Investor apprehension about the elections, load-shedding, logistics bottlenecks, fiscal vulnerabilities from state-owned enterprise bailouts, volatile commodity prices and climate change shocks were among the key risks highlighted in economic outlook reports for 2024.
There has been a collective sigh of relief as the anticipated investor apprehension about the SA elections did not materialise. The formation of the government of national unity (GNU) is showing promising signs of stability and direction. The extended period without load-shedding has also come as an unexpected but welcome surprise that the business and investment community did not foresee earlier this year.
The seemingly stable energy supply, the relatively promising economic trajectory after the establishment of the GNU, and the potential for lower interest rates could thus boost SA’s growth to 2% in 2024, from 0.6% in 2023.
However, long-standing, stubborn challenges remain firmly in place and must be urgently addressed if the country is to achieve the growth ambitions outlined in the National Development Plan (NDP) 2030. President Cyril Ramaphosa reiterated in his state of the nation address early this year that the NDP remains SA’s growth blueprint. Actual economic growth levels achieved by the country have fallen significantly short of the NDP expectations over the past decade.
Encouragingly though, the outlook for the country seems to already be more positive and sustained than during the brief “Ramaphoria” rally in 2018, when Jacob Zuma was replaced by Cyril Ramaphosa as state president. Yet, despite the encouraging signs so far, the investment community remains in watch-and-wait mode to see if the GNU can sustain this positive trajectory with real, sustainable economic outcomes, as envisioned in the NDP.
Hinder progress
The current growth forecast for the short to medium term is unlikely to make a significant dent in unemployment, poverty and inequality. Instead, annual growth of 4%-5% is needed. However, this can be achieved only through credible policy reforms that favour sustainable economic growth and stability.
A series of critical decisions must be made swiftly, as a fundamental shift is needed in “grey” policy areas that hinder business progress and investment in growth. Achieving policy certainty and clarity in areas such as labour market dynamics, telecom spectrum and mining sector expansion will play a pivotal role in driving the economy forward.
However, there is optimism within the business and investor community that the next decade could be different. The NDP as a blueprint is not far removed from what is needed to address SA’s myriad bottlenecks and socioeconomic challenges. The real challenge has been the capacity to execute and deliver.
An immediate priority should be strengthening government’s capacity to execute effectively. Already some recently appointed ministers in the GNU are taking a more pragmatic approach, driving change in key areas. With a stable foundation for growth and growing interest from investors, there is potential for faster progress. Macroeconomic reforms, investment and trade are expected to stimulate the economy further.
Long-suffering and increasingly indebted South Africans will welcome these developments, as they are in desperate need of relief. While the Old Mutual Savings & Investment Monitor 2024 showed that 33% of working South Africans felt confident about the country’s economic outlook and 68% believed their financial situation would improve in the next six months, debt remains a major concern.
Financial relief
It is alarming that 30% of working South Africans have approached creditors in the past year to make payment arrangements. Unsurprisingly, 43% of working South Africans are highly concerned about their debt. Debt distress has become a significant issue, but with a strong possibility of an interest rate cut later this month much-needed relief for consumers may soon be on the horizon.
The introduction of the two-pot retirement system on September 1 may offer some financial relief to qualifying customers, as it allows limited access to a small portion of their retirement savings for emergencies. However, this option should be approached with caution as withdrawing from retirement savings will incur taxes and could negatively affect long-term retirement outcomes.
Ongoing economic support and growth will be key to sustainable improvements in the lives and livelihoods of citizens. It will be imperative that the private sector remains a crucial partner to government on the road to success. It is no coincidence that private sector participation in electricity supply has helped Eskom to deliver over five months without load-shedding.
The new leadership at Transnet and other parastatals also appears to recognise the benefits of private sector involvement in alleviating bottlenecks at ports, mines and within the renewable energy sector, among others.
SA is set to host the Group of 20 (G20) next year, and government and the private sector must work together to prepare for this important event. In early 2025 the World Economic Forum will further set the stage for showcasing the country’s progress.
SA must begin to make its presence felt and offer a sobering, positive narrative about why it is an investment destination of choice as an emerging market. The G20 includes the world’s top 19 countries and both the EU and AU, and is the premier multilateral forum for addressing global economic challenges. SA will chair about 200 meetings, marking the first time the summit is held on African soil. The opportunity this presents is immense.
As we move forward, the GNU’s stability is essential. The business and civil sectors must be prepared to act decisively to hold government accountable for its promises.
• Williamson is Old Mutual Group CEO.
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