After nearly two decades of weak growth, declining investment and rising structural bottlenecks, South Africa faces a narrow window in which decisive reforms may determine whether it will escape long-term stability or remain trapped in low growth.
Coface research shows that South Africa's per capita gross domestic product (GDP) in 2025 remains below 2007 levels, making it the only BRICS economy to lose ground in almost two decades.
Once buoyed by commodity demand and global integration in the early 2000s, growth was derailed by successive shocks, including the global financial crisis, the end of the commodity super-cycle, and the COVID-19 pandemic, which exposed deep structural weaknesses.
Major barriers highlighted by the study include:
- Power system failure is due to aging infrastructure and long-term underinvestment
- Deeply distorted labor market due to persistent unemployment and skills mismatch
- Weak capital formation, investment levels well below peer economies
- The decline in public finances is largely driven by salary-heavy spending rather than investment in infrastructure.
The Coface South Africa webinar, “How can South Africa break free from the persistent trap of economic stagnation in a world defined by uncertainty, structural constraints and rising geopolitical tensions?”, highlighted the issues.
Abdul Waly, CEO of Coface South Africa, and Aroni Chowdhury, Chief African Economist of Coface, examine why South Africa has underperformed its emerging market peers Brazil, Colombia, Chile and Malaysia and what changes are needed to restore sustainable growth.
What changed and why it matters
Despite the challenges, the outlook is not without hope. Chaudhary says developments have begun to alter sentiments, including:
- The stability of South Africa's electricity supply improved, with Eskom recording its strongest grid performance in five years and extended periods without loadshedding.
- South Africa's removal from the FATF gray list and the recent sovereign credit rating upgrade have helped reduce borrowing costs and restore investor confidence.
- The World Bank's $350 million credit-guarantee vehicle, which was expected to facilitate up to $10 billion in private infrastructure investment over the next decade, particularly to expand the transmission grid.
“These were important signals,” says Chaudhary. “But perception and credibility matter just as much as policy implementation. Markets reacted not only to reforms, but also to how credible and sustainable those reforms were.”
Global risks and geopolitical pressures
The discussion also placed South Africa's recovery within a highly volatile global context. Rising geopolitical tensions, particularly the ongoing conflict in the Middle East, have put renewed pressure on energy markets, oil prices, shipping routes and global inflation expectations.
For an open economy like South Africa, these dynamics have been shown to directly influence currency stability, inflation and interest rate expectations, trade flows and external demand as well as business confidence and investment decisions.
Against this backdrop, traditional forecasting had become increasingly difficult, reinforcing the need for scenario-based planning and robust risk frameworks.
looking ahead
The webinar concluded with a forward-looking discussion of what will ultimately determine whether South Africa can transition from a fragile recovery to sustained, inclusive growth.
Main topics include:
- Urgency of structural reforms in next 12 to 24 months
- The role of fiscal discipline, infrastructure investment and policy coherence
- How can businesses deal with increased uncertainty when looking for opportunity
- Structural strengths, including a diversified industrial base, strong financial institutions, and deepening global trade integration, continued to support the recovery.
“South Africa's transition from a fragile recovery to sustained, inclusive growth will ultimately depend on the ability of businesses to continue investing and trading despite uncertainty,” says Valley.
“By helping companies protect cash flow and manage counterparty risk, trade credit insurance gives companies the confidence to pursue opportunity rather than retreat from volatility and this confidence will be critical in translating the country's structural strength into sustainable economic momentum.”