At the start of 2025, there is greater optimism about the South African economy compared to 12 months ago. Economists expect lower inflation, a decline in interest rates and higher economic growth this year compared to 2024. However, the domestic growth outlook may turn around and improve if loadshedding is reduced and rail and port infrastructure constraints are resolved, given the results of initial reforms in these sectors, and if cost-of-living pressures are reduced due to moderating inflation and potential rate cuts toward the year’s african gold capital investment latter half. This has helped boost confidence (which dropped sharply ahead of the elections) on the supply side of the economy, as shown by various business surveys. In the third quarter GDP decreased by 0.3%, despite positive signs of economic growth that led economists to expect the economy to grow by up to 0.5%.
SOUTH AFRICA’S ECONOMIC GROWTH TO DOUBLE IN 2024
While faster implementation of such 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. Focus is on project preparation and creating a pipeline of bankable projects (a long-standing challenge in South Africa), strengthening public-private partnerships (PPPs) through reforming their frameworks, as well as using risk-sharing initiatives and financial instruments to unlock greater private funding. Of the 10 industries reported on by Statistics South Africa (StatsSA), four saw contractions in 2023, while three recorded marginal positive increases (less than 1%). Only the finance, transport, and personal services sectors grew more than 1%—by 1.8%, 4.3%, and 2%, respectively.5 Furthermore, business sentiment has been flat as companies juggle multiple challenges, including high costs of business, high lending rates, noteworthy power and transport constraints, as well as policy and political uncertainty linked to the upcoming elections, among other things. Household final consumption expenditure increased by 0.5%, with the highest growth rates reported for non-durable and semidurable goods. The main positive contributors to the increase were spending on food and non-alcoholic beverages https://deriv.com/ housing, water, electricity, gas and other fuels, recreation and culture and restaurants and hotels.
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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.
- Consequently, interest rates are set to continue to decline, which will subsequently provide breathing room for consumers and businesses alike.
- As a result of a November 1993 bilateral agreement, the Overseas Private Investment Corporation (OPIC) can assist US investors in the South African market with services such as political risk insurance and loans and loan guarantees.
- Only the finance, transport, and personal services sectors grew more than 1%—by 1.8%, 4.3%, and 2%, respectively.5 Furthermore, business sentiment has been flat as companies juggle multiple challenges, including high costs of business, high lending rates, noteworthy power and transport constraints, as well as policy and political uncertainty linked to the upcoming elections, among other things.
Comparison with other emerging markets
Nevertheless, after underperforming for more than a decade, South Africa https://www.psg.co.za/ has entered a new era and has a window of opportunity to turn things around and pen a new story—one that utilizes the foundation stone of reforms and growth-enhancing infrastructure spending to create a society that is more inclusive, job-creating, and sustainable in the medium to long term. Learn about Deloitte’s offerings, people, and culture as a global provider of audit, assurance, consulting, financial advisory, risk advisory, tax, and related services. Allison Pieterse is a senior consultant in the Audit and Analytics Solutions team working on projects at the intersection of economics and healthcare as well as strategic advisory.
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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 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. Stats SA’s data for the third quarter of 2024 showed a surprising 0.3% contraction in GDP, with the agriculture, forestry, and fishing sectors taking a particularly hard hit, shrinking by a staggering 28.8%. Deloitte Insights and our research centers deliver proprietary research designed to help organizations turn their aspirations into action.
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These reforms, which incorporate public and private sector comments, are expected to streamline PPP regulations and reduce complexity, and help unlock greater private capital for public projects. Also, given the need for infrastructure funding in the longer term, new financing mechanisms are being explored, including amending infrastructure to an asset class via the new Securities Regulations of the Banks Act. This could help unlock new investment vehicles such as asset-backed securities that could be traded based on pooling infrastructure loans, or the creation of infrastructure investment trusts.46 These tools could though come in helpful as South Africa looks to unlock greater private funding for climate and green projects, particularly in support of the Just Energy Transition. Private enterprises have been driving the fixed-investment agenda and effective delivery of, in particular, energy infrastructure.