South Africa’s economic rebound is in jeopardy unless the nation takes swift action to address its severe infrastructure deficiencies, according to a recent warning from S&P Global Market Intelligence.
These long-standing issues have hampered the continent’s most industrialized economy, preventing sustained growth over the past decade.
Urgent Action Needed to Avoid Further Decline
Thea Fourie, S&P Global’s Director for Sub-Saharan Africa Economics and Risk, stressed the urgency of the situation at a Bloomberg event.
“Without decisive measures to tackle bottlenecks in energy, ports, rail, and water, South Africa risks lagging even further behind,” she cautioned.
These infrastructure improvements are essential for strengthening institutional frameworks and propelling economic expansion.
Glimmer of Hope Following Elections
The May elections offered a glimmer of hope, opening a “window of opportunity” for change. However, the success of any reforms hinges on political stability and a commitment to implementing meaningful improvements.
S&P Global Ratings predicts a modest growth rate of 1.1% for South Africa in 2024, averaging 1.3% from 2025 to 2027, up from a meager 0.6% in 2023. Notably, real growth per capita is expected to stagnate this year.
Bottlenecks in Logistics and Electricity Hinder Growth
The ratings agency has assigned South Africa a foreign currency rating of “BB-/B” and a local currency rating of “BB/B,” both with a stable outlook.
Fourie highlighted the persistent inefficiencies in logistics and electricity as significant obstacles to growth.
Critical Reforms Offer Potential Solutions
Potential game-changers include the Electricity Regulation Amendment Bill, which aims to remove barriers to electricity production and distribution, potentially alleviating the nation’s ongoing energy crisis.
Additionally, efforts to encourage private sector involvement in developing major ports like Durban and Richards Bay could unlock economic potential.
Sustainability of Government Unity Raises Concerns
Fourie also expressed concern about the sustainability of the government of national unity, which had initially been met with investor optimism.
The coalition formed after the African National Congress lost its parliamentary majority in May’s election, bringing together business-friendly parties like the Democratic Alliance, which has historically held differing views. The risk of “policy paralysis” looms as these parties grapple with finding common ground on crucial issues.