## Boosting Growth and Prosperity in South Africa

_IMF News, March 10, 2025_

## Source details

**Canonical URL:** [Boosting Growth and Prosperity in South Africa](https://www.imf.org/en/news/articles/2025/03/10/cf-boosting-growth-and-prosperity-in-south-africa)

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## Bibliographic details
- Authors: Kamil Dybczak, Delia Velculescu March
- Published: March 10, 2025

---

### Key challenges
- Declining real per-capita income.
- Persistent unemployment, pervasive poverty, and one of the highest inequality rates in the world.
- Deepening structural rigidities and governance weaknesses, evidenced by the negative contribution of Total Factor Productivity to growth over the past 15 years.
- One in three adults and two in three young people out of work.

### Recent political and reform context
- New Government of National Unity in power since June 2024 committed to provide new impetus to ongoing structural reforms initiated in 2020.
- Government statements: “We are steadily removing the obstacles to meaningful and faster growth... [through] economic reforms that we are implementing as part of Operation Vulindlela,” — South African President Cyril Ramaphosa.
- Major sectoral reforms underway:
  - Electricity sector reforms allowing for private-sector participation in electricity generation, including from renewable sources.
  - Logistics sector reforms allowing private sector participation in freight rail and port operations.
  - Streamlining digital communications regulations and water licensing procedures.
  - Modernizing the eVisa system.

### IMF-recommended structural reform package (summary)
- Fully implement reforms already underway and pursue further structural reforms.
- Actions to enhance the business environment:
  - Cut excessive red tape and administrative requirements.
  - Ensure small and medium enterprises have fair access to markets to support entrepreneurship, firm growth, and job creation.
- Governance and public administration:
  - Fight corruption.
  - Professionalize public administration.
  - Improve governance of state-owned enterprises to build trust and create a more stable business climate.
- Labor-market reforms:
  - Reduce spatial disparities.
  - Help young people enter the labor force.
  - Make regulations for small and medium-sized enterprises more flexible to durably reduce the high unemployment rate.

### Quantified impacts from IMF analysis and key statistics
- Reforms halving South Africa’s business regulation, governance, and labor-market gaps relative to peers could:
  - Increase medium-run output by 9 percent.
  - Further boost employment.
  - Reduce poverty and ensure more widely shared benefits of growth.
- Inequality impact:
  - South Africa’s Gini coefficient would decline by 10 points, bringing South Africa closer to its peers.
- Electricity cost context:
  - Providing information about the cost of electricity in South Africa, which is 68 percent higher than in the US, was found to boost support for electricity reforms by 9 percentage points.
- Reforms communication and compensatory support:
  - Providing compensatory support to vulnerable groups affected by the reforms would lead 75 percent ofindividuals initially opposed to reforms to become reform supporters.

### Policy implementation and social support considerations
- Building broad social support is essential to achieve full benefits of reforms.
- Communication and engagement, along with policies to support vulnerable groups, are vital to increase acceptance of reforms.
- Specific behavioral findings:
  - Information provision about relative costs (example: electricity costs) can materially increase reform support.
  - Compensatory support transforms opposition into support for a large share of initially opposed individuals.

### Outlook
- While challenges are massive, the new government’s mandate provides a unique opportunity to implement an ambitious package of reforms to put the economy on a path toward higher growth and prosperity for all.
- The IMF stands ready to support South Africa in its efforts.

*By Kamil Dybczak and Delia Velculescu — March 10, 2025. Delia Velculescu is the IMF’s mission chief for South Africa. Kamil Dybczak is a senior economist for South Africa in the IMF's African Department.*

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## References

- [SOUTH AFRICA AND THE IMF](https://www.imf.org/en/Countries/ZAF)
- [STAFF REPORT](https://www.imf.org/en/Publications/CR/Issues/2025/01/30/South-Africa-2024-Article-IV-Consultation-Press-Release-Staff-Report-and-Statement-by-the-561414)
- [SOUTH AFRICA: SELECTED ISSUES](https://www.imf.org/en/Publications/CR/Issues/2025/01/30/South-Africa-Selected-Issues-561419)
- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/03/10/cf-boosting-growth-and-prosperity-in-south-africa_