petroleum to any state-owned company designed by the minister.
“For any company looking to develop gas or petroleum resources, this is a new source of considerable uncertainty,” said Mavuso
“The bill is sitting on the president’s desk for assent and would be better sent back to parliament for reworking, which would enable companies to take on the huge risks of developing major new gas resources.”
She added that the broader minerals sector has faced two decades of decline due to a lack of exploration activity, and the sector needs to be better regulated.
Moreover, the legal system’s inefficiencies have hit the business environment.
The Johannesburg High Court, the busiest commercial court in South Africa, can only give court dates for commercial litigants in over a year’s time due to a lack of judges.
“The swift resolution of commercial disputes is key to business, and the backlogs in our courts mean investment and other commercial decisions are held up. It is a further dampener on economic activity that will require a concerted effort from government, along with funding, to resolve.”
Although the signing of the Independent Police Investigative Directorate Act last week marked progress in tackling crime and corruption, Mavuso said that the overall effectiveness of the rule of law depends on the nation’s courts.
“Of course, there are always going to be strengths and weaknesses that affect our economic outlook. Our challenge, in working with our government partners, is to shift the dial more toward strengths.”
“That will result in further improvements to the growth outlook, which ultimately leads to more economic activity, jobs and taxes for government to use in improving social services.”
With reporting from Bloomberg
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