The member firms comprising KPMG in Southern Africa are not a global partnership, single firm, multinational corporation, joint venture, or in a principal or agent relationship or partnership with each other. However, if reforms are implemented successfully and investor confidence strengthens, South Africa has the potential to exceed these forecasts and move closer to its 3% growth goal. For instance, proposals targeting private healthcare and initiatives like BEE are sparking debates about their potential impact on business confidence. This does not compare well with the International Monetary Fund’s 4% projection for emerging and developing economies, and even falls below the outlook for https://www.alexforbes.com/ advanced economies of 1.7%.
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Furthermore, manufacturing, https://fnb.co.za/ construction, mining, and trade industries also contracted — of those, manufacturing and mining have faced more challenging circumstances due to ongoing electricity shortages, weaker freight and logistics capacity, and — in the case of mining — lower commodity prices. Manufacturing and mining are among the six industries (besides electricity, construction, trade, and transport) that by the end of the second quarter of 2023 were still trending below their 2019 levels of gross value added (based on average quarterly gross value added). 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 latter half.
Cape Town’s economic growth strategy delivers tangible success across key sectors
Eskom will continue to focus on implementing generation recovery, strengthening governance, and tackling crime and corruption while future-proofing the organisation to enable energy security, growth, and long-term sustainability to the benefit of South Africa and sub-Saharan Africa. “This concrete and ongoing delivery of the action plan has boosted business confidence with credit rating agencies and banks stating Eskom’s performance recovery is a key contributor towards positive sentiments as far as South Africa’s GDP growth prospects of up to 2% are concerned,” said Dan Marokane, Group Chief Executive of Eskom. Mining has been the main driving force behind the history and development of Africa’s most advanced economy. Large-scale and profitable mining started with the discovery of a diamond on the banks of the Orange River in 1867 by Erasmus Jacobs and the subsequent discovery and exploitation of the Kimberley pipes a few years later. Gold rushes to Pilgrim’s Rest and Barberton were precursors to the biggest discovery of all, the Main Reef/Main Reef Leader on Gerhardus Oosthuizen’s farm Langlaagte, Portion C, in 1886, the Witwatersrand Gold Rush and the subsequent rapid development of the goldfield there, the biggest of them all.
Comparison with other emerging markets
The South African economy remains under pressure going into 2024, mainly due to supply-side constraints in the electricity and logistics sectors. The economy only posted 0.3% year-on-year growth over the first three quarters, including a decrease of 0.2% year-on-year in the third quarter of 2023. Outlooks for 2024 and beyond have also moderated and are dependent on the (historically slow) speed of structural reforms, largely to address record levels of load shedding experienced during 2023. These are important steps in the right direction, but they remain paced and the results of greater confidence, and a continued focus on reforms and unlocking fixed investment spending will https://www.capitecbank.co.za/ still take time to trickle through to faster and job-creating economic growth. And there will likely be bumps along the way, not least from the challenges that come with a coalition government (including divergent views on crucial policy areas, as already seen), but also from possible downside risks to growth in the global environment, linked to inflation, geopolitics, continued economic weakness in China, and others.
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. Deloitte Insights and the our research centers deliver proprietary research designed to help organizations turn their aspirations into action.
- 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.
- However, the highest projection is expected from FNB and the National Treasury, with a 1.3% GDP growth rate.
- Given some of the constraints under discussion, but also stemming from various uncertainties such as heightened geopolitical tensions in the Middle East, climate change risks, still-tight financing conditions, and South Africa’s upcoming elections on May 29, there are notable downside risks to growth.
- The South African economy remains under pressure going into 2024, mainly due to supply-side constraints in the electricity and logistics sectors.
- The member firms comprising KPMG in Southern Africa are not a global partnership, single firm, multinational corporation, joint venture, or in a principal or agent relationship or partnership with each other.
A sector-by-sector view of the economy
With the electricity supply crisis continually weighing on economic growth, it is critical that these reforms continue to be implemented to curb power cuts, unlock investment and get the economy back on course. Still, the final reading of 2023 came in at 5.1% y-o-y in December, marking the second lowest reading of the year. The South African Reserve Bank (SARB) noted in its Monetary Policy Committee (MPC) meeting in January 2024 that although headline inflationary pressures at a global scale appear to be moderating, core inflation remains sticky. The MPC would like to see South African inflation trend further towards the midpoint of its targeting band of 3%-6% and subsequently made the unanimous decision to keep the policy rate unchanged at 8.25%, noting that risks to the upside remain for the inflation outlook.
To make a dent in unemployment, create jobs, and to reduce poverty and inequality, South Africa needs a faster pace of growth; but slow reforms will mean sluggish to no growth in the foreseeable future. With limited space for accommodative policy on both the monetary and fiscal fronts, it is imperative that reforms are implemented timeously and effectively if the South African economy is to have a chance at recovery. Building on the budget review in February 2024, the MTBPS indicated that government has finalized amendments to regulations that govern PPPs in South Africa, to be released before end of November 2024.
Nevertheless, after underperforming for more than a decade, South Africa 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. Over the past five years, Pieterse has worked with governments, funders, and private companies across Africa providing research, data analysis, and insights to solve client challenges and produce additional strategic value. Eskom expresses gratitude to all stakeholders, including the Minister of Electricity and Energy, the Eskom Board, the government and the National Energy Crisis Committee (NECOM), for the collaborative effort in addressing the country’s electricity challenges.
Despite improvements in managing power outages, the lasting effects of 2023’s load shedding crisis remain evident. The first quarter of 2024 still experienced energy disruptions, hampering industrial output and slowing economic momentum. On agc motsepe the supply side of the economy, various plans that have been set in motion to address supply-side constraints will need to be executed. Launched in 2020, Operation Vulindlela focuses on accelerating reform implementation within the electricity, rail, water, and telecommunication industries.13 Although some argue that these reforms are not ambitious enough14 and that momentum has been slow, there has been some progress.