AfDB Urges Strategic Reforms as South Africa’s 2024 GDP Growth Slows to 0.6%

South Africa’s economic growth dipped slightly to 0.6% in 2024, down from 0.7% in 2023, reinforcing the urgent need for comprehensive reforms and strategic investment to unlock the country’s vast capital and developmental potential. This is the key takeaway from the African Development Bank’s (AfDB) newly released Country Focus Report titled “Making South Africa’s Capital Work Better for its Development”, launched on Wednesday during a high-level event in Pretoria.

The report comes at a time of escalating global challenges, including geopolitical tensions, energy insecurity, and economic instability across parts of Africa. South Africa’s struggles, while unique in their complexity, reflect wider continental pressures—offering both lessons and calls for transformation.

Structural Bottlenecks Hampering Growth

The report attributes South Africa’s sluggish economic performance to a confluence of structural and environmental constraints. These include:

• Persistent power outages caused by load shedding and aging energy infrastructure.

• Agricultural disruptions driven by prolonged droughts and climate change impacts.

• Logistical and transport inefficiencies, particularly within ports and rail systems, hindering export competitiveness.

Despite these headwinds, the African Development Bank highlights South Africa's resilience and latent wealth. As of 2020, the nation’s total wealth—including human capital, financial systems, natural resources, and physical infrastructure—was estimated at over $3 trillion.

Government Response: A Call for Stakeholder Collaboration

In his remarks at the report’s unveiling, Deputy Minister of Finance Ashor Nick Sarupen acknowledged the need for structural transformation and private-sector collaboration.

“We are committed to working with the private sector and development partners to drive investment in key sectors such as renewable energy, manufacturing, finance, technology, and tourism,” Sarupen said.

He emphasized the country’s robust institutional framework, diversified economy, and deep capital markets as critical assets. However, he acknowledged the rising cost of capital, squeezed fiscal space, and growing cost of living as major hurdles.

To mitigate these, the government will deepen reforms in education and healthcare, while expanding entrepreneurship, skills development, and vocational training, particularly for the youth. These initiatives aim to foster inclusive, job-rich growth and reduce economic vulnerability.

“South Africa remains resilient,” Sarupen asserted. “We have the tools, the people, and the capital. The challenge is to deploy these resources strategically and equitably.”

AfDB’s Vision: Mobilizing Africa’s Wealth for Sustainable Development

Professor Kevin Chika Urama, AfDB’s Chief Economist and Vice President, opened the session by calling for a paradigm shift in how Africa utilizes its assets.

“If Africa commits to investing in its own development and managing assets efficiently, it can break free from dependency and unlock transformative growth,” Urama said.

He criticized the continent’s weak tax systems and revenue leakages, noting that poor tax administration and retention limit the capacity of governments to invest in long-term development. Improving public financial management and governance is therefore crucial.

The report also notes South Africa’s strategic position as Chair of the G20 in 2025, giving it a platform to advocate for Africa’s voice in global economic governance and financing reforms.

Panelists Offer Insights on Institutional Strength and Asset Optimization

The launch included a robust panel discussion moderated by Edward Sennoga, AfDB Lead Economist, which explored how South Africa can better leverage its capital for development.

Key insights included:

• Yolande Smit, National Treasury Chief Director for Macroeconomic Policy, emphasized the need for evidence-based policymaking to restore investor confidence.

• Joseph Matola, Head of Economic Diplomacy at the South African Institute of International Affairs, called for deeper integration between development strategy and global trade diplomacy.

• Anders Pedersen, AfDB Chief Regional Power Systems Officer, stressed the importance of modernizing energy infrastructure and fostering public-private partnerships in renewables.

• Innocent Onah, AfDB Chief Natural Resources Officer, highlighted the critical role of mineral and natural resource governance in long-term fiscal sustainability.

Country Focus Report: A Strategic Compass

The AfDB’s Country Focus Reports are designed to bridge macroeconomic insights with actionable national strategies. The 2025 edition not only dissects the structural issues affecting South Africa’s growth but also provides a blueprint for harnessing its vast, underutilized capital assets.

The report notes that, like many African nations, South Africa has immense opportunities to:

• Maximize human capital through education and health reform.

• Optimize business and financial capital through innovation and regulatory efficiency.

• Leverage natural resources sustainably to drive green growth.

• Improve fiscal space through better revenue collection and expenditure management.

A Crossroads for South Africa’s Development

As global economic dynamics shift and regional challenges deepen, the AfDB's report offers a timely intervention. With strong institutions, resource abundance, and a sophisticated financial sector, South Africa is well-positioned to drive its development trajectory—provided it makes the right strategic reforms and investments now.

“With strong collaboration between government, business, and development partners, we can build a South Africa where every citizen can thrive,” Sarupen concluded.