South Africa's economic forecast for 2025: cautious optimism amidst challenges

As South Africa transitioned into 2025, the outlook for the national economy presented a mix of cautious optimism and underlying challenges.

The year 2024 ended with modest growth, but the country's economic performance remained constrained by several key issues that shaped its trajectory heading into 2025.

Experts agreed that while South Africa's economic growth was expected to remain sluggish, there was a slight improvement from 2024’s 1% to a projected 1.5% in 2025.

Challenges like high unemployment, poverty, and underperforming state-owned enterprises (SOEs) persisted, but experts believed strategic actions could improve the outlook.

Economist Ulrich Joubert stressed that growth was crucial, but structural issues like labour market inefficiencies and poor education exacerbated these challenges.

He noted, “If we look at the prospects for 2025, we must first consider not just the problems we face but also the deep-rooted factors contributing to them.”

Joubert highlighted SOEs, particularly Transnet, as significant obstacles to progress.

"Many of these state-owned enterprises don't operate as we would like them to," he stated, urging private investment to address inefficiencies, particularly in infrastructure sectors like rail.

He also stressed the need for reducing government intervention and simplifying bureaucracy to allow the private sector to thrive.

“Long-term growth requires a reduction in government intervention and a simplification of bureaucratic red tape,” he argued.

Regarding the labour market, Joubert called for a paradigm shift in education and training.

“If we want to reduce unemployment, we need to enhance education and training systems, while exploring an alternative labour dispensation,” he explained, pointing to South Africa's shortage of skilled workers as a key barrier to growth.

Dr. Willie Cilliers, chairman of Business Western Cape, offered a more optimistic view, citing improved economic stability with inflation dropping to nearly 3% in 2024, down from 7-8% in previous years.

“In 2024, inflation was brought down to nearly 3%, far better than the 7-8% we saw in previous years,” he said.

Additionally, he noted that decreasing interest rates could stimulate business activity in 2025.

Cilliers highlighted government initiatives aimed at poverty alleviation but stressed that poor implementation remained a major hurdle.

"The challenge lies in the execution of these policies. While the frameworks are there, we often see poor implementation," he explained.

Cilliers also underscored the importance of small businesses in spurring economic growth.

“The impact of the Department of Small Business has been poor so far, especially when it comes to activating entrepreneurs,” he noted, advocating for a more effective allocation of grants.

"Rather than giving grants that don't create sustainable businesses, we need to empower individuals to start and sustain their own businesses through mentorship and financial support."

Economist Dawie Roodt is carefully optimistic about South Africa's economic outlook for 2025.

He highlighted several tailwinds, including significant progress in addressing the country’s electricity issues and improvements in logistics, particularly in Transnet.

"It seems confidence has turned for the better, especially following the establishment of a so-called government of national unity. These are certainly positive developments," he said.

Roodt is relatively optimistic about oil prices, predicting a decline.

He believes that, if South Africa navigates its international relationships carefully, the country could avoid significant disruptions.

"I think the oil price will come down, and this, coupled with a stronger rand, could support the economy."

These experts agreed that global factors, such as trade relations with the U.S, China, and India, would significantly shape South Africa's economic prospects.

They also saw tourism as a potential growth area, with Cilliers noting, "We have so much to offer as a country in terms of tourism, but we need to ensure that our roads and other key infrastructure are in place to support this growth."

While recovery was expected to be gradual, both Joubert and Cilliers believed that addressing key structural issues—such as education, SOEs, and infrastructure—could lay the foundation for a more sustainable and inclusive economy in 2025.

James Vos, the City’s MEC for Economic Growth, shared his New Year’s resolution for Cape Town’s economy, with a vision focused on sustainable growth through repeat tourism.

He emphasized, “My wish for Cape Town is simple yet powerful: that every visitor to our city becomes a repeat visitor.”

Vos highlighted that repeat tourists not only spent more but also became valuable advocates for the city, driving its long-term success.

Reflecting on the past year, Vos celebrated record-breaking milestones, including over 10 million passengers at Cape Town International Airport and 88 cruise liners docking at the city’s cruise terminal.

He credited these achievements to strategic marketing campaigns like the Choose Cape Town campaign, which targeted key international markets.

"Focused marketing can deliver results," he said, pointing out the success of initiatives such as branding London’s black cabs with QR codes linking to Cape Town travel offers.

Looking ahead, Vos expressed his commitment to expanding Cape Town’s global reach by targeting untapped markets, particularly India and China.

"In 2025, I will personally lead strategic trade missions to these countries," he shared, aiming to establish new airline routes and build valuable partnerships.

Vos outlined his Five-Point Programme of Action for continued growth, focusing on expanding air access, docking more cruise liners, hosting more conferences, showcasing local attractions, and unlocking investment.

He also highlighted new initiatives like the Trusted Tour Operator Scheme to streamline visa processing and the Remote Work Visa, which positioned Cape Town as a top destination for remote workers.

Tourism’s economic impact remained significant, contributing R27.3 billion annually.

Vos believed, “Tourism enriches lives and builds vibrant, inclusive communities.” As he looked to 2025, his focus remained on growing direct flight connections and strengthening partnerships with global cities.