The Economist: After lost decade, the case for optimism in South Africa

Key topics:South Africa shows signs of economic recovery after years of decline.State reforms boost energy, ports, telecoms, and foreign investment.High unemployment, crime, and political uncertainty still limit growth..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..From The Economist, published under licence. The original article can be found on www.economist.com© 2025 The Economist Newspaper Limited. All rights reserved..The Economist.South Africa’s economy has long been defined by big holes. The wealth from its diamond and gold mines helped make it Africa’s most industrialised country in the 20th century. More recently a big hole is what the economy has found itself in. gdp per person is lower today than it was 20 years ago. Over that time South Africa has fallen from 27th to 39th in the ranking of largest economies, overtaken by the likes of Bangladesh, Thailand and Israel. A pollster in September found that 80% of South Africans believe that their country is heading in the wrong direction.But a swelling group of optimists thinks otherwise. Adrian Enthoven, the boss of Yellowwoods, an investment firm, and the scion of a business dynasty, spoke for many of them when he argued in an influential lecture late last year that “after a decade of decline, South Africa has turned the corner.” If he is correct, the consequences would be far-reaching for the country and, since South Africa is Africa’s largest economy, for the continent, too. The presidency of Cyril Ramaphosa may undergo a reassessment as he enters his final years in office..Read more:.Decade of decline: South Africa stocks lose $50bn as foreign investors pull out.The optimists’ case begins with state-run firms, such as Eskom, the electricity utility. In 2022 economists from Harvard University ascribed around 40% of South Africa’s underperformance since 2008 to the failure of utilities, which like other state entities were looted under Jacob Zuma, Mr Ramaphosa’s predecessor. Better, newly appointed, managers at Eskom have cut the number of days with blackouts from 284 in 2023 to just eight last year. The widespread adoption of rooftop solar power has helped as well.Mr Enthoven suggests that there is more going on. He argues that since the launch, in 2020, of Operation Vulindlela, a task-force set up with the support of organised business, Mr Ramaphosa has overseen underrated market-based reforms. These policies have been bolstered by the formation, in 2024, of the Government of National Unity (gnu), a coalition led by the African National Congress (anc) and the former opposition, the Democratic Alliance (da).State-run monopolies are being opened up. For 100 years Eskom controlled the generation, transmission and distribution of electricity. But since 2023 generation plants of any size can be built without a licence. A new independent transmission company means that soon electricity will be traded on an open market. These changes have caused an investment boom. Developers are considering around 220gw of potential renewables and battery-storage projects, about four times Eskom’s installed capacity (though not all will be built).Transnet, a state-run firm whose mismanagement of ports and freight rail has crimped exports, is on a similar track. In December it struck its first deal to privatise a port, when it awarded a 25-year concession to a Philippine firm for the port of Durban, the largest in sub-Saharan Africa. Some 11 private rail operators will soon have access to Transnet’s hitherto monopolised freight routes that take minerals from pits to ports.There is more good news. Spectrum auctions have helped to improve mobile coverage and reduce data costs. A backlog of work visas, a source of angst for firms, has been mostly cleared. Once passed into law, the Public Service Amendment Bill should professionalise a civil service stuffed with anc cadres. It could be “the most crucial institutional reform enacted in our lifetimes”, says Mr Enthoven.Macroeconomic indicators are improving. In 2025 the country recorded consecutive fiscal surpluses for the first time in 15 years. The ratio of debt to gdp could soon start to fall. Average inflation in 2025 was at its lowest level for 21 years. In November s&p, a credit-rating agency, upgraded South Africa’s sovereign debt for the first time in nearly 20 years.And yet there is still a way to go before economic growth is fast enough to make a serious dent in the country’s unemployment rate, which at 32% is among the world’s highest. Business leaders and Mr Ramaphosa’s team often talk of growth of at least 3% within three years. But the IMF does not expect growth to exceed 2% in the next five years.That’s because the reforms, though genuine, are limited. Rudi Dicks, the joint head of Operation Vulindlela, argues that while his team has done “phenomenally…some of the work is unfortunately slow”. Even the task-force’s own audit notes that progress is “delayed/off track” across many of its initial five priorities: electricity, logistics, visas, water and telecoms.And many critical areas remain unaddressed. With blackouts less common, the most frequent complaint among chief executives is the extent of organised crime and its links to political elites. The head of a large investment fund worries about the “Mexicification” of South Africa. Goolam Ballim of Standard Bank argues that while the “foundations of growth are slowly broadening…none of this will mean much without deeper improvements in governance.” He says an ongoing inquiry into allegations that politicians—including the former police minister—are in cahoots with criminals is a chance for South Africa to bolster the rule of law, as Brazil did through its “Operation Car Wash“ (Lava Jato) investigations. (Senzo Mchunu, the former police minister, denies wrongdoing.).Read more:.The Economist - Why South Africa should scrap Black Economic Empowerment.Even if that happened other constraints on growth exist. Though some bosses, including black executives such as Fani Titi of Investec, a bank, are arguing for a rethink of Black Economic Empowerment (bee), the anc is unlikely to ditch its landmark affirmative-action policies, despite the mounting evidence that they raise costs for firms and act as a cloak for corruption. Many firms, especially in the mining sector, worry about weakening property rights.And then there is the politics. The anc will select a new leader in 2027, who will probably also take over as president of the country before the next general election in 2029. The favourite, Paul Mashatile, Mr Ramaphosa’s deputy, could have different views on the merits of the coalition. The da, which has accused Mr Mashatile of corruption, may find it harder to be in a gnu led by him. (Mr Mashatile denies wrongdoing.)An end to the gnu that ushers in a populist coalition would be “catastrophic” for South Africa, notes Mr Enthoven. The uncertainty makes it all the more important for reformists to show a sense of urgency. If South Africa is indeed going to turn a corner, it had better get a move on.

The Economist: After lost decade, the case for optimism in South Africa

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