South Africa’s new government under pressure
South Africa’s economic future rests on the stability of the Government of National Unity (GNU) and its ability to address pressing challenges like unemployment, rising costs, and stagnant wages.
Momentum Investments Group chief economist Sanisha Packirisamy said public expectations for the GNU are high.
South Africans went to the polls in May 2024 in what proved to be one of the country’s biggest elections since the dawn of the country’s democracy.
For the first time in 30 years, the ANC lost its parliamentary majority, securing just 40.2% of the vote.
This dramatic decline paved the way for a GNU, comprising ten political parties committed to addressing the nation’s pressing challenges.
“The GNU has fostered collaboration on key reforms, including energy, healthcare and transport,” Packirisamy said.
“This shift marks a significant departure from single-party dominance, reflecting a maturing democracy capable of prioritising collective governance over partisan politics.”
Upon the GNU’s formation, local equities and the currency rallied as markets considered the coalition a positive step forward in South Africa’s economy.
The formation of the GNU garnered optimism about the potential for enhanced policy reform implementation that would push the country’s growth rate higher in the coming years.
The GNU was seen as another entry on a long list of green shoots in the South African economy in 2024.
Other entries included Eskom’s miraculous turnaround, slow but certain recovery in the logistics sector, lower inflation and the start of the Reserve Bank’s interest rate-cutting cycle.
Paired with these positive developments, establishing the GNU boosted confidence among citizens and investors, with growing optimism about accelerated reforms.
The Social Research Foundation’s (SRF) October 2024 survey showed that 60% of South Africans view the GNU as effective, especially among ANC and DA supporters.
However, Packirisamy warned that the coalition’s success will depend on maintaining cohesion and delivering tangible results.
“Shifting voter support in the local government elections in 2026 will certainly be a litmus test in this regard,” she said.
Optimism surrounding South Africa’s progress has already led to a lower risk premium attached to local investments.
However, Packirisamy warned that the risk premium could fall even lower once the economic fruits of actual reform measures and the enhanced private sector participation across the economy become more evident over time.
In addition, despite the SRF’s findings on positive sentiment surrounding the GNU, the organisation also cautioned that without significant economic improvements, particularly in job creation, the coalition could face backlash.
This could embolden opposition parties and shape voter sentiment ahead of the ANC’s 2027 national elective conference.
Forces outside the GNU’s control also threaten the coalition and South Africa’s sustainability.
Packirisamy said the country’s economic progress, despite domestic political stability under the GNU, remains vulnerable to global instability.
This instability could take the form of geopolitical tensions, fluctuating commodity prices, and economic slowdowns among key trading partners.
2025 may prove to be an increasingly unstable year for global politics, as US President-elect Donald Trump’s return to the White House could see a flood of new and more strict trade relations with South Africa.
In 2024, Trump expressed his intention to potentially end the African Growth and Opportunity Act (AGOA) and impose a 10% tariff on all products imported into the USA.
The AGOA is a US trade program that allows eligible sub-Saharan African countries to export a range of products to the US duty-free.
South Africa has been a participant since the program’s inception in 2000 under the administration of President Bill Clinton.
South Africa’s trade with the US is made easier through the AGOA, which removes approximately 6,800 US tariffs to promote Sub-Saharan African exports to the US.
The AGOA has been vital in bolstering South Africa’s export sectors and maintaining jobs in industries like agriculture and manufacturing.
Therefore, losing access to the AGOA – coupled with a potential 10% tariff – could negatively impact South Africa’s trade with one of its biggest partners.
Private sector participation

While a lot depends on the GNU, Packirisamy added that South Africa’s economic outlook for 2025 also hinges on improving electricity supply, primarily through Eskom’s efforts and growing private sector involvement.
Eskom’s miraculous turnaround was some of the best news to come out of 2024 and played a large role in improved expectations for South Africa’s economy.
The utility’s energy availability factor has consistently exceeded 60%, with the last bout of load-shedding taking place at the end of March 2024.
This trend is set to continue in 2025, with Eskom predicting little to no load-shedding this year.
Packirisamy said key units at Kusile, Medupi, and Koeberg’s unit two will add over 2,000 MW to the grid.
In addition, enhanced maintenance and reduced unplanned outages have resulted in a 71.2% year-on-year drop in diesel costs, saving Eskom R16.3 billion.
However, Transnet, which faces severe operational and financial struggles, is a significant threat to South Africa’s progress.
The utility reported a R2.2 billion interim loss for the six months ended September 2024 and stated it needed R14 billion annually to invest in its six corridors, which have suffered infrastructure challenges and rampant theft.
“While rail improvements may take three to five years, we are optimistic that port enhancements could yield quicker results,” Packirisamy said.
Another threat to the country’s stability is water scarcity, which remains a critical issue, with three-quarters of usable surface water fully utilised.
“Mismanagement and underinvestment have exacerbated the crisis, leading to declining water quality and excessive consumption rates,” she said.
“Only 54% of drinking water systems met compliance standards in 2023, down from 95% in 2014.”
“Nevertheless, for South Africa to secure a sovereign rating upgrade, sustained economic growth, fiscal discipline, and progress in key infrastructure areas are essential.”
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