The May 2024 general election marked the emergence of a new government equation in South Africa, as the African National Congress (ANC), led by incumbent President Cyril Ramaphosa, lost its parliamentary majority for the first time in 30 years.
The re-election of Cyril Ramaphosa necessitated a coalition known as the Government of National Unity (GNU), which included the Democratic Alliance (DA) and other political parties.
ANC’s electoral setback was unexpected, as South Africa has been mired in issues such as chronic economic underperformance and structural weaknesses, along with other issues like social strains.
Have things improved under the ANC administration? After a decade in which growth barely kept up with a growing population, expanding by just 0.7% per year between 2015 and 2024, the economy finally managed to cross the 1% mark. It expanded by roughly 1.1%-1.3 % in 2025, which by international standards is low but still a significant step-up. However, the ratio still falls short of the analysts’ expectations of 1.4%, with issues like fiscal pressures and soaring unemployment still haunting the African major.
The data also comes on the eve of the coalition government completing its two years (to be marked in June this year). The administration took over with the promise of stabilising the economy, apart from restoring confidence, and unleashing the growth machine. While the new data calls for celebration, it should be a muted one, with cautious optimism ruling the roost. Global Business Outlook will further lay bare the real picture of the South African economy.
Signs of resilience
The terms “South African Economy” and “weak performance” have become synonymous since 2010, with low growth failing to generate jobs and uplift the living standards. When OECD (Organisation for Economic Co-operation and Development) analysed the country’s real GDP growth of the 2015 2024 period, it found that the ratio was barely keeping up with GDP per capita at existing levels, while the unemployment rate crept up to about 32.5 % in 2023 2024. Also, public debt rose to nearly 77 % of GDP by 2025 (under the GNU rule).
The result was that most families did not experience much in the way of economic benefits, with considerable inequality and few opportunities for the young. According to the World Bank, during the 2015-2024 period, South Africa’s growth “was four times slower than other middle income countries,” which left real GDP per capita approximately where it was in 2007 and contributed to some of the world’s most intransigently high unemployment rates.
However, by 2025, the economic landscape was a different story. While economic growth was sluggish in the first half of 2025, picking up steam in the second half, the IMF Article IV Consultation for 2025 reported growth of around 1.3 % that year, with ‘robust private consumption’ holding demand steady while investors and households regained confidence, leading to a slightly higher pace of growth, which was still modest, given quarterly gains and stronger performance in agriculture and services, and improved macroeconomic stability.
Discussing the latest growth figures, as per StatsSA, the African country’s national statistics service, GDP uptick is heavily dependent on consumer spending and the services sector, rather than on vital investments and industrial development. While the finance, real estate, and business services sector showed signs of resilience, along with activities like agriculture, forestry, fishing, trade, catering, and accommodation, productive segments like manufacturing, electricity, gas, water supply and construction are in negative growth territories.
Even if the uptick in consumer spending was positive, as household final consumption expenditure increased by 3.6%, apart from contributing 2.4 percentage points to GDP growth, investment activities still took a significant hit.
Gross fixed capital formation decreased by 2.2%, reducing overall economic growth by 0.3 percentage points. The sign is clear: Low investment levels are hurting South Africa’s long-term economic prospects by constraining productive capacity and infrastructure development.
Macroeconomic perspective
The most significant of these developments supporting higher growth is the stability of inflation and the macroeconomic framework, which allows for a lower average rate of inflation of about 3.2% in 2025 as noted by the IMF, reducing the uncertainty for businesses and households to make borrowing and investment decisions, and providing the central bank with greater flexibility to support growth through reasonable interest rate policy. Analysts argue that this approach has been the reason why the South African economy has remained stable, instead of going into recession in the face of global and domestic headwinds.
Financial markets have also been more resilient. In late 2025, S&P Global raised South Africa’s long-term foreign-currency credit rating from BB- to BB, its first upgrade from a major agency in nearly 20 years, citing stronger economic growth prospects, a better fiscal outlook and reduced contingent liabilities, largely due to improved performance at state-owned enterprises like Eskom and freight logistics entities.
Even though the rating is still below investment grade, the upgrade was widely viewed as a positive sign of market confidence, which could help to lower borrowing costs and encourage investment if the trend continues.
Energy front developments
Energy shortages have been one of the most critical constraints on South Africa’s economy in recent years, as load shedding (caused by ageing infrastructure and mismanagement) crippled productivity and deterred investment.
However, recent improvements are notable, with Eskom, the state owned utility, reporting its first full year profit in eight years in 2025, following reduced outages, operational improvements and cost management measures. It also registered only 13 days of power cuts in a financial year that had seen 329 days of outages earlier.
While far from consistent or comprehensive, this progress has alleviated bottlenecks in production across sectors and has given investors who were previously discouraged by the chronic unreliability of electricity supply renewed confidence.
More broadly, government and analysts have noted that other sector reforms, such as opening up parts of the energy market to private investment and planning structural changes to Eskom, are signs that long-term challenges are being addressed rather than simply patched in the short term.
Another important source of demand momentum in 2025 was private consumption: Households began to spend more confidently as inflation stabilised and jobs, while still weak, improved slightly. More broadly, a variety of structural reform efforts have been underway, with consultants and policy advisors stressing the need for bigger change. For example, the IMF stressed that a combination of macroeconomic stability, strengthened finances, and structural reforms would be necessary to underpin continued growth and employment.
Persistent headwinds remain
Despite these encouraging developments, there is a broad consensus among economists that South Africa’s recovery remains delicate and incomplete. By international standards, the situation remains dire. Although official data indicated that the unemployment rate had fallen slightly by late 2025, South Africa has among the highest jobless rates in the world, and youth unemployment is higher than the headline figure.
High unemployment reduces consumer spending and increases inequality and social discontent. With growth of 1.1%-1.3 % per year, the economy will need to create a large number of jobs to keep up with new workers entering the labour force, which is unlikely without structural shifts in economic policy, investment and education.
Fiscal balance remains a key challenge, as public debt increased from approximately 31.5% of GDP in 2010 to about 77% by 2025, leaving little room to fund public investment, social spending, and infrastructure upgrades, thereby restricting room for short-term growth and long-term fiscal sustainability.
While debt levels seem to be stabilising in the short run and credit rating agencies have responded positively, analysts emphasise that fiscal discipline must be combined with growth-oriented policies to prevent crowding out of investment and public services.
Persistent logistics and transport bottlenecks, from rail inefficiencies to port congestion, constrain trade and increase business costs. This will require more than just funding; it will also necessitate effective project delivery, governance reforms, and private-sector partnerships. Addressing these deficits and determining South Africa’s long-term competitiveness will take years, if not decades.