The economy strengthened during the runup in global commodity prices in the 2010s, but since then a mix of drought, lower commodity prices and political uncertainty have stymied growth. Real GDP growth has been weak over the past two years. The mining sector has suffered from resource nationalism, a growing trend across Africa. Investor uncertainty is deterring investment. Slowing Chinese demand for resources, a shift away from fossil fuels and a less competitive South African mining sector all weigh on growth prospects.
The recent re-election of Cyril Ramaphosa as President, who aims to revive economic growth, improve policy certainty and curtail corruption, is a positive. But issues around land reform, labour laws and income inequality will likely continue to hinder investment.
South Africa’s young population and location bode well for the long term outlook, even in the face of a declining birth rate. South Africa has better infrastructure than most other African countries. Still, large external imbalances, lack of critical infrastructure, heavy reliance on commodities and a history of race-based policies poses downside risks.