South Africa shouldn’t ‘let a good crisis go to waste’

South African Reserve Bank Governor Lesetja Kganyago says that the country is progressing in addressing its structural constraints.

Referencing a popular Winston Churchill expression, Kganyago told reporters that South Africa should “never let a good crisis go to waste.”

He noted that South Africa didn’t let “a good energy crisis go to waste” as the country has now experienced over 150 days without load shedding, a far better performance than expected. This comes from improved generation from Eskom’s coal-fired power stations.

Positive moves in the energy space could then spill into the other parts of the sectors, most notably transport, where Transnet hopes to expand growth.

The Governor also noted that South Africa could benefit from security fears surrounding the Suez Canal, with ships potentially landing in South African pots. However, he acknowledged the equipment shortages and maintenance problems at Transnet’s ports.

He noted that addressing the nation’s structural restraints could increase South Africa’s GDP from the 1% expected in 2024 to 3.5%.

Optimism reigns

After a challenging decade of low growth, South Africa’s economy looks set to improve from 2025 onwards.

South Africa’s GDP increased by a meagre 0.6% in 2023, far below the population’s expected growth of 1.5%. This means that the country hit a per-capita recession.

That said, economists and fund managers see 2025 as a turning point.

The latest Bank of America Fund Manager Survey showed that managers expect South Africa’s GDP to increase by 2.0% to 2.5% in the next three years, boosted by reforms in rails, ports, and electricity transmission.

Managers also believe that the domestic equities will return a total of 17% over the next year.

The SARB is widely expected to cut interest rates in Q3, boosted by improving inflation, the rand’s strength, and the US Federal Reserve’s September cut. This should boost domestic asset classes.

The BER also expects the nation’s GDP to increase by 2.2% in 2025, the fastest rate in over a decade (excluding 2021, which saw a rebound from the COVID-19 pandemic-induced recession in 2020).

The new Government of National Unity (GNU), which includes the ANC and eight other parties, most notably the market-friendly ANC and IFP, has eased the country’s logistics struggles and implemented key reforms.

The new government has committed to accelerating reforms to boost economic growth.

Shannon Bold, senior economist for macroeconomic modelling and forecasting at the BER, said that logistics constraints should ease in 2025, while consumer and business sentiment is expected to improve.

Kganyago noted that improved sentiment is an easy boost for growth, as it costs nothing.

The National Treasury also prioritises stabilising debt and the nation’s debt service cost, which stood at R1 billion a day at the start of the year.

Absa also upped its 2025 GDP forecast from 1.7% to 2.0%, with the group expecting that the continued boost in electricity supply and the GNU’s support of reform in critical areas will likely boost private confidence and investment.

However, the ‘Big Four’ bank said that more needs to be done in the logistics sector.

Despite Stats SA data on freight rail volumes showing a slight recovery, it has not been smooth.

In addition, the country’s localised water shortages are also an essential risk that needs to be monitored, particularly in Gauteng.

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