South Africa’s economic growth is expected to be around double that seen in 2023, says Investec chief economist Annabel Bishop – but this is coming from a really low base, with load shedding likely to keep eating away at the country’s potential.

In a note on Wednesday (3 January), Bishop said that economic growth expectations for 2024 are currently sitting at a paltry 1.0% – double the expected growth of 0.5% in 2023.

Any growth at all in 2023 comes as a surprise after near-permanent load shedding stripped away most of the country’s economic potential on top of over crises, such as infrastructure and governance issues.

Even though the economy manage to scrape some growth, that does not mean that the issues are a thing of the past, Bishop warned.

“Electricity supply is not expected to fully and consistently meet demand this year, and higher stages of load shedding are likely,” she said.

“Load shedding is likely to persist through 2024, at risk of worsening from stage 3/4 as insufficient capacity comes online. But 2025 should see more capacity from private sector generation, with further build-up over subsequent years.”

Helping South Africa’s economy along in 2024, Bishop said that global economic growth should prove to be a boon, with the global economy only slowing to a projected 2.7% – bypassing many of the fears of a global recession.

But this won’t be enough to overshadow local jitters.

Domestically, sentiment concerns linger around the coming 2024 national elections, where it is widely expected that a coalition government will come to power.

The exact nature of the coalition government after the national elections is an unknown, and currently dulling business confidence and causing some volatility in local markets, Bishop said.

“Downside risks to the economic outlook particularly come from an increased left-leaning stance in government after the elections, with such municipal coalitions already having seen deteriorating service delivery, and provide an anti-business, and so growth, stance,” she said.

“A dampening of economic growth this year would also come from higher taxation and failure to cut back wasteful, needless and inefficient expenditure and root out corruption. Left-wing governments are ranked as having higher corruption levels than centrist ones.”

Despite these worries, there are some positives to take note of.

For instance, South Africa’s inflation outlook is positive, with Bishop expecting headline inflation to settle around 4.5%, even dipping lower at times.

The lower fuel price at the end of 2023 and into 2024 will assist in bringing the slight elevation in inflation under control.

Feeding from this, the Reserve Bank is also expected to finally start cutting interest rates, she said, with Investec anticipating three 25 basis point cuts in the latter half of the year.

This comes against a backdrop of the current restrictive rate environment, which has seen consumers come under stress, growth in bank lending slow, and lending conditions tightening.

As rates are cut, these pressures should ease.

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