SOUTH AFRICA SHOULD MAINTAIN THE REFORM MOMENTUM TO SUSTAIN GROWTH
SOUTH AFRICA SHOULD MAINTAIN THE REFORM MOMENTUM TO SUSTAIN GROWTH
Yugen Pillay, Head of Public Sector , BDO South Africa
As Finance Minister Enoch Godongwana prepares to present the National Budget on 25th February, it is important to stress the importance of South Africa implementing further structural reforms to sustain the growth momentum that has been experienced particularly during the past three quarters.
These reforms, underpinned by improving investor sentiment and confidence, will be critical if the country is to achieve the 1.8% growth for 2026 to 2028 as forecast by Minister Godongwana when he presented the Medium-Term Budget Policy Statement in November 2025. The country however needs significant growth above the 3% range to address rising unemployment and elevated poverty and inequality levels, particularly among the vulnerable and disadvantaged of our society.
As the year unfolds, the country is witnessing cautious business optimism supported by, the removal of the country from the Financial Action Task Force (FATF) grey list and the decision by S & P Global to raise the country’s foreign-currency and long-term sovereign rating, the first such upgrade in nearly two decades. The 1.8% target will be a challenge in the short term, but a start has been made, and we need to sustain the momentum. In the medium to long-term, it is certainly possible to achieve that target, provided that structural reforms continue to be supported by government and investor confidence in the country grows.
In this regard, interventions such as the implementation of the National Infrastructure Plan (NIP) provide a clear roadmap for infrastructure development over the next few years which is the foundation to enable growth. There is no doubt that if the country sticks to the plan and make Public-Private-Partnerships a fundamental part of the plan, we will be able to achieve the objectives within the timeframes specified. Government may also need to ease access to these infrastructure investments to private players, especially big global investors if we want to ensure success.
It is also important to highlight the importance of further reforms of public entities such as Eskom and Transnet which are two major arteries of the economy. With Transnet, we’ve seen the new operator taking over which should reduce lead times and contribute to a free-flowing import/export structure, coupled with the recent rail operating agreements which were agreed with Transnet. With Eskom, what business really wants to see is a reduction in electricity prices. While it is uncertain whether this is possible in the mid-term, it is however something that has to be considered if we want to see growth rates of above 3% as the president once mentioned
It is interesting to note though, that the private sector has already been playing its part in addressing shortfalls in the public sector and a fundamental concern for the private sector, which it would want addressed in the budget, is the issue of crime and corruption which has to be curtailed with a clear workable plan.
I think the more pressing question though, is how much more can the private sector weather, given the service delivery challenges including water and the already mentioned high rates of crime and corruption. Government needs to implement tougher measures on corruption in an effort to move us lower down on the Corruption Perceptions index, something that investors would view in a positive light.
Another concern for now remains the US trade policy towards South Africa, which may have an impact on our growth and economy. However, the decision by the US government to renew, although for just one year, the African Growth and Opportunity Act (AGOA) provides a temporary relief to the country. The business sector would welcome the conclusion of a favourable trade agreement that benefits both countries and promotes trade, investment and tourism.
While the country’s geopolitical risk has increased over the last year and a bit, this in itself is not a game changer but also highlights the fact that we should have several bilateral agreements in place so that when one sours we are still able to continue on our growth trajectory. There is therefore no doubt that the BRICS bloc will support South Africa but the timing of such trade deals will be important.