The Bureau for Economic Research (BER) at Stellenbosch University has forecasted that economic growth could rise significantly to 3.3% in 2025, provided that the government’s reform program under Operation Vulindlela gains momentum.
Operation Vulindlela (OV), a joint initiative of the Presidency and the Treasury, aims to eliminate structural and policy obstacles to economic growth.
This project is further supported by a government-business partnership, which was recently renewed. The BER’s research, commissioned by these business partners, highlights the potential impact of such reforms.
According to economic modelling released by the BER earlier this week, reforms and investment in four critical sectors—electricity, rail and ports, water, and addressing crime and corruption—could boost growth from the expected 1.1% in 2024 to 3.3% by 2025.
“Meaningful progress in these areas will support economic growth, but delays could postpone progress, while faster implementation will accelerate growth… if implemented successfully, the anticipated improvement in business confidence and private sector investment will also play an important role in redefining SA’s economic trajectory upward and improve the lives of all South Africans.”
The BER estimates that these reforms could result in 3.3% economic growth by 2025, and over 130,000 new jobs created annually, translating to a 2.1% increase in job growth.
It said that nearly one million new jobs could be created by 2029, leading to a total of 2.68 million new jobs by that year.
It would also lead to lower inflation driven by reduced electricity and transport costs, accompanied by a potential interest rate cut by the SA Reserve Bank.
Additionally, the BER’s model takes into account other reforms spearheaded by OV, such as changes to the visa regime, local government improvements, and South Africa’s removal from the Financial Action Task Force grey list.
These factors are expected to enhance both business and consumer confidence.
However, reaching the 3.3% growth target is a challenging goal. For instance, the BER notes that addressing constraints like equipment shortages, rail, and port inefficiencies could lead to moving an additional 60 megatonnes (mt) of freight via rail corridors.
This is a tall order, as Transnet transported only 153mt in the last financial year, and reaching 200mt will be difficult in the near future.
Investments in key sectors—electricity, water, ports, and rail—are expected to total in the trillions, with much of the funding coming from private sector partnerships enabled by ongoing economic reforms.
To achieve 3.3% growth by 2025, the BER projects the following:
These developments are expected to improve various economic indicators, including reduced unemployment, lower government borrowing costs, and a declining debt-to-GDP ratio.
South Africa needs two consecutive years of 2% economic growth to attract long-term value investors, and 2025 is projected to be the first of these pivotal years, according to a senior analyst from JPMorgan, BusinessDay reports.
South Africa’s economy showed modest growth in the second quarter of 2024, thanks in part to the absence of load-shedding.
Data from Statistics South Africa showed that GDP grew by 0.4% during this period, following a flat performance in the first quarter of the year, which was still affected by power disruptions. Stats SA also revised the first quarter figure slightly upward after initially reporting a 0.1% contraction.
Investec chief economist Annabel Bishop said this week that data from Q3 2024 and earlier this year supports Investec’s forecast for South Africa’s economic growth at 1.0% for the year.
Investec expects GDP growth to accelerate in 2025, reaching 1.7%.
In contrast, the IMF projects South Africa’s growth rate to hit 1.3% in 2024, with their forecast for 2026 standing at 1.4%, notably below Investec’s prediction of 2.0%.