South Africa isn’t out of the woods yet, top CEOs warn
Sentiment over South Africa has improved since the formation of the Government of National Unity (GNU), but the nation needs to be cautious over complacency.
Although sentiment has changed, Sanlam CEO Paul Hanratty said that not very much has altered for companies in their domestic operations.
“There are some tiny green shoots appearing that we need to nurture,” said Hanratty at Bloomberg’s Future of Finance event in Johannesburg.
The ANC formed the GNU after losing its majority in parliament for the first time in South Africa’s democratic era, with the DA, IFP, Rise Mzansi, PAC, Good, PA, FF Plus and Al Jama-Ah joining.
The broadly market-friendly government has led to a tear in South African markets, with the rand gaining 5% to the dollar and local-currency bonds having outpaced all peers in an emerging-market index with returns of 24% in greenback terms.
The JSE has also hit successive record highs, returning a 15.7% return in dollar terms.
Discovery CEO Adrian Gore said that if the country expedites reforms, such as operational improvements at Transnet and Eskom, GDP growth of 3% by next year is possible.
However, Hanratty said that the country needs to be cautious about becoming complacent and thinking its problems have been solved.
Although there has been no load shedding for over six months, the electricity crisis is not over. Eskom still needs to build generation capacity to deal with the increase in demand.
Several constraints led to the GDP only growing by 0.7% in 2023, and only a measly 1% is expected for 2024.
Over the past decade, the average GDP growth of less than 1% has done little to improve the country’s unemployment rate of over 33%.
Public and private sector team up
Gore’s comments came after the announcement of Phase 2 of the Government Business Partnership at the Industrial Development Corporation.
The partnership said that if it expedites reforms, South Africa could boost GDP growth by 3.3% by the end of 2025 and create millions of new jobs by 2029.
Businesses contributed over R250 million in direct funding, deployed more than 350 experts, and engaged 57 companies in power station interventions, contributing over 9,000 hours to Eskom during Phase 1 of the partnership.
Moreover, R700 million was invested in key transport corridors, and 500 security personnel were assigned to Transnet’s Freight Rail, which resulted in a 50% reduction in security incidents on coal lines.
Presidency and Business For South Africa (B4SA) said that Phase 2 will aim to scale these efforts with increased resources and a clear set of actions to boost economic growth.
President Cyril Ramaphosa said that “the collaborative efforts of this partnership, and the progress we have made so far, are well aligned with the priorities of the Government of National Unity.”
Despite the optimism, few analysts expect the economy to grow that much in 2025, even with an improved outlook.
Although the Bureau for Economic Research (BER) was commissioned and calculated the 3.3% figure, it had previously said it expected 2.2% growth in 2025.
The BER’s prediction is also the most optimistic, with Investec and the IMF expecting GDP growth of 1.7% and 1.3% in 2025, respectively.
Nevertheless, Investec remains optimistic about South Africa’s medium-term future. Growth of 3.1% is expected for 2029, which should ensure real growth as GDP outpaces population increases.
With reporting from Bloomberg
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