As noted in a previous edition of this publication,32 various plans have been set in motion to address supply-side constraints via the reform program, Operation Vulindlela (OV), launched in 2020. The first phase of the program has focused on sectors including energy, rail, water, and telecommunications.33 The finance minister announced that this program will be expanded to include other areas as part of phase 2. In the first phase, reforms under OV have attracted over 390 billion rand in investment in the energy sector.34 The focus on the ongoing implementation of structural reforms—although at times painful and resulting in short-term trade-offs—is at the core of the GNU’s medium-term strategy. Despite recording the worst year of loadshedding1 on record (so far) in 2023 (more than 6,700 hours of loadshedding were recorded in 2023,2 compared to about 3,700 in 2022),3 South Africa managed to avoid a technical recession. Real GDP growth stood at 0.6% last year.4 In the first half of 2023, businesses and households alike invested in self-generation and rooftop solar power, boosting investment spending, and aiding to bridge energy shortfalls.
Cape Town’s economic growth strategy delivers tangible success across key sectors
But household final consumption expenditure growth has been flat, given the high cost of living and the country’s energy crisis. This, together with heightened operational challenges in rail and port infrastructure, has been a drag on investment and much-needed growth both on the demand and supply side. 2023 was a challenging year for the South African economy – an expected anemic GDP growth of below 1 per cent, influenced by persisting freight, logistics, governance and energy supply constraints, high interest rates and rising fuel and food prices. In addition, adverse weather conditions continue to affect lives and livelihoods and damage infrastructure. Going into 2024, the South African Reserve Bank (SARB) anticipates a 1.2 per cent growth in the GDP for the year and expects the headline inflation rate to ease further into the bank’s inflation target range of 3 – 6 per cent – as, in fact, the headline inflation for 2023 has already hit the upper end of the target.
- The country’s borders were reopened on 1 October 2020, with some exceptions to tourists travelling from specific European countries and the US, due to high levels of COVID-19 activity taking place there.
- The domestic telecommunications infrastructure provides modern and efficient service to urban and rural areas.
- South African companies which provide services related to the Space industry, also increasing, and with the correct government legislation and support, this sector is expected to grow in South Africa.
- South Africa’s GDP decreased in the first quarter of 2024 as economists expected, with six industries recording negative growth between the fourth quarter of 2023 and the first quarter of 2024, including manufacturing, mining, construction and agriculture.
Annabel Bishop, https://standardbank.co.za/ chief economist at Investec, said at the beginning of the year that the most probable outcome for the rand was to end the year averaging between R18.17 and R19.09. The rand is now on track for its worst December performance since 2015 and its biggest quarterly decline in more than two years. Orlando Pirates have allowed the attacker to return home for the remainder of the season following his well-documented struggles.
Comparison with other emerging markets
One of the most significant focus areas in the medium term will need to be investment in infrastructure to stimulate economic growth. It needs to crowd in more private sector financing for larger projects, review the public-private partnership framework, and establish an agency to support finance and implementation of infrastructure.The need for continued progress on structural economic reforms, specifically in the electricity and logistics sectors, is now more urgent than ever. While government looks to maintain fiscal prudence and macroeconomic stability, two key focus areas stand out in its plan to spur on economic growth. One, the relentless commitment to implementing structural reforms to create a more productive and competitive economy; and two, the focus on unlocking growth-enhancing infrastructure investments, although mostly from the private sector, to boost fixed investment spending.31 This is not new thinking, but it is important—and this is now gaining wider traction in creating a more pro-business environment in South Africa. The economic costs of failure and inefficiency in these sectors have mounted over the past year, partly due to lack of investment but also due to mismanagement, corruption, and even theft. Reforms in the electricity sector – including lower restrictions on self-generation and reforms to encourage private investment – are expected to add over 11GW of renewable sources to help curb the power crisis in the medium term.
Economic growth, inflation, and central bank rate cuts
The IMF’s latest World Economic Outlook report stated that South Africa experienced a bleak output this year after the IMF slashed its growth outlook to 1% from 1.8% in January. South Africans, investors, and businesses will now look to 2025 and beyond, hoping for the fulfillment of promises that https://www.easyequities.co.za/ could steer the economy toward sustained growth. Despite the immediate challenges, the IMF has maintained its projections for 2025 and 2026 at 1.5% and 1.6%, respectively, with a gradual recovery expected over the medium term.
Mini budget and government plan focus areas
Additionally, high levels of national debt and rising interest rates rendered only 0.5% GDP growth in 2023. The positive momentum is expected to continue into 2025 and 2026 with GDP growth forecast to improve over this period to levels around the average of 1.7% experienced over the ten years leading up to the Covid-19 pandemic. “However, this is still below what is required to make a meaningful impact on economic inclusion to absorb a significant proportion of the unemployed into the labour market,” he elaborates. While faster implementation of such is africa gold capital legit reforms will contribute to boosting confidence and unlocking fixed investment, government is also looking at new ways to attract private sector investment for public sector projects.
As the 2024 February Budget Review approaches, attention will be on measures and reforms to support fiscal consolidation, and the better management of state-owned entities. This is a critical time for South Africa, especially with elections posing additional challenges to public expenditure, and even more so as the country enters uncharted political waters. With the correct government support, South Africa can increase the jobs in the manufacturing, testing, and analysis sectors of the growing Space industry. Access more insights for the consumer spending, housing, business investment, globalization & international trade, fiscal & monetary policy, sustainability, equity, & climate, labor markets and prices & inflation sectors.
In fact, top-of-mind issues for voters are unemployment, loadshedding, corruption, and crime,12 which have all taken a toll on the country’s growth performance for years. As part of an international attempt to modernize infrastructure, South Africa has faced increasing pressure to invest government funds into its water and electricity sectors. At current, these sectors are underfunded by approximately US$464 billion (This is according to the G20 GI Hub). This is characterised by several comprehensive government programs and organisations that provide resources and services to females, both adult and adolescent.
Maarten Ackerman, chief economist at Citadel, says while interest rates and inflation are slowly coming down in South Africa and around the globe, a combination of forces is likely to keep economic growth below capacity for at least the next two to three years. The National Treasury February 2024 budget states that GDP growth has been, on average, 0.8% since 2012, which is insufficient to address high levels of unemployment and poverty. The global and South African financial institutions have predicted an increase in South Africa’s economic growth at an average of 1.2% in 2024 compared to 0.6% in 2023. The result is the 10-party Government for National Unity (GNU), representing about 70% of voters (although voter turnout did drop to 58.6% from 66% five years before). Arguably, this could be the best outcome for the economic future of the young democracy.2 For one, the reelection of President Cyril Ramaphosa for a second term has ensured policy continuity, while the formation of the GNU boosted international investor sentiment toward South Africa—amid an improved global economic landscape and the start of the global rate-cutting cycle (figure 1).