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The past few years have been tumultuous in the labyrinth of SA economic and political narratives. As the nation approaches national elections within a few months the economy is in dire straits, primarily due to a combination of external shocks and internal structural deficiencies.

The Covid-19 pandemic dealt a severe blow to the SA economy, causing it to contract by a staggering 7% in 2020, the most significant decline since 1920. This downturn was not merely a consequence of the pandemic but also highlighted long-standing constraints such as energy insecurity, slow reform agendas, political infighting, corruption and persistently poor growth in key economic sectors — all of which continue to hamper recovery efforts​​.

Electricity supply shortages, particularly the load-shedding that has become common since 2007, have severely disrupted economic activity, escalating operating costs for businesses and affecting essential services such as healthcare and education.

South Africans spent 72.6 days or 1,742 hours with no power in 2023, based on independent energy analyst Pieter Jordaan’s calculations. The number of days that the country experienced load-shedding hours in 2023 is widely reported as 332.

According to Eskom, these power cuts are expected to continue every week of 2024, further undermining the nation’s growth prospects​​.

Regarding GDP, SA may have recovered to pre-pandemic levels, but employment figures tell a different story. With about 74,000 fewer jobs than at the end of 2019 and persistent effects on women and youth, the nation’s social fabric is under strain. The high poverty rate, estimated at 62.6% in 2022 — only marginally below its pandemic peak — underscores the deep-rooted economic challenges the country faces​​.

SA’s public finances have weakened notably. The budget deficit is projected to increase, with gross debt expected to rise alarmingly, highlighting the fiscal challenges ahead. Compounding these financial woes is the increasing cost of servicing this debt, which threatens to further limit the government’s ability to invest in social and economic development​.

Structural growth also remains weak. The high public debt is tying government’s hands when it comes to fiscal leeway to counter economic and climate challenges, or even to spend on essential social and development needs. At the same time there are deep-rooted issues in how job and product markets operate, and ongoing problems with governance and corruption. The knock-on impact on job creation and economic growth poses a very real threat to social cohesion and national unity, with the spectre of unrest around the elections looming ever larger.

On the brighter side, certain sectors have shown resilience. Agriculture, for example, expanded 8.2% in the first half of 2023, driven by favourable rainfall. The tourism and finance sectors have also demonstrated relative strength. However, manufacturing and mining continue to struggle under the weight of electricity shortages, policy constraints, and logistical bottlenecks​​.

SA’s strength lies in its large external assets, low foreign debt, diverse economy and sophisticated financial system, supported by the Reserve Bank’s proactive monetary policy that has anchored inflation expectations. While on paper government is progressing in revenue collection, energy sector reform, infrastructure privatisation and port access improvements, implementation lags. More urgency around actualising ongoing reforms is essential to address unemployment, poverty and inequality.

As the national elections loom, the question remains: can the current leadership steer this ship to safer shores? The answer lies not only in navigating through the immediate economic turmoil but also in addressing the deep-seated structural issues that have long plagued the SA economy.

The upcoming elections offer an opportunity for a reset, but it requires a leadership that is willing and able to chart a new course, one that brings sustainable economic growth, social equity and stability. Only time will tell if such leadership will emerge from the political quagmire, but the urgency for change has never been more apparent.

• Polley is managing partner: UK & Ireland, and senior emerging markets adviser, at Instinctif Partners.

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