South Africa economic growth less than half of where it should be
While South Africa’s economic growth prospects for 2025 are optimistic, they are less than half of what the country was promised.
KPMG’s insights from their South Africa Economic Outlook suggest that South Africa’s economy will grow by 1.5% in 2025 and 1.8% in 2026.
Frank Blackmore, the Lead Economist at KPMG SA, explained on The Money Show with Stephen Grootes that KPMG has scaled back its growth numbers slightly.
This is due to the outcome of the US elections, which have created geopolitical uncertainty, especially regarding trade and immigration policies.
“So instead of having 1.8 for next year’s growth, it’s now deferred for two years to 2026 – and I think that is possible if we continue moving in the right direction in several areas,” Blackmore said in 2024.
Business and government initiatives made significant progress in 2024, especially in the second half, regarding the electricity supply.
Now, they are looking to improve the efficiencies and growth of other logistics and network industries, including South Africa’s railroads, which have significantly burdened the country’s economy.
“Then, of course, the reductions in interest rates that we still expect to take place well into the middle of 2025 will also help both consumers and businesses and will help support growth as a result.”
While this growth target is still optimistic, it is far from the 3% growth the government hoped to achieve by the end of 2025.
Earlier in 2024, President Cyril Ramaphosa, ministers and some of South Africa’s top CEOs projected that if South Africa successfully expedites reforms, achieves operational improvements at Transnet and Eskom, and swiftly mobilises private sector investment, it could see GDP growth reach 3.3% by the end of 2025.

Blackmore explained that this growth target was too big of a stretch, though, considering that the country’s electricity supply could not keep up with that level of growth.
Despite Eskom’s improved electricity supply and load-shedding respite in 2024, the utility would not be able to provide enough electricity if the economy were to grow by around 2%.
“We’ll be in a load-shedding situation once more,” he said, which means the country isn’t out of the woods yet where the electricity supply is concerned.
Many private suppliers have come online, but much more investment needs to be made, especially in the transmission, distribution, and management systems, to handle the wave of sustainable energy.
“So I don’t think it would be realistic for us to touch on that 3%.”
However, Blackmore said that is the level of growth the country needs to achieve to make a meaningful difference in reducing unemployment, bringing more people into the economy, and getting businesses to start investing at a higher rate.
Currently, South Africa is growing at around 1.5% annually, including births and migrations. The country’s economic growth must at least match that figure, which is currently not happening.
“We see growth in 2024 being probably just over half of that, and to make a meaningful difference, you’d have to be closer to that 3%.”
Without this level of growth, it is unlikely that the country will see any meaningful changes to the unemployment rate in the next few years.

Addressing unemployment is especially complicated because it will mean solving logistics bottlenecks and improving the efficiencies of cities.
If poor service delivery and issues like water leakages are not addressed, many cities will start to decay, which would have a detrimental impact on the businesses located therein.
General government services like healthcare and transportation are also important in ensuring that the country has a healthy workforce that is able to commute to their place of employment.
“Then, of course, to attract investment from overseas, we also have to do something about crime and corruption at the top level.”
“So it’s a complex problem to increase growth, but I feel we are moving in the right direction.”
Fortunately, South Africa’s inflation outlook has improved, reaching a low last seen in February 2021.
“That’s obviously after there was no demand in the economy following Covid, and we expect inflation to remain below that target level of the reserve bank’s 4.5% for at least 2025, possibly well into 2026.”
He said this will mean that the country can expect a further percentage point decrease in the interest rate, which will put it somewhere around 6.75% at the end of the cycle.
“I think that will be significant enough to allow both businesses and consumers to up their spending and not have to contribute so much towards debt servicing, as well as making a number of growth and other strategic projects viable for businesses.”
However, there is still uncertainty about what tariffs and migration policies will look like in light of the US election outcome, although it is likely that both of those will be inflationary.
Blackmore noted that this would leave inflation higher for longer and potentially prevent interest rates from coming down as far as they otherwise would have.
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