October 4, 2024
The Economic Outlook
Key Developments and Strategies
President Cyril Ramaphosa recently launched Phase 2 of the Government-Business Partnership at the Industrial Corporation on October 1st. During this event, leaders from government and business acknowledged that improving South Africa’s economic growth outlook hinges on addressing key challenges in a timely manner. The focus areas include speeding up market reforms, improving operations at Transnet and Eskom, and mobilizing more private sector investment.
In Phase 1, businesses contributed R250 million to direct funding initiatives, deployed 350 experts, and supported 57 companies involved with Eskom. These efforts led to a significant reduction in load-shedding. In addition to the R250 million for energy, R700 million was invested in the transport sector, which included bolstering security at Transnet Freight Rail.
Focus Areas for Growth
Energy
One of the primary goals of Phase 2 is to increase the Energy Availability Factor (EAF) above 64%, unlocking an estimated R23 billion in private investment while boosting renewable energy capacity by 4GW. Enhanced energy availability will support increased production and help create jobs over the medium to long term.
Transport & Logistics
Phase 2 aims to invest R28 billion to raise rail capacity to 193 million tons by 2025, enhancing exports and creating jobs throughout the transport and logistics value chain. Key initiatives include:
- Expediting network statements
- Providing third-party operators rail access by the fourth quarter of 2024
- Establishing regulatory bodies to oversee future rail and port operations
Crime & Corruption
Phase 2 also prioritizes getting South Africa off the FATF grey list to boost investor confidence. This will involve creating a Digital Evidence Unit to address state capture cases and increasing employment in the tourism sector by 400,000 through improved tourism visas and skills development in the digital and green industries.
Conclusion
The launch of Phase 2 of the partnership reflects encouraging signs for the South African economy, building on the foundation laid in Phase 1. Recent data indicates rising consumer and business confidence, alongside a decrease in inflation rates. Even with these positive indicators, many businesses remain cautious about investing, adopting a “wait and see” approach.
Currently, South African non-financial corporate deposits have grown by over 9%, exceeding R1.2 trillion as companies await clearer direction from the government. Additionally, global events, such as conflicts in Eastern Europe and the Middle East, may further impact confidence and economic performance.
However, a stronger rand, which has appreciated against the U.S. dollar since May 2024, provides some insulation against rising international oil prices. While the South African Reserve Bank (SARB) remains cautious about potential inflationary pressures, the overall outlook hinges on continued stability and effective implementation of necessary reforms.
