A few months ago, we wrote a series of reports highlighting the opportunity costs of SA’s low growth environment. One of the report’s findings was a cumulative loss of government revenue of close to R5-trillion — the potential size of the economy (close to R12-trillion) relative to its present size (roughly R7.5-trillion).
These numbers are eye-watering given the fiscal challenges faced by SA, with particular emphasis on the support given to state-owned enterprises (SOEs) in the place of the government more actively investing in growth enhancing infrastructure and social support.
The salient message was that SA had reached the “end of the road” in our economic story and decisive action needed to be taken to get the country on a firmer and more sustainable growth trajectory.
There is simply no time for what ifs and buts. The dislocation in GDP per capita between SA and the rest of the world reminds us how much poorer South Africans have become in the wake of a disastrous period of economic growth.
Rekindle trust in SA
We need to rebuild confidence in the SA economy to provide a fundamental basis for the attraction of investment, growth and job creation. Growing the pie, rather than simply redistributing the existing pie, is of critical importance to meaningfully address the problems of poverty, unemployment and inequality.
Now SA’s moment of truth has come. Recent SOE performance, the focus of this article, is setting the scene for a story of a remarkable, almost miraculous, SA turnaround. A lot has improved lately, so it may be opportune to reflect on what this means for the SA recovery story. In this moment of truth, can the momentum be sustained and capitalised on?
Over the past few years President Cyril Ramaphosa has walked the long road of his signature economic reform programme, Operation Vulindlela. Its purpose was to accelerate structural reforms to boost economic growth and create jobs.
Of greatest importance was to address issues related to energy, logistics, water and strengthening local government, among others. Any economy at a foundational level is built on energy, logistics, communications and people.
There are increasing signs that the structural reform programme is achieving its intended outcomes. While the road ahead remains long, SA is in a fundamentally better position than it was two years ago.
For example, Eskom recently exceeded an energy availability factor (EAF) of 70%, a critical milestone (as well as rebounding into profitability), particularly in the context of lower unplanned outages and higher planned outages (a proxy for maintenance).
Investor sentiment
The year-to-date six-month average EAF is averaging about 60% for the year, above 2024 (January-September 2024: 56.9%) and 2023 (January-September 2025: 54.7%). Two years ago Eskom was a binding constraint on economic growth but is now less of a constraint, though its average EAF must continue to trend higher for investor sentiment to materially improve as trust and confidence are rebuilt.
Another example is Transnet, which moved its highest volumes of containers ― 436,428 twenty-foot equivalent units (TEUs) in July, relative to the last peak of 432,044 TEUs in July 2018 ― at our ports for a July relative to other Julys over the past seven years.
August was equally encouraging, with volumes moved sitting at about 92% of peak August volumes (410,384 TEUs versus peak 447,072 TEUs in August 2019) over the past six years. Our internally developed port availability factor model has Transnet ports operating at their best levels since 2021.
In addition, the recent news that the Philippines-based International Container Terminal Services contract award for the Transnet Durban Container Terminal (DCT) Pier 2, upheld by the Durban high court, has been well received. It provides the needed platform for private participation at our ports to begin. This should be a pivotal moment for private sector participation across our SOEs and SA’s economic landscape more broadly and signals a catalytic moment for economic reform in SA.
Rail logistics have been less encouraging though the worst of rail performance is hopefully behind us. We have observed stagnation at our railways and it is critical that rail performance improves along with the performance at our ports.
Lights on, goods moving
That said, in aggregate the broader backdrop is encouraging, particularly when considering the upcoming G20 Leaders’ Summit in November. Therein lies an inherent opportunity for SA to sell itself as a safe destination for foreign investment. The lights are on and goods are moving. The primary issues weighing on business and investor confidence have been dealt with to some extent.
SA has also officially exited the Financial Action Task Force greylist. Kudos to finance minister Enoch Godongwana, director-general Duncan Pieterse, and the National Treasury team. The determination of National Treasury in dealing with the issues raised by FATF shows the power of purpose, and the power of pulling in the same and right direction.
The risk premium on SA has dissipated in an extraordinary way over the past 18-months. You need look no further than the performance of our long bond yields and currency to confirm this statement. In addition, our fiscal position is better than it was at the time of the national budget impasse, supported by lower borrowing costs and a potential revenue uplift from elevated commodity prices.
As reform momentum has increased in our SOEs it is important for these to spill over into some of the other critical reform areas and priorities. Local government reform is of paramount importance and the review of the White Paper on Local Government is expected to address the challenges experienced at a local government level.
Addressing issues related to broader governance, corruption and criminal justice, water, IT and education, among others, are important too. An excellent source for reform progress in SA is the Business Leadership SA reform tracker, which is detailed in tracking reform progress in the various areas.
This is SA’s moment of truth. The state is poised to operate more optimally through the improvements at Transnet and Eskom. Ramaphosa and the relevant roleplayers must double down on those initiatives.
The fundamental bedrocks of any economy are energy, logistics, human capital, and IT. If we continue to get these right Ramphosa’s Operational Vulindlela will leave a lasting impact and legacy.
As reform gathers momentum there is similarly a fundamental opportunity for a rebound in SA Inc assets, whose valuations have been depressed due to the challenging economic backdrop of yesteryear.
• Mazwai is an investment strategist at Investec Wealth & Investment International.
