Ramaphosa hunting South Africa’s ‘big four’

 ·20 Jan 2025

President Cyril Ramaphosa’s “fairy tale” 3% economic growth target for South Africa faces a challenging reality and four big issues that won’t be easily overcome.

The 3% target set by the president—with buy-in from businesses and other partners—is a bold ambition and sits in the face of most projections between 1.5% and 2% in the near term,

The International Monetary Fund (IMF) this past week laid out its expectations, seeing just 1.5% GDP growth for South Africa in 2025, moving up only slightly to 1.6% in 2026.

According to the Bureau of Economic Research (BER), while a 3% target is not impossible, it is more likely that economic growth will average just below 2% from 2026 to 2029.

Although this is faster than the decade before the Covid-19 pandemic, it is still not enough.

The BER’s Impumelelo Economic Growth Lab said that while growth is set to increase in 2025, this could prove to simply be a “camel hump,” with challenges maintaining the upward trajectory.

This is because much of the cyclical support is expected to fade beyond 2025, it said.

It added that the government’s track record of slow implementation and delays could lead to a loss of momentum on the reform front, hampering progress.

Ramaphosa’s ‘big four’

Overall, there are four issues Ramaphosa’s administration needs to tackle to even think of seeing 3% growth.

There are:

  • Electricity shortages;
  • Logistics challenges;
  • Water constraints; and
  • Governance failures.

The BER noted that load shedding has caused deep damage to the economy, with the country unable to expand the local mining, manufacturing and construction sectors.

Although the lifting of load shedding was a boost for businesses in 2024, the BER said that businesses need to be sure that there is a stable supply of electricity before committing to long-term investment.

Moreover, the nation’s ports and rail system has been weak, with the nation’s freight rail capacity having been on a long downward trend since 2018.

Municipal water supply problems have also underscored local government weaknesses.

Water is a critical input for several activities, and the lack of water has been a major drag on consumer and business confidence.

The BER added that ongoing service delivery issues and governance problems are also massive constraints.

Broader governance issues, such as the FATF greylisting, have harmed South Africa’s ability to perform fast and unburdened cross-border transactions.

The BER said that tackling these issues via reforms could lift economic growth above 3%.

This would see household consumption increase due to improved job growth and positive real wage growth (adding 0.6%), investment (adding 0.6%), and exports (adding 0.7%).

For 2025 alone, tackling these issues would see South Africa’s GDP rise from the BER’s projected 2.2% to 3.3%

Source: The BER

Not likely to happen

That said, the rise to over 3% is not within the BER’s forecast, with a clear programme of action from Operation Vulindlela and the government to tackle the nation’s constraints still pending.

The BER said that Operation Vulindlela, a joint initiative between the National Treasury and the Presidency, will need to be reinvigorated to ensure that the accelerated programme can be achieved.

Phase one of Operation Vulindlela showed that a dedicated reform programme could deliver huge results, with significant progress in the electricity sector.

However, a poorly scoped and vague reform objective could do the opposite and present a risk to the outlook.

The BER said that implementation is the key. Any further delays will make 3% increasingly difficult to reach.

This was echoed by the IMF’s most recent review of South Africa’s outlook (October 2024), where it warned that, while the country’s trajectory is positive, risks are tilted to the downside and any resistance or delays to implementing reforms could see the growth path falter.


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