| For a developing country, achieving sustained growth that can lift much of the population out of poverty is usually a challenge—there often are historical inequities and societal strains posing sizable obstacles to success. But some nations make things even harder for themselves. That’s been especially true for South Africa, which has struggled for years with self-inflicted impediments. But 2025 might turn out different.
The new year offers Africa’s biggest economy its best shot in more than a decade to break the grip of stagnation. And as the host of the Group of 20 meetings and summit this year, the nation’s leaders have a big stage to show the world how it’s turned a corner. Pretoria is finally beginning to address major roadblocks to growth, led by corruption and related power outages that have undermined South Africa’s industry and commerce. Pledges have been made to invite the private sector to help operate the country’s troubled ports and freight rail network. Steps are being taken to ease immigration for workers with much-needed skills. Follow-through is vital of course and pledges are just pledges until fulfilled. But there’s enough substance for economists surveyed by Bloomberg to project a 1.7% growth rate this year. While that’s hardly stellar, it’s almost double the average of the prior decade. South Africa will take the win, and maybe run with it.  Power lines above shelters in the Ivory Park settlement near Johannesburg last month. Electricity outages have been a major impediment to growth in South Africa. Photographer: Leon Sadiki/Bloomberg This week in the New Economy | To be sure, such a modest gain in South Africa’s GDP wouldn’t be nearly enough to tackle one of the world’s highest unemployment rates. It would however clear the nation’s rate of population expansion (only just) and match the increase in the size of its labor market. That underscores the miserable record South Africa has assembled over the past decade. But still, good news is good news. Key to the shift in momentum was a boost in sentiment triggered by the swift formation of a broad coalition government after last May’s national elections. The African National Congress, which ruled South Africa for 30 years, ceded its majority without dispute, ushering in a new era for the nation’s politics. The resulting administration includes the business-friendly Democratic Alliance—one of the country’s few White-led parties—as its second-biggest member. The union was a political earthquake in a country forever marked by the horror of Apartheid inflicted by its White minority. But it’s also marked a not-undramatic shift away from the ANC’s traditional proclivity for state involvement in the economy. With a national airline just emerging from bankruptcy and state power and logistic utilities virtually insolvent, the party has displayed a newfound openness to the business sector. But the recovery is a fragile one, and 2025 is the year that will likely determine whether it will hold. Some things are beyond the government’s control.  Apartment buildings in Steyn City outside Johannesburg. Replete with manmade lagoon, biking trails and restaurants, homes here sell for as much as 50 million rand ($2.7 million), emblematic of South Africa’s radical wealth inequality. Photographer: Cebisile Mbonani/Bloomberg The US election in November powerfully reshaped the global context as well, with trepidation over policies of the incoming Trump administration propelling the dollar higher, including against the rand. That in turn has reduced the ability of South Africa to lower rates, which would otherwise have bolstered growth. For South Africa to have its best chance at sustaining economic momentum, the new coalition arguably will need to stay intact, the lights must stay on and the government will need to find a way to fix transport routes needed to export the country’s coal, iron ore, fruit and cars. That first prerequisite isn’t guaranteed, given the public sniping between senior ANC and DA officials over education and health policy. Other warning signs can be seen, with some measures aimed at economic recovery already stuttering. The first major port privatization has been delayed by a legal dispute over a government body’s tender process, and entry of the first privately run trains on the national freight network is well behind schedule.  South Africa President Cyril Ramaphosa Photographer: Dwayne Senior/Bloomberg This month, after a year of negotiations with the government, steelmaker ArcelorMittal said it will close mills key to the construction, mining and automotive industries. The government listens well but can’t make decisions, the chief executive of its local unit said. With this year’s G-20 leadership bringing global attention to South Africa, President Cyril Ramaphosa has the opportunity to right the ship and publicly shake off these maladies. His country, and legacy, may depend on it. —Antony Sguazzin | 
