As South Africa navigates its first full year under a Government of National Unity, cautious optimism about economic reforms has been tempered by systemic challenges. Can this political arrangement deliver the stability and policy coherence necessary for meaningful growth?
South Africa–the continent’s largest economy–enters 2025 at a crossroads, with the country’s economic outlook striking a balance between cautious optimism and systemic challenges.
The International Monetary Fund (IMF) projects GDP growth at 1.5%, a slight improvement over the 0.8% growth of 2024.
However, some economists remain skeptical about the ability of the newly formed Government of National Unity (GNU) to deliver on the promise of stability and reform, even though initial assessments are somewhat positive.
“The GNU has been well-received by financial markets,” Dawie Roodt, Chief Economist at the Efficient Group tells FORBES AFRICA. “The multiplicity of political parties in governance provides checks and balances on one another.”
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Political Realities and Challenges in Governance
Roodt’s guarded optimism is tempered by political realities. While the GNU’s formation has signaled a break from a purely ANC-driven government, ideological divides persist.
Daniel Silke, political economist and director at Political Futures Consultancy, underscores the challenges to FORBES AFRICA.
“There’s still significant political confusion within the ANC as to what policy ideology should dominate. This uncertainty hampers the implementation of any meaningful structural reforms,” he says.
Roodt, however, disagrees: “There’s no policy uncertainty,” he argues. “The ANC’s ideological framework is crystal clear—it’s socialist, developmental, and fundamentally incompatible with modern economic principles.”
Political infighting, largely driven by the ANC’s factions and ideological clashes, threatens the coalition’s effectiveness.
“The battle for leadership within the ANC is already underway ahead of the 2027 elective conference,” Silke says. “This creates an environment where long-term policy coherence is sacrificed for short-term political positioning.”
Roodt echoes these concerns, noting that while financial markets have welcomed the GNU, its stability is far from guaranteed.
“The 2026 local elections could destabilize the coalition,” he warns. “Without a unified policy approach, investor confidence could waver.”
It is not only the ANC under scrutiny. The opposition Democratic Alliance (DA), while often praised for governance in regions like the Western Cape, has also faced challenges, particularly at the metropolitan level.
Infrastructure – The Core to Success or Failure
South Africa’s economic vulnerabilities remain significant. Infrastructure issues—from inefficient ports to aging water systems—continue to stifle growth. While the energy crisis has eased following reforms in 2024, systemic inefficiencies remain.
In 1994, only 76.4% of households reportedly had access to piped water. According to StatsSA, from 2002 to 2023, 87% of households had access to improved water sources, though rural areas still face disparities. Similarly, electricity access rose from 36% in 1994 to almost 9o% in 2023.
Roodt acknowledges its substantial contribution in expanding access to basic services for the vast majority of South Africans.
Youth unemployment remains a pressing issue. With millions of young people excluded from the workforce, South Africa’s demographic dividend risks becoming a liability.
Despite several challenges, sectors like logistics and manufacturing present opportunities.
Silke suggests a two-pronged approach: “In the short term, lower-end manufacturing offers a realistic solution for absorbing unskilled labor. In the long term, comprehensive education reform is essential to build a skilled workforce”.
Roodt concurs but adds a note of caution: “South Africa’s education system is failing to produce graduates equipped for the demands of a modern economy. Without significant improvements, we’ll remain reliant on importing specialist skills, further hampering our ability to compete globally”.
A Nation at a Crossroads
As the nation navigates these challenges, the stakes have never been higher. South Africa stands at a crossroads, its path forward uncertain but crucial to shaping its future.
“The GNU provides an opportunity to reset South Africa’s trajectory,” says Silke. “But this requires a decisive break from outdated ideologies and a commitment to implementing difficult reforms.”
Roodt’s conclusion is more sobering: “Unless we address corruption and inefficiency at all levels of government, our growth will continue to lag behind our potential. South Africa’s future depends on bold, immediate action—and the political will to follow through”.
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