South Africa’s economy gaining momentum, but window for reform is narrow: BER Report

SOUTH Africa's economy is showing early but meaningful signs of recovery, with improved business confidence, firmer growth prospects, and renewed policy momentum, but government must act swiftly to ensure the gains do not evaporate.

- YOGASHEN PILLAY

This is according to a new Bureau for Economic Research (BER) report released on Monday by Lisette IJssel de Schepper and Claire Bisseker.

The report argues that while South Africa's longstanding structural constraints are well understood and key reforms are already on the table, the country now needs “urgency, leadership and discipline” to convert this positive shift into durable economic progress.

After years dominated by public frustration and pessimism, the report says the national mood has noticeably improved.

“The country hasn't solved its problems, but the balance of risks has tilted, and mood is less relentlessly negative. (This is borne out by the 10-year government bond yield falling to below 9%.) It helps that the economy grew again in the third quarter, extending the run of positive quarterly outcomes to a full calendar year”

South Africa recorded its fourth consecutive quarter of positive growth in the third quarter, with real GDP rising by 0.5%. Growth was “broad-based,” with nine of the ten major production sectors expanding.

Household consumption remained the key driver on the expenditure side, but, importantly, fixed investment turned positive after three consecutive weak quarters.

For 2025, the BER projects GDP growth of around 1.3% — modest, but stronger than earlier fears. “There is upside potential” the authors note.

“This is hardly a number to frame on the wall, but better than what we feared a few months ago. There is upside potential. What sits behind the improvement? Partly, some long-awaited policy signals have become actual decisions. For instance, the National Treasury and Reserve Bank uniting to formally lower the inflation target to 3% is material.”

This shift, along with the Bank's cautious 25 basis point rate cut in November, is expected to gradually reduce the cost of capital and anchor inflation expectations.