South African economic growth is on an upswing as the nation chips away at the bottlenecks that have held it back for years, said Standard Bank Group.
Chief economist Goolam Ballim said efforts to improve governance and the performance of critical infrastructure bottlenecks have finally roused Africa’s largest economy, which has grown by less than 1% on average over the past decade due to mismanagement and corruption.
He sees growth at 1.7% next year — more upbeat than the International Monetary Fund which this week maintained its 2027 forecast at 1.3% — rising to 2% in 2028.
“We’ll continue to incrementally build toward escape velocity,” Ballim told Bloomberg in an interview from Cape Town. “The foremost ingredient in this 2%-plus growth trajectory relates to institutional capacity.”
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President Cyril Ramaphosa last year established a judicial commission to probe criminal syndicates that have infiltrated South Africa’s justice system, following explosive allegations by the head of police in KwaZulu-Natal province. The accusations rekindled concern that corruption, which flourished during the rule of former President Jacob Zuma, remains a serious problem.
The commission’s final report was due at the end of August but on Thursday the president extended it until November 16. That pushes publication of the potentially politically damaging findings until after municipal elections on November 4.
While the probe, known as the Madlanga Commission, has exposed the severity of South Africa’s institutional breakdown, it could be “cathartic” and foster a boost in investor confidence, Ballim said.
“Aggregate governance is improving,” he said. “Capital is going to chase confidence. Confidence is going to hinge on the capacity for the rule of law to be substantial, predictable, and to hold.”
South Africa’s economy has already begun to benefit from improvements in electricity delivery and efficiency at the nation’s ports and railways. Efforts to strengthen the rule of law are likely to add to that momentum, he said.
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Nearly 70% of the reforms identified as goals by Ramaphosa in 2020 are either on track or have been completed.
Stronger growth would also extend beyond South Africa’s borders, potentially lifting gross domestic product in the southern continent by as much a 0.7% for every one percentage point increase in the nation’s GDP, Ballim said.
“If South Africa does well, the region does well,” Ballim said. “If there is one region that can really turn its dial, and turn the dial for the rest of sub-Saharan Africa, it is southern Africa, with South Africa at its core.”
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