Business sentiment in South Africa has markedly strengthened following the establishment of a Government of National Unity (GNU) in June, according to a report released Monday by PricewaterhouseCoopers (PwC). The GNU, formed through a coalition of ten political parties after an inconclusive general election, appears to have fostered newfound optimism among investors, analysts, and corporate leaders. The economic consultancy asserts that this shift is buoyed by hopes of a more competent and reform-oriented administration, sparking gains across key financial and economic indicators.
Since the GNU’s inception, the Johannesburg Stock Exchange (JSE) All Share Index has surged by 15.2% in the third quarter alone, achieving historic highs driven by anticipation around the economic benefits a stable, multi-party government could bring to both corporate revenues and the overall economy. The South African rand also appreciated notably, nearing the 17 units-per-U.S. dollar threshold last seen in early 2023.
Lullu Krugel, PwC South Africa’s chief economist, remarked on the renewed investor enthusiasm, noting, “The sentiment in global financial markets has been notably more favourable towards South Africa since the formation of the GNU, which has continued to strongly drive economic reforms initiated by the prior administration.” Krugel attributes recent asset appraisals’ upward trajectory to a “growing optimism” about the potential impact of the GNU, asserting that earnings outlooks for businesses predominantly reliant on the South African market have improved “significantly” in recent months.
In the bond market, the yield on government securities declined to its lowest in three years, with PwC’s analysis indicating that both business activity and broader sentiment reflect a resurgence in confidence. Current expectations for short-term business conditions are reportedly at their highest in several years, signalling a positive shift from the prevalent apprehension that has characterised the South African economic landscape amid extended periods of political turbulence and policy inertia.
PwC’s latest South Africa Economic Outlook projects a modest 0.8% real GDP growth for 2024, with the growth rate anticipated to rise to 1.4% by 2025. The report suggests that a sustained economic recovery could narrow the anticipated fiscal deficit, potentially offsetting the anticipated revenue shortfall if improved economic conditions drive stronger-than-expected tax receipts in the 2024/2025 fiscal year.
Further strengthening the economic outlook, the second phase of a government-business partnership was initiated earlier in October. The business community has expressed commitment to collaborating closely with the government in addressing long-standing economic impediments, notably energy supply constraints and logistical inefficiencies. This initiative follows years of debilitating electricity shortages and infrastructure challenges that have weighed heavily on business operations and economic growth potential.
Shirley Machaba, CEO of PwC Southern Africa, voiced the corporate sector’s renewed commitment to supporting the GNU’s reform agenda, saying, “South African CEOs have recommitted to supporting the government in the next phase of our public-private partnership. We will assist the GNU in implementing the reforms needed to accelerate economic and employment growth towards a more prosperous South Africa.”
The PwC report underscores that while economic progress remains fragile and conditional on effective policy implementation, the tentative resurgence in business confidence offers a critical opportunity for South Africa to realign its economic trajectory. Whether this optimism translates into sustained economic improvement will ultimately hinge on the GNU’s ability to implement and maintain meaningful structural reforms that can foster growth, resilience, and investor trust in the longer term.
