Indeed, elections all over the world in 2024 will put the spotlight on the global state of democracy, including in South Africa. There will be more than 40 elections involving over four billion people, for the first time covering almost half of the world’s population. Western economies as a whole might do better https://www.investopedia.com/terms/i/investment.asp in 2024 than expected at present, but are not out of the woods yet. This issue includes an assessment of the global economic situation, and a chapter summarising developments and providing projections for each individual country. KPMG is the brand under which the member firms of KPMG International Limited (KPMG International) operate and provide professional services. “KPMG in Southern Africa” is used to refer to the individual member firms within the KPMG organization in Mozambique, Zambia, Namibia, Botswana, Zimbabwe, Mauritius, and South Africa.

Of the 10 industries reported on by Statistics South Africa (StatsSA), four saw contractions in 2023, while three recorded marginal positive increases (less than 1%). Analysis by The ONE Campaign shows that African countries are paying a 500 percent premium on their private loans in comparison to what they could achieve by borrowing from the World Bank’s International Bank for Reconstruction and Development. As a result of this premium, the debt that African countries raised from capital markets over 2016–2021 will cost https://africa-gold-capital-investment.org/ these countries an additional $56 billion in interest.

Costlier services drive South African inflation higher

Together, the world’s middle-income countries are facing an additional $74 billion in unnecessary costs for the new bonds they issued in 2021 https://www.forbes.com/investing/ due to the premium they incur from borrowing privately. Many African countries arguably need more debt to finance their massive infrastructure needs. Estimated public finance needs for addressing the climate crisis, transitioning energy systems, and investing in sustainable development are $2.3 trillion to $2.5 trillion a year by 2030 for emerging market economies, excluding China.

Transformer explosion at Eskom’s Matla power station leaves nine employees injured

Parsons says Eskom load shedding remains the Achilles heel of the economy but there may now be positive developments on the load shedding front that could strengthen levels of energy security as 2024 unfolds if private power supply projects materialize as planned. Macro-economic tailwinds have included the stabilisation of energy supply and the early reform taking place at Transnet. They have also included fiscal stabilisation, inflation easing below the South African Reserve Bank’s 3% to 6% target range, interest rate cuts, accelerated real wage growth and the embrace of the private sector. For near- to medium-term growth, South Africa’s prospects remain constrained due to subdued export prices, low demand, a weaker rand, and the mentioned supply-side constraints to growth, together with high sovereign credit risks that increase borrowing costs and limit investment and growth.

As 2024 winds down and businesses turn their attention to next year, the outlook for the South African economy in 2025 comes into focus. While domestic factors (such as load-shedding, interest rates and extreme weather events) have a direct impact on the country’s economic outlook, so too does the economic health of its trade and investment partners. “This reduction in the rate of inflation is the primary reason behind the central bank commencing its interest rate https://africa-gold-capital-investment.org/ reduction cycle. The positive effect of a reduction in interest rates of households and businesses should lead to an increase in both consumption and investment spending,” Blackmore said.

The water crisis is becoming a “commercial risk” to business

However, there may now be positive developments on the Eskom load shedding front that could strengthen levels of energy security as 2024 unfolds. During 2023 about 2.5GW of rooftop solar was added in SA, and if private power supply projects materialise as planned in the months ahead, load shedding could ease as the year progresses. This will not mean a complete end to Eskom blackouts, but rather create the possibility that load shedding could be reduced to less disruptive levels during 2024. However, the domestic growth outlook may turn around and improve if loadshedding is reduced and rail and port infrastructure constraints are resolved, given the results of initial reforms in these sectors, and if cost-of-living pressures are reduced due to moderating inflation and potential rate cuts toward the year’s latter half. Supply constraints will diminish through fewer power outages and rail freight and port bottlenecks.

Water

The President cited disruptions in the supply of electricity and clean water as a major problem in many municipalities. He added that many local councils are plagued by poor governance, limited capacity and severe financial constraints which affect service delivery. While unemployment levels remain extremely high, the President said more South Africans are finding jobs. Government welcomes the country’s economic growth, as reflected in the latest Gross Domestic Product (GDP) figures.

• The member firms comprising KPMG in Southern Africa are not a global partnership, single firm, multinational corporation, joint venture, or in a principal or agent relationship or partnership with each other.
• Such a commission would bring together leading experts to propose amendments to credit rating methodologies, prudential regulations, and data need.
• Supply constraints will diminish through fewer power outages and rail freight and port bottlenecks.
• Activity remains more resilient than expected, although with considerable divergence across economies, inflation is falling steadily and unemployment remains low.
• KPMG expects this positive momentum to continue into 2025 and 2026 with GDP growth forecast to improve to an average of 1.7%  as experienced over the 10 years leading up to the Covid-19 pandemic.
• South Africa’s economic outlook in 2024 will be shaped by global economic trends, geopolitical developments, domestic infrastructure challenges, effective implementation of government’s reform commitments and the national election.

Gulf Co-operation Council’s expanding African footprint

“The expectation, however, is for stronger economic growth over the final quarter of the year on the back of the improved macroeconomic environment,” Blackmore said. KPMG South Africa has forecast economic growth of 1.5% for South Africa in 2025 and 1.8% in 2026 in its latest economic update report. Ballim said smaller economies would achieve astonishing levels of outperformance in regions, particularly in East Africa where countries were achieving growth of 4% to 6.99%. South Africa’s economy is expected to improve over the next five years as the government of national unity (GNU) continues implementing reforms, particularly in Eskom and Transnet.

There is more money flowing out of these countries in debt service than is entering, in terms of official development assistance or new debt. While Africa’s debt service is projected to peak at $89 billion in 2024, it will remain high at $79 billion in 2025, $69 billion in 2026, and $64 billion in https://www.investopedia.com/terms/c/cryptocurrency.asp 2027. Unless they can invest public resources in education, build climate resilience, and upgrade infrastructure to support economic transformation, they are unlikely to be able to compete in a rapidly changing world. To calm domestic inflation, central banks implemented the fastest tightening of monetary policy since the 1980s. Because 80 percent of external debt in low- and middle-income countries is held in U.S. dollars, this increased rates immediately while strengthening the U.S. dollar against local currencies, which further increased the costs of servicing debt. Between January 2022 and March 2023, African currencies lost 8 percent of their value, increasing their debt by 10 percent of GDP.

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The second quarter’s economic growth is a clear indication that South Africa’s economy is on a solid path to recovery. The positive trajectory also speaks to the effectiveness of the measures that have been implemented to support recovery and growth. The absence of load shedding has played a crucial role in revitalising key sectors, particularly the electricity, gas, and water supply industry. The Government remains committed to implementing policies that will sustain and accelerate growth, ensuring that the benefits are felt by all South Africans. Private enterprises have been driving the fixed-investment agenda and effective delivery of, in particular, energy infrastructure.