A brief “good news” outlook on the political and economic landscape in South Africa right now, from renowned and highly respected economist Dr. Roelof Botha.

Elections herald new era of cooperation

30 years ago, South Africa became a democracy with the principles of free enterprise and private property ownership firmly embodied in a constitution that drew acclaim from the rest of the democratic world – it is, after all, premised on the United Nations’ Declaration on Human Rights. It was a proud moment indeed and one that befitted the ascendancy to the head of state of a Nobel Peace Prize winner, Nelson Mandela.

After three decades of ANC rule, South Africa’s national elections have made headlines again – mostly for good reasons. The ANC’s monopoly over socio-economic policy has been broken and around three-quarters of the votes were garnered by parties that remain committed to the constitution. Most of the world’s democratic nations are governed my coalitions or governments of nation unity (GNUs). Such arrangements have the common characteristic of forcing two or more political parties that represent different expectations from the voting public to work together in public sector service delivery and economic policy.

South Africa has now joined this club, which is an indication of a maturing democracy. Even though the third and fourth largest political parties both share populist views, this should not be of concern for the preservation of socio-economic freedom. It is abundantly clear that the two largest political parties have more than sufficient support to form a GNU. Both are committed to maintaining the constitution and the principle of private property rights.

Marginal GDP growth secured in 1^st quarter

According to Statistics SA, the year-on-year real growth rate in the country’s GDP amounted to 0.5% in the 1^st quarter of 2024. The economy has now grown at real positive rates for eleven of the past twelve quarters, despite the lingering after-effects of the Covid pandemic, weak prices for several key export commodities and, since 2022, the restrictive monetary policy stance of the SA Reserve Bank’s Monetary Policy Committee.

The largest sector of the economy, which encompasses financial & business services and real estate, managed to record a nifty year-on-year real growth rate of 2.4% in the 1^st quarter. Together with personal services, which embody a multitude of small entrepreneurial businesses, these two sectors have consistently expanded their share of GDP. In the 4^th quarter of 2018, their combined share of GDP at basic prices (value added) was below 40% but reached a level of almost 46 % during the second quarter of 2024. (Please note that the graph is based on four-quarter averages, in order to eliminate seasonal influences).

Literally brighter months in April and May

Contrary to all kinds of conspiracy theories, the absence of electricity rationing for two full months was made possible by a combination of lower demand via rooftop solar installations by the private sector; improved coal stability; higher levels of battery storage; and progress with planned maintenance at several power stations. The battle for a permanent restoration of electricity supply stability continues, however, with the expansion of grid capacity and the removal of unnecessary constraints on independent power producers as the most important issues to be addressed.

South Africa shines in key tourism indicator

On 21 May, the World Economic Forum published the 2024 edition of the Travel & Tourism Development Index, which benchmarks and measures the sustainable and resilient development of the global Travel & Tourism sector. Between the 2022 and the 2024 indices, South Africa has fared exceptionally well, climbing 7 places in the overall country rankings. Only six countries managed to record a larger jump in the rankings table, namely Brazil, Turkey, Indonesia, Saudi Arabia, Albania, and Uzbekistan. South Africa also retained its number one position on the African continent, ahead of Mauritius and Egypt.

Other good news on the tourism front is the welcome jump in South Africa’s recovery rate for overseas visitors (calculated as the monthly post-Covid number of tourists divided by the number for the corresponding month before the pandemic). Following a meaningful and consistent recovery since 2022, the rate stalled at around 80% during most of 2023. In March 2024, however, the rate climbed to 92%, boosted by the traditional top-ten source countries for overseas tourists. The latter is headed by the UK, with Germany, the US, the Netherlands, and France completing the top-five.

With good news all round for the future of the South African economy, plus interest rates peaking at the top of the rate cycle resulting in low property prices, there’s never been a better time to invest in property! To ensure you are getting the best possible deal on your property financing options, enlist the assistance of one of our Phoenix Bonds home loan consultants – for a free service resulting in expert advice and personalised consideration, contact us today.