South Africa’s economy rising from the ashes – BusinessTech
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Experts believe that South Africa’s economy will have a strong couple of years following a challenging past decade.
South Africa’s GDP only increased by a meagre 0.6% in 2023.
Although growth seemed importable at the start of the year due to heightened load shedding, it is likely insufficient to meet the country’s population growth.
With South Africa’s population growing by roughly 1.5% annually, the country will likely hit a per-capita recession in 2023.
Between 2019 and 2023, South Africa’s economy only expanded by 1%, but the population’s growth over that period meant that GDP per Capita fell by 4%. This should, however, also factor in the devastating impact that Covid-19 had on the economy.
2024 did not start well, with the GDP declining by 0.1% quarter-on-quarter.
However, high-frequency data suggest that Q2 will show a rebound amid a better-than-anticipated energy supply. Thus, South Africa will miss a technical recession, which is characterised by two straight quarters of negative growth.
Most economists and analysts have estimated that South Africa’s economy will grow by roughly 1.0% in 2024.
Best in a decade
However, the picture does seem brighter for the future.
According to the latest Bank of America Fund Manager Survey, managers see reform in rails and ports, electricity transmission, and skills as key to boosting South Africa’s GDP by 2.0% to 2.5% in the next three years.
Managers also have a positive outlook on domestic equities, with a 17% total return expected over the next year.
The South African Reserve Bank (SARB) is also widely expected to cut interest rates in Q3, which could boost domestic asset classes.
The Bureau for Economic Research (BER) also previously estimated that South Africa’s GDP would increase by 2.2% in 2025.
This would be the fastest growth rate in over a decade when excluding 2021, which saw a rebound from the pandemic-induced recession.
The boost is due to the anticipated easing of the country’s logistic struggles and the implementation of key reforms by the new Government of National Unity (GNU).
The GNU comprises the ANC and eight other parties, most notably the market-friendly ANC and IFP. The new government has committed to spending up reforms to boost economic growth, especially regarding the nation’s poor-performing rail network.
Shannon Bold, senior economist for macroeconomic modelling and forecasting at the BER, noted that logistics disruptions should be less constraining in 2025. Consumer and business sentiment is expected to improve.
The National Treasury has also committed to stabilising debt and the nation’s debt service cost.
As reported by Business Day, Absa has also upped its 2025 GDP forecast from 1.7% to 2.0%.
The group said that continued electricity supply and the GNU’s support of reform in critical areas of infrastructure are likely to boost private confidence and investment.
However, Absa warned that more needed to be done regarding logistics infrastructure. Although Stats SA data on freight rail volumes have slightly recovered, the recovery has not been smooth.
Moreover, the country’s localised water shortages are an essential risk to monitor, especially in Gauteng.
This could constrain GDP growth in the coming years.
The government is aware of the water challenges facing South Africa, and President Cyril Ramaphosa signed the South African National Water Resources Infrastructure Agency SOC Ltd Bill, establishing a new agency responsible for developing and managing national water infrastructure.
With reporting from Bloomberg
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