ARE WE CRUISING NICELY?

Long-standing economic issues in South Africa have included significant unemployment, enduring inequality, and slow growth.

Over the past ten years, these problems have been made worse by stagnation, an increasing debt load, and declining investor confidence.

But as 2025 approaches, there is a renewed sense of hope that the nation is about to undergo a transformation.

Izak Odendaal, an investment strategist at Old Mutual Wealth, stated that South Africa’s economy is set to undergo a good change provided the correct circumstances are met on both a structural and cyclical level.

Odendaal emphasized that the possibility of economic growth picking up speed again is one of the main causes of this optimism.

Increased investment and structural changes are starting to pay off, paving the way for a more robust and dynamic economy.

Productivity, labor force expansion, and capital investment are all closely related to economic growth.

Although South Africa has a large labor pool, capital investment has not kept pace, with national investment levels falling well short of the benchmark of 30% of GDP typically required for long-term high growth.

The nation’s deteriorating infrastructure, slow productivity, and limited economic production are all clear signs of this deficit.

Odendaal pointed out that there are currently initiatives in place to buck this tendency, especially in vital industries like water infrastructure, logistics, and energy.

Important turning points have included the unbundling of Eskom and the opening of the power market in South Africa to private sector involvement.

Even while there are still issues, as shown by sporadic power outages, there is little chance that load shedding would return to the debilitating levels observed in 2022 and 2023.

Significant private investment is still being drawn to the energy sector, guaranteeing that advancements will continue well after 2025.

Odendaal also noted that significant advancements are being made in logistics, another crucial reform area.

Economic effectiveness has been hampered by Transnet’s decline over the last ten years. Reforms are encouraging, as seen by Transnet Rail’s recent separation into independent operating and infrastructure management divisions.

Similar to the reorganization of the energy sector, the opening of rail networks to private sector operators is anticipated to attract new investment and increase efficiency.

Infrastructure investment has the potential to draw large amounts of both domestic and foreign capital, especially in the areas of energy and transportation.

The energy sector’s impetus is expected to spread to bulk water supply and logistics, supporting a broader economic rebound.