South Africa kisses its ‘lost decade’ goodbye
South Africa’s lost decade appears to have come to an end, with 2024 ushering in a new government and greatly improving investor sentiment towards the country.
This is expected to boost economic growth to around 1.7% – levels not seen in 15 years. While still comparatively slow, this is nearly double the average for the past decade.
As Old Mutual Wealth investment strategist Izak Odendaal explained, there were very few reasons to be positive about South Africa’s future 12 months ago.
The country still grappled with the impact of electricity disruption, while political uncertainty increased ahead of key national elections, giving investors enough reason to pull their cash out of South Africa.
At the end of 2024, however, the mood was very different. Load-shedding now seems a thing of the past and will most likely never again be as severe as in 2022 and 2023.
This was due to a significant increase in private production and operational improvements at Eskom.
Though the ANC performed much worse than expected in the election, it immediately accepted the results and started coalition talks.
A centrist Government of National Unity (GNU) was formed, and it has prioritised growth-boosting structural economic reforms and ongoing gradual fiscal consolidation.
Progress has been made with electricity and a relaxed visa regime for skilled workers. At the same time, Transnet quietly published its Rail Network Statement a few days before Christmas, paving the way for private players to run trains on its tracks.
However, much work still lies ahead, with new crises emerging. The most pressing of these are the state of Johannesburg, the country’s economic hub, and sporadic water shortages in parts of the country.
But for the first time in years, there are genuine reasons to feel more optimistic about South Africa, Odendaal said.
This optimism has been boosted by lower inflation and the anticipated interest rate cuts that will follow. The Reserve Bank cut rates twice in 2024 and will probably cut two or three times again this year.
Despite falling 4% in December, the rand ended the year as one of the best-performing currencies against a globally strong US dollar, losing only 3%.
Odendaal said that even though the local currency broke through R19 to the dollar on Friday, 10 January, this decline was in line with other currencies.
The increased optimism was evident in the value of various South African asset classes, which soared following the GNU’s formation in the middle of the year.

Economists surveyed by Bloomberg expect the economy to grow by 1.7% in 2025 compared to a mere 0.7% in 2024.
While this is an improvement, it merely indicated a period of stabilisation rather than deterioration, the head of macroeconomic research at Standard Bank South Africa, Dr Elna Moolman, said.
“What is important is that we are moving in the right direction, and this is not just a cyclical improvement or a reaction to interest rate cuts,” Moolman explained to 702.
“This is, in our view, part of an uptrend to above 2% economic growth in the future. That is the crux.”
Moolman said it would be important to see the private sector’s response to the improvement in electricity supply and the formation of the GNU.
The reaction is expected to be positive, with many companies finally using the cash on their balance sheets to invest in growth rather than subsistence.
“This year, we will see how private sector companies actually respond to an improved political environment,” Moolman said.
“We have seen a slight uptick in business confidence and view in fixed investment improve. However, this year, we will see if they actually invest in expansion and add productive capacity or if it will be more of just treading water.”
She said Standard Bank’s research expects economic growth to be above 2% next year and then gradually improve further after that.
However, she warned that even this will not be enough to address all of South Africa’s challenges and make a real dent in the country’s unemployment figures and government debt.
“It is enough, importantly, for all of these figures to stabilise rather than deteriorate. What is important is that we think this is structural, and some of the improvements are irreversible.”
“The turnaround starts slowly, and some of the structural reforms take time, but they tend to be irreversible and can lead to significant improvements.”
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