South Africa Economic Growth – How South Africa Can Achieve Growth Beyond 1.5%
South Africa’s economy is at a crossroads, with both challenges and immense potential shaping its future. Chris Holdsworth, Chief Investment Strategist at Investec Wealth & Investment, recently shared his thoughts on how the country can move forward. His insights highlight the importance of infrastructure, business confidence, and stable policies in unlocking economic growth.
South Africa Economic Growth
The International Monetary Fund (IMF) has revised South Africa’s GDP growth forecast for 2024 to 1.5%. While modest, it’s an improvement and a step in the right direction. However, Holdsworth believes the country should set its sights higher. “Our growth shouldn’t stagnate at 1.5%—we need to aim for 3% or more,” he said, pointing to past successes during Thabo Mbeki’s first administration, when South Africa achieved 3.5% growth through strong domestic business confidence.
One of South Africa’s most pressing challenges is its crumbling infrastructure. Decaying roads, unreliable railways, and underperforming ports have held the economy back. Yet, these issues also present a major opportunity. “The return on infrastructure investment is very high. It’s not just about creating jobs—it’s about building the foundation for industries to thrive,” Holdsworth explained. Encouragingly, there are signs of progress. “Railway and port performance bottomed out last year and has been improving steadily,” he noted, with increased container volumes and better rail freight efficiency signaling positive change.
Building business confidence is another crucial step. “Investors need predictability and stability,” Holdsworth emphasized. Inconsistent policies and regulatory uncertainty deter both local and foreign investment. Strengthening trust between the public and private sectors will be key to unlocking much-needed capital for growth. Internationally, South Africa’s recent currency stability has begun to rebuild investor confidence, presenting an opportunity to position the country as a competitive destination for investment.
Relief for consumers is also on the horizon. With inflation easing and interest rate cuts likely in the coming year, households could soon feel some financial breathing room. Holdsworth predicts a potential reduction of 100 to 150 basis points in interest rates, which could boost consumer spending and, in turn, support economic recovery.
The construction industry, however, remains one of the hardest-hit sectors. Activity is still 25% below pre-pandemic levels, but Holdsworth sees potential here too. “If the economy grows at 2.5% or more, the construction sector will have to expand to meet demand,” he said. This could create jobs and address stock shortages, making it a key driver of South Africa’s recovery.
Holdsworth’s vision for South Africa is clear: focus on rebuilding infrastructure, boosting business confidence, and providing stability. With these priorities in place, the country can shift its growth trajectory and create lasting progress. “Growth doesn’t happen overnight, but it’s within reach if we make the right choices now,” he concluded.
