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.

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.

South Africa’s removal from the FATF greylist and the recent S&P Global Ratings upgrade have also contributed to the improved macroeconomic footing.

Business sentiment has begun to turn. The RMB/BER Business Confidence Index rose to 44 in the fourth quarter, a meaningful improvement after a volatile year. However, firms continue to flag crime, corruption, and red tape as persistent obstacles, warning that confidence remains fragile.

The report said that recognising that the country has an opportunity to seize this positive momentum, the emerging consensus is that although Operation Vulindlela (OV’s) reforms may be enough to shift the growth rate to 2%, simply fixing what is broken will not achieve more rapid, transformative long-term growth.

“It will require a laser-like focus on a set of urgent priorities to turn the R1.8 trillion sitting on corporate balance sheets into the wave of investment needed to get growth really pumping.”

The report added that the Government of National Unity should also adopt a simple vision for the economy.

“A simple and logical proposal is 3 x 3 x 3 in 3: 3% growth, a 3% budget deficit, and 3% inflation within three years. This will require fixing the basics fast and must include:

• Doubling down on OV Phase 1 and 2 reforms. Full implementing Eskom’s unbundling and Transnet’s turnaround is SA’s highest-impact growth lever and should be seized with gusto.
• Supporting the Treasury’s trading services reforms to fix metros’ electricity, water, and sanitation systems.
• Unleashing township economies by slashing red tape, fighting crime, and improving SMEs' access to capital.
• Focusing on exports. Mining is the lowest-risk catalyst for an export-led industrial strategy. SA has the minerals and expertise, but not conducive policy. Fix that, and investment will follow.
• Replicating the success of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) for the transmission build, ports and rail rehabilitation, provision of bulk water infrastructure, and logistics corridor security."

BUSINESS REPORT