The tide is turning in South Africa

After years of grappling with persistent challenges, South Africa is beginning to witness a promising turnaround.

The electricity crisis, once a daily disruption, has significantly eased, with Eskom reporting over 260 consecutive days without load-shedding in 2024 as of 13 December.

This remarkable milestone is a direct result of the Generation Recovery Plan, which has improved the reliability of the coal-fired fleet while slashing diesel costs by nearly 68% compared to the previous year.

Eskom’s enhanced energy availability factor and strategic planning suggest the country is on track for a load-shedding-free summer, providing much-needed stability to households and businesses alike.

Another critical area of concern is the logistics sector, which has shown notable improvement.

Ports have reduced wait times, and rail freight is flowing more efficiently than during the peak of the crisis.

These gains have been supported by efforts from the National Logistics Crisis Committee, which continues to address systemic challenges in the sector.

While risks remain, such as the looming threat of a water supply crisis, these strides highlight the progress made in restoring vital infrastructure.

Economic indicators further underscore this positive momentum. Inflation, once a significant burden, has cooled to levels not seen in over a decade.

Food inflation, in particular, has dropped to its lowest rate since 2010, providing relief to households across the country.

This deflationary trend has prompted modest interest rate cuts, with expectations of further reductions in 2025. Lower rates, combined with rising real incomes, have boosted consumer confidence and household spending.

Real income grew by 5.2% year-on-year in October, while the Consumer Confidence Index continues its upward trajectory, reflecting improved sentiment among South Africans.

The partnership between government and business has played a pivotal role in fostering these gains.

The second phase of the government-business collaboration aims to deepen structural reforms, attract investment, and sustain positive national sentiment.

Business confidence, although still fragile, has shown consistent improvement over three successive quarters, reaching its highest level in over two years by the third quarter of 2024.

This renewed optimism is driven by tangible outcomes, such as the increased number of clean government audits and the positive revision of South Africa’s credit outlook by S&P Global—the first upgrade since the onset of the COVID-19 pandemic.

Despite these achievements, challenges persist.

The third quarter of 2024 revealed disappointing GDP growth, with a contraction of 0.3%, largely due to a severe decline in agricultural production and ongoing logistics bottlenecks.

Additionally, while the unemployment rate is projected to improve slightly, it remains a significant concern, underscoring the need for sustained economic growth to absorb more individuals into the labour market.

Looking ahead, South Africa’s economic prospects appear brighter.

Forecasts suggest GDP growth could strengthen to 1.7% in 2025, bolstered by a stable political climate under the Government of National Unity (GNU).

This coalition, formed after the May 2024 elections, has shown a commitment to implementing structural reforms, particularly in state-owned enterprises like Eskom and Transnet.

Standard Bank’s chief economist, Goolam Ballim, predicts a more promising economic landscape for 2025, with the potential for sustained GDP growth of up to 3.5% over the next five years if key reforms continue.

South Africa’s leadership on the global stage also provides an opportunity to amplify its progress.

As the chair of the Business 20 (B20) and Global 20 (G20) in 2025, the country can influence global discussions while advocating for its priorities.

However, global risks, such as geopolitical tensions, the slowdown of China’s economy, and the escalating climate crisis, remain significant external threats.

For now, South Africans can celebrate the strides made in addressing some of the country’s most pressing issues.

The stabilisation of energy supply, cooling inflation, and improved governance are critical building blocks for a more prosperous future.

Yet, as experts caution, sustaining this progress will require continued collaboration between government, business, and civil society to tackle remaining challenges and seize the opportunities ahead.

With effective leadership and a commitment to reform, South Africa stands poised to chart a path toward inclusive and sustainable growth.

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