PwC and Strategy&: New GNU government has bolstered business confidence
The formation of South Africa's Government of National Unity (GNU) following its recent elections has bolstered business confidence and provided a positive outlook for the country's economy, according to an economic report from PwC and Strategy&.
The GNU, composed of ten political parties, was established in June 2024 to address South Africa’s critical political and economic challenges after the elections yielded no outright majority. This coalition government has sparked optimism among investors, citizens, and corporate leaders, with PwC and Strategy& (its strategy consulting subsidiary) noting significant gains across various economic indicators.
One prominent measure of this optimism is seen in the Johannesburg Stock Exchange (JSE) All Share Index, which rose by 15.2% in the third quarter, hitting new record highs. This gain reflects the confidence of both domestic and international investors in the GNU's potential to implement necessary economic reforms and promote a stable business environment.
The South African rand has also strengthened, trading near R17 per U.S. dollar by late September, a level last seen in early 2023. This currency appreciation further illustrates renewed trust in South Africa's economic management and growth prospects.
The PwC and Strategy& report further highlights how the improved sentiment in global financial markets has had a tangible impact. Lower government bond yields, now at their lowest point in three years, suggest that both local and international investors perceive South Africa as a safer, more stable investment destination. Domestic business sentiment and expectations for near-term economic conditions are also at multi-year highs, signaling a broader optimism about South Africa’s future under this multi-party government.
Lullu Krugel, Chief Economist of PwC in South Africa, stated: “The sentiment in financial markets has been notably more favourable towards South Africa since the formation of the GNU which has continued to strongly drive economic reforms set in motion by the previous administration. Appraisals for the rand, government bonds and local equities have shown positive momentum in recent months on the back of growing optimism of what the multi-party government could mean for the economy.”
South Africa’s current business climate is also benefiting from strengthened partnerships between the government and the private sector. In early October, the second phase of a government-business collaboration was launched, with South African businesses committing to aid the GNU in addressing long-standing challenges like power shortages and inefficient logistics.
Economic projections from PwC and Strategy& estimate a 0.8% real GDP growth rate for 2024 and a more optimistic 1.4% growth for 2025. If the economic reforms continue as planned, the researchers anticipate a reduction in the expected tax revenue shortfall for the 2024-2025 fiscal year, driven by potentially stronger tax inflows.
The partnership between business and government is seen as a critical factor for South Africa’s recovery, particularly as efforts to resolve electricity load-shedding, transportation inefficiencies, and crime begin to bear fruit. “South African CEOs have recommitted to supporting the government in the next phase of public-private partnerships,” said Shirley Machaba, CEO of PwC Southern Africa.
The report also explores industry-specific insights for sectors such as manufacturing, which has recently seen a 9.3% year-on-year turnover increase, partly due to stronger automotive sales. South Africa’s mining industry, central to its economy, is also witnessing increased merger and acquisition activity, largely driven by demand for strategic minerals like copper, essential to the global green transition.
PwC and Strategy& suggest that continued foreign and local investment, coupled with efforts to promote sustainable practices, could further enhance growth and job creation in these sectors.
