After nearly two decades of weak growth, declining investment and rising structural constraints, South Africa faces a narrow window in which decisive reforms could determine whether it escapes long‑term stagnation or remains trapped in low growth.
Coface research shows that South Africa’s Gross Domestic Product (GDP) per capita in 2025 remained below its 2007 level, making it the only BRICS economy to have lost ground over nearly two decades.
Once buoyed by commodity demand and global integration in the early 2000s, growth had been 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.
Key constraints highlighted by the study include:
- The failure of the electricity system, driven by ageing infrastructure and chronic under‑investment
- A deeply distorted labour market marked by persistent unemployment and skills mismatches
- Weak capital formation, with investment levels well below peer economies
- Deteriorating public finances, driven largely by wage‑heavy spending rather than infrastructure investment.
A 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?”, unpacked the issues.
Abdul Vally, CEO of Coface South Africa, and Aroni Chaudhuri, chief Africa economist at Coface, examined why South Africa had underperformed its emerging‑market peers Brazil, Colombia, Chile and Malaysia, and what needed to change to restore sustainable growth.
What changed and why it matters
Despite the challenges, the outlook is not without hope. Chaudhuri says developments have begun to shift sentiment, including:
- Improved stability in South Africa’s electricity supply, with Eskom recording its strongest grid performance in five years and extended periods without loadshedding
- South Africa’s removal from the FATF grey list and recent sovereign credit rating upgrades, which had helped lower borrowing costs and rebuild investor confidence
- The World Bank’s $350-million credit‑guarantee vehicle, which was expected to unlock up to $10-billion in private infrastructure investment over the next decade, particularly to expand the transmission grid.
“These were important signals,” Chaudhuri notes. “But perception and credibility mattered just as much as policy execution. Markets responded not only to reform, but to how believable and sustained those reforms appeared.”
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, had placed renewed pressure on energy markets, oil prices, shipping routes and global inflation expectations.
For an open economy like South Africa’s, these dynamics have been shown to directly affect 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 on what would ultimately determine whether South Africa could transition from a fragile recovery to sustained, inclusive growth.
Key themes include:
- The urgency of structural reforms over the next 12 to 24 months
- The role of fiscal discipline, infrastructure investment and policy coherence
- How businesses could navigate heightened uncertainty while positioning for opportunity
- Which structural strengths, including a diversified industrial base, strong financial institutions and deep global trade integration, continued to support recovery.
“South Africa’s transition from a fragile recovery to sustained, inclusive growth will ultimately depend on the ability of businesses to keep investing and trading through uncertainty,” says Vally.
“By helping companies protect cash flow and manage counterparty risk, trade credit insurance gives firms the confidence to pursue opportunity rather than retreat from volatility and that confidence will be critical in turning the country’s structural strengths into lasting economic momentum.”