South Africa’s biggest risks in 2024

The biggest risks to South Africa’s 2024 economic outlook may come from insufficient power supply, strains on debt sustainability and the erosion of state legitimacy ahead of elections, according to Allianz. 

The global financial services giant estimates that South Africa’s economy will expand 1.4% this year from the 0.7% forecast for 2023, but a lack of reliable electricity supply poses the heaviest drag on growth. 

Africa’s most industrialized nation endures almost daily power cuts because years of neglect, corruption and mismanagement have left state-run electricity utility Eskom unable to keep up with demand. 

Electricity outages prevent businesses, industry and households from realizing their potential and “it is improbable that sufficient capacity will materialize in the next 12 months,” Allianz said in its maiden Country Risk Atlas report.

Debt sustainability

A worsening debt trajectory is another factor that could weigh on the country’s economic outlook, Allianz said in its report, which assesses non-payment risks in 84 major economies.

“Due to a considerable short-term absorption of revenues to repay interest on debt and an increase in sovereign bond yields, South Africa ranks in the worst quintile in our public debt sustainability risk assessment as of end-2023,” Allianz said.

The situation could be further exacerbated by increased demands on public finances for social programs and idiosyncrasies among state-owned companies ahead of elections, according to the report.

Government departments and state-owned entities have been advocating for more spending even as tax revenues have undershot forecasts.

Their calls have grown louder as opinion polls show the ruling African National Congress may lose its majority for the first time since taking power in 1994 in elections that need to be held by August.

President Cyril Ramaphosa has pledged to extend and improve a popular 350 rand ($18.42) monthly social grant for the unemployed introduced during the coronavirus pandemic despite it not being budgeted for beyond March 2025.

Finance Minister Enoch Godongwana will likely provide more details when he tables the annual budget on Feb. 21.

State legitimacy 

The erosion of the state’s credibility is a further risk to the country’s economic outlook, Allianz said. 

“Worsening disputes among political elites and the resulting increase in violent uprisings and insurgencies further weigh on state legitimacy, the capability of the ruling ANC party to defuse dissent and the predictability and effectiveness of government action,” it said. 

In July 2021, law enforcement agencies struggled to bring under control a week of rioting and looting, which coincided with the arrest of ex-President Jacob Zuma on contempt charges and was fueled by widespread anger over poverty and coronavirus curbs.