Following the 2024 election, President Cyril Ramaphosa announced a Government of National Unity (GNU) as the ANC lost its majority in parliament.
Ten other parties have joined the GNU: DA, IFP, Good, PA, FF Plus, UDM, Rise Mzansi, PAC, Al-Jama Ah, and UAT.
Thus, the president included several of these parties in his cabinet, which increased from 30 to 32 to accommodate the new faces.
The markets have responded positively to the retention of the ANC’s Godongwana.
BofA said that Godongwana’s fiscal plan could benefit from potentially strong growth due to reduced levels of load shedding.
The government expects a main budget deficit of 4.3% of GDP in 2024/25 (BofA: 4.5%) and 3.9% in 2025 (BofA: 4.1%)
When including Eskom’s debt support, BofA’s all-in deficit is at 5.4% in 2024/25 and 4% in 2026/27.
During the 2023 Budget, Godongwana announced Eskom debt relief amounting to R254 billion from 2023/24 to 2025/2026.
BofA said that 2026 could be a turning point as Eskom will need no further support, leading to enough of a primary surplus to ensure debt stabilisation. (a year later than Treasury’s baseline).
Load shedding
Better electricity supply should also drive GDP growth stronger and result in better tax revenues.
Electricity supply has improved since April, with over 100 days of no load shedding in the country - the first time since 2021.
The enhanced power supply could represent a significant structural improvement if sustained for the rest of the year.
This could drive GDP growth towards 2% over the medium term.
“Stronger GDP growth should drive budget revenue growth higher. An improving fiscal outlook will likely result in tighter asset swap spreads over the medium term,” said BofA.
However, South Africa’s economy is not expected to shoot the lights out in the short term.
BofA economist Tatonga Rusike previously said that GDP should grow by 1.3% in 2024.
Other economists and analysts generally expect GDP to grow by roughly 1%.
Although this would be an improvement from 2023’s GDP growth of 0.6%, it is still incredibly low and far below what the country needs to keep up with population growth.
South Africa’s population growth generally hovers around 1.5%, meaning that anything below that figure represents a per-capita recession, meaning South Africans are getting poorer.
What to do
Amidst the low-growth environment, several prominent CEOs in South Africa recently spoke of what the country needs to do.
Discovery CEO Adrian Gore said that the Presidential task team Operation Vulindlela should have a unit focused on economic growth and jobs.
Standard Bank CEO Sim Tshabalala said that the state needs to be incapacitated and work with civil society and business to drive growth.
Tshabalala said that the Public Service Amendment Bill should be accelerated. This bill would introduce transparent and competitive recruitment processes in the public service, improve pay, and increase civil servants’ status.
Investec Bank CEO Cumesh Moodliar also called for greater public-private partnerships (PPPs), with a focus on logistics amid South Africa’s poor-performing ports and railroads