Operation Vulindlela, the government’s sweeping structural reform programme, along with others, could push annual growth rates as high as 3%, the IMF said on Thursday.
The IMF analysis also found that if South Africa closes half the gap with emerging market best practices in various areas across business, governance and labour markets, real output could increase by up to 9% over the medium term.
“This may support annual growth rates of up to 3%, facilitating more sustainable reductions in unemployment and public debt,” the IMF said.
“We also recommend a comprehensive package of cross-sectoral reforms to improve the business environment, address governance challenges and corruption, and increase labour market flexibility.”
The assessment, published as part of the IMF’s Article IV consultation, said the estimated growth would be achieved if the country maintains the pace of implementation of the reform programme it has built so far.
“Continued, resolute implementation of these sectoral reforms remains crucial as reliable electricity, railways, ports and water infrastructure are fundamental for consumers and the economy,” said Delia Velculescu, the IMF’s mission head in SA.
Operation Vulindlela has made inroads across sectors that have long acted as a drag on South African competitiveness. In the electricity sector, where load-shedding crippled businesses and households for years, reforms permitting private participation have contributed to stabilising supply, including from renewable sources, the fund noted.
Logistics, another chronic bottleneck, has also seen movement. The IMF views the logistics reforms, which have opened up freight rail and ports to private investment and competition, as a significant development given the historical dominance of state entities in these corridors. Water sector reforms are also advancing, aimed at improving the delivery of municipal services.
“Our analysis indicates closing half the gap between South Africa and emerging market best practices in these areas could result in an increase in real output of up to 9% over the medium term. This may support annual growth rates of up to 3%, facilitating more sustainable reductions in unemployment and public debt,” the IMF said.
“We also recommend a comprehensive package of cross-sectoral reforms to improve the business environment, address governance challenges and corruption, and increase labour market flexibility.”
The structural push comes alongside a shift in the monetary policy framework the IMF described as a milestone for macroeconomic stability.
“The new 3% inflation target marks an important policy milestone, aimed at strengthening South Africa’s economic framework and ensuring macroeconomic stability,” the fund said.
“Since the new target was announced and thanks to the central bank’s strong credibility, inflation has stayed around 3% and inflation expectations have declined steadily. This has enabled the central bank to reduce policy rates, boosted investor confidence and helped drive down government bond yields, lowering borrowing costs for the government,” the IMF said.
The IMF expects South Africa’s GDP growth to reach 1.3% in 2025 and 1.4% in 2026, up from earlier projections of 1.1% and 1.2%, respectively, and rise gradually to 1.8% by the end of the decade. With a 3% inflation target in place, inflation is expected to ease to 3.3% in 2025, 3.6% in 2026 and settle at 3% from the end of 2027.
The IMF said these reform plans are closely tied to what happens in the 2026 budget. The government’s fiscal plan aims to stabilise public debt in the near term and reduce it to about 70% of GDP over time. To do this, the IMF said National Treasury must deliver a primary budget surplus of 1.5% of GDP in the 2026 financial year.
That would require keeping a tight rein on spending, including the public-sector wage bill, improving procurement systems, strengthening oversight of state-owned enterprises and eliminating fraud so funds are better directed towards priority areas.
Correction: February 20 2026
A previous version of this article noted that the IMF analysis showed Operation Vulindlela would add 9% to real output. This has been corrected.
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