South Africa’s peaceful political transition was one of the most remarkable political feats of the past century. The African National Congress (ANC) has been driving the policy agenda since 1994. Fifth general elections were held in May 2014, and the ANC won majority of 62% of the vote, governs eight out of nine provinces, and President Zuma was reelected for another term. Local government elections will be held in October 2016.

A sustained record of macroeconomic prudence and a supportive global environment enabled South Africa’s gross domestic product (GDP) to grow at a steady pace for the decade up to the global financial shock of 2008-2009. Improvements in the public budget management system and efforts to restore the macro fundamentals by National Treasury played an essential role.

Due to consistent and sound budgetary policies South Africa has been able to tap into international bond markets with reasonable sovereign risk spreads. The 2012 Open Budget Index prepared by the International Budget Partnership ranked South Africa second among 94 countries surveyed. In 2014 however, South Africa’s ratings have been downgraded by some rating agencies citing poor growth prospects mainly because of labor market instability and rising government debt as well as high deficits on the current account

Pro-poor orientation of public spending has contributed to improved social development indicators in a range of areas. Millennium Development Goals (MDG) on primary education, gender, several health indicators and environmental sustainability are likely to be achieved. Social insurance programs currently cover around 16 million people and, at 3.5% of GDP, are more than twice the median spending among developing economies.

Key Development Challenges

South Africa remains a dual economy with one of the highest inequality rates in the world, perpetuating inequality and exclusion. With an income Gini of around 0.70 in 2008 and consumption Gini of 0.63 in 2009, the top decile of the population accounts for 58% of the country’s income, while the bottom decile accounts for 0.5% and the bottom half less than 8%.

Life expectancy, after falling dramatically from 62 years in 1992 to 53 years in 2010, recovered to 62 years in 2014. The recent recovery was in large part due to the rapid expansion of the antiretroviral treatment programs to fight HIV/AIDS. And it is supported by declines in both adult and infant mortality. The poor are particularly vulnerable, and high HIV and AIDS infection rates, as well as TB infections, have severely strained the health system, contributing to the poor health indicators

Recent Economic DevelopmentsSouth Africa’s growth is stuck in low gear with real GDP growth estimated at 2.0% and the same for 2016 due to a combination of domestic constrains and external headwinds arising from the fall in commodity prices and slowdown of the Chinese economy.  The weak growth performance has exacerbated already high unemployment, inequality, and macro vulnerabilities. However, a slight recovery is expected in 2017 with real GDP growth estimated at 2.4% as new electricity supply comes on line.

The weak economic outlook has made the fiscal outlook more challenging. The Government announced an adjustment package of expenditure savings (0.6% of GDP) and tax measures (0.6% of GDP) to reduce the budget deficit from 4.0% of GDP in 2014/15 to 2.5% of GDP in 2017/18 and stabilize the gross debt burden at about 50% of GDP, helping minimize pressures on the sovereign rating.

Government Policy Priorities

The current administration is acutely aware of the immense challenges to accelerate progress and build a more inclusive society. Its vision and priorities to address them are outlined in the 2030 National Development Plan (NDP) which outlines two main strategic goals to double the GDP by 2030 and eliminate poverty, and reduce inequality, as measured by the income Gini coefficient, from 0.70 to 0.60.

To achieve these, the NDP lists several critical factors for its successful implementation; focused leadership that provides policy consistency; ownership of the plan by all formations of society, strong institutional capacity at technical and managerial levels, efficiency in all areas of government spending including management of the public service wage bill and making resources available for other priorities, and prioritization and clarity on levels of responsibility and accountability at every sphere of government as well as a common understanding of the roles of business, labor and civil society.

Last Updated: Oct 06, 2015

A Country Partnership Strategy (CPS) for 2013-2016, was discussed by the World Bank Group (WBG) Board in November 2013. The CPS is demand-driven and centered on knowledge and technical cooperation as well as support to the implementation of the ongoing lending program in energy and the environment.

The CPS is anchored to the government’s National Development Plan. It primarily focus on the three I’s: reducing inequality, which responds to priorities in improving access and quality of public service delivery at the national level as well as in smaller cities and townships; promoting investments, refers to the large infrastructure deficit in the country, and ambitious plans to meet this demand through both public and private investments and; strengthening institutions, responds bolstering financial risk management through improving the capacity of public institutions.

Last Updated: Oct 06, 2015

Improving energy security and greening South Africa’s energy mix and preserving the country’s biodiversity

The $3.75 billion Eskom Investment Support Project (EISP) seeks to enhance South Africa’s power supply and energy security in an efficient and sustainable manner. The project has three components: $3.05 billion for completing the 4,800 megawatt Medupi coal-fired power station using proven, efficient supercritical technology; $260 million for piloting a utility-scale 100 megawatt wind power project in Sere and a 100 megawatt concentrated solar power project with storage in Uppington. These wind and solar investments are also being supported by $350 million in financing from the Clean Technology Fund under the proposed Eskom Renewable Support Project ($250 million to be channeled through the World Bank Group (WBG) and $100 million though the African Development Bank). Funding comes from the Agence Française de Dévelopment (AFD), European Investment Bank (EIB), and the Kreditanstalt für Wiederaufbau (KfW), with Eskom making up the balance of the total cost of $1.55bn.

In addition, the EISP include a $485 million allocation for low-carbon energy efficiency components, including a railway to transport coal to reduce greenhouse gas emissions. The construction of Medupi power station is behind schedule by about four years. The first generating unit six is in full n commercial operations since mid-2015, injecting 800MW into the national grid. . The Sere Wind Farm is  is now generating electricity at its full capacity of 100MW since January 2015.

To sustain these investments the WBG is supporting a number of technical assistance activities and advisory services. ,

Growth, Jobs and Private Sector Development

The 7th South Africa Economic Update with a focus on jobs and the country’s changing demographics was launched in August 2015. The report pointed out thatSouth Africa could double its per capita income and eliminate extreme poverty by 2030 by generating jobs for its high and growing number of young workers. It found that some 5.8 million jobs would have to be created over the next 15 years to absorb the new working age entrants and lower the unemployment rate by three quarters. This together with improved labor productivity and better educational attainment would increase real GDP growth to 5.4% per year by 2030.

Urban development

The Urban Reimbursable Advisory Service (RAS) worth $5 million is now under full implementation, supporting Government's efforts to turn around the apartheid spatial legacy of SA cities and improve spatial efficiencies.

The WBG also supports the government’s efforts to better understand how the townships and informal settlements and their populations are situated in the overall economy and linkages to the non-township economy in urban and rural areas.

Service delivery and human capital

A landmark common treatment protocol for TB in the mining sector signed in Johannesburg in 2014, at the Regional Ministerial Meeting on Harmonizing the Response to TB in the Mining Sector with the active support and intermediation of the WBG. The forum was convened by the Government of South Africa and sponsored by the WBG, the Stop TB Partnership, and the Global Fund to Fight AIDS, Tuberculosis and Malaria. For the first time in history, four countries (South Africa, Lesotho, Mozambique, and Swaziland) signed such common protocol. Four other countries (Malawi, Namibia, Zambia, and Zimbabwe) signed intent to conduct preparatory works. The WBG is working closely with the countries to support implementation of the protocol and supporting countries that signed intent with country level preparatory work. 

Last Updated: Oct 06, 2015

Partners include specialized agencies of the United Nations system, the African Development Bank (AfDB), the Department for International Development (DfID).

Last Updated: Oct 06, 2015


South Africa: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments