Despite mounting anxiety over South Africa’s economic stagnation and political uncertainty, there remains a credible path to growth and stability if the right reforms are prioritised. The country is far more investable, capable, and aligned than the current narrative suggests.
One economic indicator I consider key to South Africa’s future is the fixed investment to GDP ratio, which currently sits at just 15%. At that level, it’s perfectly consistent with our economic growth rate of around 1%. If we want to lift growth to 4% or even 5%, we must close the fixed investment gap. That means lifting it by at least 10 percentage points to 25%.
This may sound ambitious, but it’s not unprecedented — we’ve done it before. The rate of economic growth in the first 15 years after 1994 lifted from the very volatile levels of the ’80s and early ’90s to two and then three and then four percent. Between 2004 and 2007, as fixed investment peaked, we hit a growth rate of 5% of GDP.
There are three actions we need to take to close the investment gap: refurbish the coal fleet, revise the empowerment scorecard to remove barriers to fixed investment, and secure market value compensation for property in the event of expropriation. Should South Africa do those three things, then you will see a lift in the fixed investment rate. It will be a very rapid lift.
And this could have a profound impact on unemployment. South Africa’s rate of unemployment is officially just over 30%. In practice, it’s over 40%. If we go to a growth rate of 4% of GDP, and if we hold that for 20 years, we will bring the unemployment rate down to near 10%.
Internationally, we also have a strategic opportunity, particularly in our relationship with the US. South Africa is eminently investable for Americans and Donald Trump’s interest in the country is an asset to be exploited. The solution lies in building a new bilateral investment treaty that is mutually beneficial to the US, while not alienating China or Russia.
South Africa should also not underestimate its strategic importance. Simonstown is one of three points that now anchor control of the Indo-Pacific route, through which more than half of sea-going global trade passes.
The political landscape is also evolving in a way that should give us reason for cautious optimism. The delays around Budget 2025 should be seen as a sign of democratic maturity, not dysfunction. For the last 400 years, wherever you resided within what are today the borders of South Africa, there was probably a single political actor who had the power to decide what the rules of the game were. And about 300 days ago, that changed for the first time.
The GNU’s growing negotiating power is essential to long-term progress.
Far from being a radicalised or fractured nation, data indicates that South Africans are more united than often portrayed. We are comfortably a country where seven to eight out of 10 people share broadly the same values of decency, hard work, law and order, of valuing education and the like.
The value systems of different South Africans are in fact very closely aligned and you can argue, as I do now, that there is a serious prospect that South Africa becomes one of the world’s most successful societies.
• Cronje is director of Frans Cronje Private Clients (Pty) and chair of the Social Research Foundation
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