Economic growth faces severe challenges as productivity stagnates

A NEW report by the Bureau for Economic Research (BER) on Monday said that South Africa's economic growth has deteriorated significantly in recent years. Economists have echoed similar sentiments.

- YOGASHEN PILLAY

The report said that South Africa experienced a remarkable economic growth deterioration between 2005 and 2025. “This report uses a growth accounting framework to show that productivity shrunk and investment stagnated. Post-pandemic, productivity has recovered but not investment.”

The report added that in short: a collapse in productivity growth led by inefficient state-owned enterprises which consumed a large share of savings without any benefit to the economy. “This largely reflects the impact of South Africas state-capture decade, in the years after 2010.

This crowded out private sector investment, which has remained stagnant in real terms at around R500 billion a year - far too little to support a meaningful and much-needed expansion of the capital stock. In addition, fiscal policy directed resources to unproductive uses and tax rates rose further, dampening growth”

The report said that faced with an inflationary environment, the real interest rate increased which meant there could be little growth support from monetary policy.

“Investment growth has been negative during 2024 to 2025. The total capital stock grew by an average of 0.4% between 2022 and 2024”

The report added that the 1994 policy choices hold lessons for 2025.