Two big opportunities to grow South Africa’s economy
A new Deloitte analysis said South Africa could benefit from focusing on its energy transition goals and supplying critical commodities in a global clean energy future.
Deloitte’s Hannah Marais said South Africa’s economic growth outlook in 2023 came under pressure because of global and local events.
Globally, the economic slowdown and recession fears impact trade and investment in South Africa.
Locally, severe power cuts, the cost-of-living squeeze, slow investment, sluggish pace of reforms, logistical constraints, and political uncertainty weigh the growth outlook in 2023.
Estimates released by the South African Reserve Bank (SARB) expect real GDP growth to slow to 0.3% in 2023.
However, it is not all doom and gloom. The country’s fiscal position has improved over the past two years.
Fiscal consolidation measures such as budget discipline and better-than-expected tax collections brought down the budget deficit last year.
Smaller deficits are forecast for the next three years, with a primary budget surplus expected for 2023/24.
The revenue windfalls are being used to reduce elevated government debt and to support reforms at crucial state-owned enterprises (SOEs).
However, fiscal risks on both expenditure and revenue continue to loom.
To improve South Africa’s economic outlook, the government must create an enabling environment conducive to investment.
Marais said a game changer for the country is leveraging the opportunities linked to its energy transition goals.
It includes a move away from a coal-dominated energy mix while overcoming its power generation shortfalls.
South Africa has massive renewables potential, not only in solar and wind but also in green hydrogen.
Another opportunity is supplying and adding value to critical commodities in a global clean energy future.
South Africa has a notable comparative advantage in supplying key minerals and metals for clean energy applications. It includes:
- Platinum group metals – used in catalytic agents in hydrogen electrolysis and fuel-cell applications.
- Vanadium – input for long-duration battery energy storage applications.
- Rare earth elements – used in permanent magnets in the electrical motors of wind turbines and in electric vehicle motors.
- Nickel – applications in EVs and battery storage, and hydrogen and geothermal technologies.
“This could help give rise to new drivers of economic activity that boost growth and create jobs while also ensuring a just and fair transition toward carbon neutrality,” Marais said.