South African economic comeback

The formation of a new, united government in South Africa and the prospects of it being able to drive an economic recovery are helping to bolster sentiment and investment, according to the head of a banking industry group.

“Now that we have hope that South Africa is going to be in a growing environment again, we are beginning to” see a revival in investment, Bongiwe Kunene, managing director of the Banking Association South Africa, said at an event at Bloomberg’s Johannesburg offices on Wednesday.

“These are big investments, which are premised on an operating environment that enables investors to look forward to returns” that they have budgeted for, she said. 

The outlook for South Africa has turned more positive since the African National Congress lost its outright majority for the first time in 30 years in the May 29 elections and formed a governing coalition with the centrist Democratic Alliance and eight other parties.

Investors are anticipating the tie-up will help accelerate reforms that are needed to lift output, including improving energy supply and tackling logistics snarl-ups.

While gross domestic product has expanded by an average of less than 1% over the past decade, Stellenbosch University’s Bureau for Economic Research last week predicted growth of as much as 2.2% in 2025 as the reforms gather momentum.

Kunene said in an interview that some of the largest investments are taking place in the energy industry, and those are being underpinned by the government’s commitment to buy more renewable electricity from independent producers and make the bid process more predictable.

She expects that moves by e-commerce giant Amazon.com and Chinese fast-fashion retailer Shein to establish a presence in South Africa will increase demand for warehousing and lift investment in the property industry. 

“It weaves the narrative that we really are on a comeback in more ways than one,” Kunene said.