What Ramaphosa needs to do to turn South Africa’s ‘3% fairy tale’ into reality

South Africa’s economic growth is currently stagnating between 1 and 2%, significantly below the government’s targets.
KPMG South Africa forecasts economic growth of 1.5% in 2025 and a further 1.8% in 2026.
The Bureau for Economic Research’s (BER’s) current baseline forecast is for economic growth in South Africa to average just below 2% from 2026 to 2029.
Unpacking what is keeping South Africa between 1 to 2% economic growth, they attribute this lackluster performance to key constraints, including:
- Electricity supply:
- Inadequate logistics infrastructure:
- Municipal water supply challenges:
- Governance and local government service delivery failures.
However, the BER Impumelelo Economic Growth Lab’s recent report titled Turning the 3% growth fairy tale into reality proposes policy reforms; modeling that their effective implementation could boost growth to 3.3% by 2025.
Lifting these constraints could raise growth to 3%
This was the same figures as the the projections given by President Cyril Ramaphosa, ministers and some of South Africa’s top CEOs at the launch of Phase 2 of the Government Business Partnership.
The BER describe the targert as tough but achievable.
They said that the successful implementation of these reforms, rather than just planning, is crucial to “turning the 3% growth fairy tale into reality.”
- Electricity
The BER said that the current reform model uses the energy availability factor (EAF) to reflect better performance at Eskom.
“However, this is not enough,” said the BER.
The research unit said that a durable improvement in electricity performance needs the country’s electricity reforms to continue.
“This includes a proper unbundling of Eskom and a viable business model and balance sheet for the National Transmission Company of South Africa to ensure that new transmission grid is constructed at scale,” they added.
- Logistics
South Africa has increased its trade position over the past year, but inefficiencies at state-owned logistics company Transnet continue to hold back the country’s trade performance.
Investec’s Chief Economist, Annabel Bishop recently said that that deep-rooted structural problems at the SOE, which will take a long time, “will inhibit trade more so than tariffs from the Trump administration.”
Transnet carried 151.7 million tonnes of capacity in FY 2024.

- Water reform to entice private sector investment
“The South African National Water Resources Infrastructure Agency SOC Limited will be key in creating a bankable entity that can deliver bulk water,” said the BER.
However, they emphasised that bulk water is not the major constraint over time; rather, the delivery at a municipal level.
“Here, strengthening local government capacity and capabilities are vital,” added the BER.
- Governance wake-up
Improvements in multiple shortcomings of governance, including service delivery failures and combatting corruption, are essential to foster business investor confidence, facilitate economic activity, and ultimately improve the broader socio-economic environment.
The BER also points to the negative impact of the Financial Action Task Force (FATF) greylisting.
In February 2023, the FATF greylisted South Africa due to inadequate measures against combating corruption, money laundering, terrorist financing, and proliferation financing.
The FATF highlighted the need for South Africa to implement a robust strategy to counter terrorism financing, enhance anti-money laundering efforts, and improve the investigation and prosecution of complex financial crimes.
Very broadly, being on the grey list means the country must address strategic deficiencies within specified timeframes and is subject to intensified monitoring.
Economics Professor Jannie Rossouw from Wits Business School explained that greylisting diminishes South Africa’s attractiveness as an investment destination, leading to higher interest rates and diminished foreign investment.
Will reforms have an impact?
Addressing these governance failures are crucial in improving the lives of South Africans, boosting business confidence and attract investment.
The BER’s economic modeling suggests that implementing reforms focused on electricity, ports and rail, water, and governance could increase economic growth to 3.3% by 2025.
This growth would be driven by several factors:
- Increased exports:
Improved infrastructure, particularly in the electricity and logistics sectors, would enable South Africa to capitalise on commodity price surges and increase its export capacity.
Using data from South African Association of Freight Forwarders on how port systems could be transformed by concessions, the BER estimates that an additional 60 million tonnes could be added to capacity within a few years.
This would boost both export capacity and investment and the BER’s model predicts that this could add up to 0.7 percentage points to growth.
- Investment growth:
The BER predicts enhanced business confidence resulting from a stable electricity supply, improved logistics, stable water provision and greater governance would create more favorable business environment would encourage private sector investment.
This is estimated to contribute a further 0.6 percentage points to growth.
- Household consumption:
Job growth and positive real wage growth, supported by the overall economic uplift, would boost household consumption, adding another 0.6 percentage points to economic growth.
“Overall, this would add around 1%pt to economic growth,” said that BER.
Can this work?
While the BER’s economic modeling suggests that South Africa could achieve 3.3% economic growth by 2025 through a robust reform agenda, they emphasise that realising this potential hinges on effective implementation.
“Importantly, the package of reforms needs to happen together. Lifting the constraint to ports, for example, will not be enough to increase economic growth. A stable supply of electricity and water will also be needed.
“The reform agenda needs to work in lockstep,” added the BER.
“This is not our baseline forecast as we still need to see a clear programme of action (and, more importantly, implementation) from Operation Vulindlela (OV) / the government to tackle these constraints.”
They acknowledge the successes of OV’s first phase, particularly in the electricity sector. However, they caution against “overloading the team with poorly scoped and vague reform objectives” in subsequent phases.
The BER stress the need for a focused approach, advocating for a “clear set of specific, measurable, achievable, ambitious, realistic time-bound reform agenda”.
“The implementation of existing structural reform plans can lift economic growth beyond 2% – and, in fact, we can get there in a short space of time,” said the BER.
However, the BER warn that “the crux is in the implementation, and any further delays will mean that 3% becomes more and more difficult to reach.”