Things are looking up for South Africa

South Africa’s economy will likely expand 2.2% in 2025 with an anticipated easing of the country’s logistic woes and the new unity government’s commitment to implementing key economic reforms, the Bureau For Economic Research said.

The Stellenbosch-based research body’s forecast is rosier than that of the central bank’s 1.5% growth estimate for 2025, and the International Monetary Fund’s 1.2%. It would be the fastest growth rate in more than a decade, excluding 2021 an outlier year when the economy rebounded from a pandemic-induced recession. 

A new government, formed by the African National Congress with business-friendly parties after it lost its outright majority in the May 29 elections, has committed to accelerating reforms to boost economic growth.

A top priority is fixing its ports and rail networks.

“Logistics disruptions should be less constraining,” Shannon Bold, senior economist for macroeconomic modelling and forecasting at the BER, said in a presentation, noting that a return in consumer and business sentiment is expected. 

The BER said the new government’s commitment to mobilizing investments and speeding up reforms with the aid of Operation Vulindlela, a 2020 initiative between the Presidency and the National Treasury, bodes well for growth.

The agency’s work has helped generate an investment potential of R500 billion.

BER said lower inflation, a stronger currency and interest rate cuts should also help lift growth. While South Africa’s inflation rate remains above the midpoint of the central bank’s 3% to 6% target band, where it prefers to anchor expectations, the bank now sees it moderating to 4.3% in the last quarter of 2024. 

That could prompt policymakers to lower borrowing costs, potentially as soon as September, provided price pressures soften as expected.