In a bold move to revitalize its economy, South Africa aims for a 3.3% GDP growth by the close of 2025, with the objective of generating millions of new jobs by 2029. Achieving this goal will depend on the effective implementation of comprehensive reforms, operational enhancements at crucial state-owned entities, and the rapid mobilization of private sector investments. This optimistic vision was articulated by President Cyril Ramaphosa, various ministers, and some of the country’s leading CEOs during the launch of Phase 2 of the Government Business Partnership at the Industrial Development Corporation on October 1.
Economic Context and Growth Projections
The South African economy has faced significant challenges in recent years, evidenced by growth rates of just 1.9% in 2022 and a mere 0.7% in 2023. Projections for 2024 indicate that GDP growth is likely to average around 1%. However, despite these modest figures, government and business leaders are determined to foster an environment conducive to more substantial economic growth.
Adrian Gore, Vice President of Business Unity South Africa (BUSA) and co-convenor of the partnership, expressed his belief in the feasibility of these ambitious goals, stating, “We are setting high targets, but the potential rewards are significant. If we remain focused and committed, we can achieve them.” He highlighted research commissioned from the Bureau for Economic Research, which underscores the economic benefits that could emerge from expediting reforms and enhancing the operational efficiencies of key sectors such as energy and transportation.
Strengthening of the South African Rand
Adding to the positive outlook, the South African rand has recently shown remarkable strength against the US dollar, reaching a 20-month high. This appreciation is attributed to increased foreign investor sentiment and recent interest rate cuts by both the South African Reserve Bank and the US Federal Reserve1. The rand strengthened to 17.2 per USD, its highest level since January 20231. This trend is supported by South Africa’s annual inflation rate dropping to 4.4% in August, below the central bank’s preferred midpoint of the 3-6% target range1.
A stronger rand can help reduce import costs and inflation, potentially supporting economic stability and growth. Additionally, the rand’s appreciation is seen as a positive signal for international investors, enhancing South Africa’s attractiveness as an investment destination
Achievements from Phase 1
In 2023, organized business, representing around 150 CEOs, pledged to collaborate with the government to address critical issues in electricity supply, transport and logistics, and the pressing challenges of crime and corruption. This initiative, referred to as Phase 1, resulted in over R250 million in direct funding, the deployment of more than 350 experts, and significant contributions to Eskom, the state-owned power utility.
These efforts led to a noteworthy reduction in load shedding, a persistent issue that had severely impacted the economy, disrupted businesses and affecting daily life for millions of South Africans. The partnership’s achievements during Phase 1 have laid a solid foundation for the subsequent phase, which aims to scale up these efforts.
Goals of Phase 2
As Phase 2 unfolds, the partnership is set to expand its initiatives with increased resources and a clear action plan aimed at driving more rapid economic growth. Key areas of focus include:
- Energy Security: To enhance long-term energy security, the initiative aims to maintain an Energy Availability Factor (EAF) above 64%. This involves unlocking R23 billion in private investments, boosting renewable energy capacity to 4GW, and constructing 1,000 kilometers of new transmission lines. The Department of Energy will play a crucial role in facilitating private sector investments in energy generation, expediting the procurement of new capacity, strengthening regulatory frameworks, and expanding the transmission network.
- Transport and Logistics: The partnership aims to secure R28 billion in rail infrastructure investments by 2025. This will increase rail capacity to 193 million tons, enhancing exports and fostering job creation. Key initiatives under this focus include expediting network statements, enabling third-party access to rail services by the fourth quarter of 2024, and establishing regulatory bodies to oversee necessary reforms in rail and port operations.
- Crime and Corruption: The immediate goal is to facilitate South Africa’s removal from the Financial Action Task Force (FATF) grey list, which has implications for international investment and credibility. This effort includes the establishment of a Digital Evidence Unit aimed at effectively prosecuting cases related to state capture and corruption.
Job Creation and Youth Engagement
Beyond these focal areas, the partnership has set ambitious targets to create 400,000 jobs for youth by 2026. This will be achieved through collaborative initiatives, improved tourism visa processes, and enhanced skill development for emerging digital and green industries. Additionally, the partnership seeks to bolster township economies and expand job platforms like SAYouth.mobi, which connect young individuals with employment opportunities.
Martin Kingston, Chair of the B4SA steering committee, emphasized the need for continued momentum, stating, “The country and the business sector are energized by the positive sentiment, but we must remain vigilant and committed to driving these crucial reforms forward.”
Government Commitment and Future Prospects
Minister of Agriculture John Steenhuisen welcomed these initiatives, noting that the successes seen in Phase 1 should now be accelerated into high gear. “This is precisely what South Africa needs—we have already witnessed the benefits arising from Phase 1, and it’s time to build on that progress,” he remarked.
Minister in the Presidency Khumbudzo Ntshavheni reaffirmed the government’s commitment to fostering collaboration between the public and private sectors, stating, “Today marks a significant milestone for South Africa. We will continue working alongside businesses and labor to create an environment that enables us to meet these ambitious targets.”
With a collective vision for growth and transformation, South Africa is poised to embark on a journey toward a more prosperous and inclusive economy, one that prioritizes sustainable development and the well-being of its citizens.