Overview

  • South Africa’s peaceful political transition is known as one of the most remarkable political feats of the past century. The ruling African National Congress (ANC) has been driving the policy agenda since 1994.  In August 2016 the country held the most competitive Local Government Election since 1994 in which the ANC-lost majority support in four of the metropolitan cities. Political parties negotiated coalition deals that saw the ANC unseated in the cities of Johannesburg, Pretoria and Nelson Mandela Bay.

    Due to consistent and sound budgetary policies, South Africa has been able to tap into international bond markets with reasonable sovereign risk spreads. The latest Open Budget Index prepared by the International Budget Partnership ranks South Africa top among the countries surveyed, and South Africa has been committed to fiscal sustainability. Nevertheless, low growth, weak revenue collections, and expenditure pressures have been keeping fiscal deficits higher than forecast. This has resulted in several downgrades of South Africa’s credit rating.

    The South African economy grew at 1.3% in 2017. The World Bank estimates a further acceleration in 2018, to 1.4%. Given population growth, gross domestic product (GDP) per capita growth has been stagnant or low since 2014, leaving little room to reduce poverty. Commodity prices remain important for South Africa, a major importer of raw materials. A strong investment response in light of improved business sentiment in 2018 will be critical to propel growth and create jobs.

    Key Development Challenges

    South Africa has made considerable strides toward improving the wellbeing of its citizens since its transition to democracy in the mid-1990s, but progress is slowing. Based on a poverty line of $1.90 per day at Purchasing Power Parity (PPP), poverty fell from 33.8% in 1996 to 16.9% by 2008. Factors driving this included social safety nets, real income growth, as well as decelerating inflationary pressure on households, the expansion of credit, and growth in formal housing. Yet progress has slowed in recent years due to structural challenges and weak global growth since the global financial crisis of 2008. Poverty was 18.9% in 2015, having increased slightly since 2011. High unemployment remains a key challenge, standing at 26.7% in the last quarter of 2017. The unemployment rate is even higher among youths, close to 50%.

    South Africa remains a dual economy with one of the highest inequality rates in the world, perpetuating both inequality and exclusion. According to Statistics South Africa, the Gini coefficient measuring relative wealth reached 0.65 in 2014 based on expenditure data (excluding taxes), and 0.69 based on income data (including salaries, wages, and social grants). The poorest 20% of the South African population consume less than 3% of total expenditure, while the wealthiest 20% consume 65%.

    The fiscal outlook remains challenging. To counter weak revenue collections and accommodate the government’s 2017 commitment to free higher education, the 2018 budget introduced new revenue measures, including a 1% increase in the value added tax rate. There is a commitment to limit the high wage bill, while public investment will be cut to make room for new expenditure priorities. Overall, public debt is expected to stabilize in the medium term.

    Government Policy Priorities

    The current administration is acutely aware of the immense challenges it needs to overcome them to accelerate progress and build a more inclusive society. Its vision and the priorities it is making to address them are outlined in the 2030 National Development Plan, which comprises the two main strategic goals of eliminating poverty and reducing inequality from 0.69 to 0.60 by 2030.

    To achieve these goals, the National Development Plan (NDP) lists several factors critical for its successful implementation. These include the sort of focused leadership that provides policy consistency; ownership of the plan by all layers 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 in every sphere of government, as well as a common understanding of the roles of business, labor, and civil society.

    Last Updated: Apr 19, 2018

  • Country Partnership Strategy (CPS) for 2014-2017 , was discussed by the World Bank Group (WBG) Board in November 2013 and has been extended for a further year. 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: Apr 19, 2018

  • The South African portfolio has five active projects valued at US$4.1 billion, comprising two IBRD financed projects (US$3.8 B) and three trust-funded projects (US$300m).  The Eskom Investment Support Project (US$3.75 billion) is the largest of the two-lending operation (75% disbursed to-date). 

    The second IBRD project is the Land Bank Loan, which was approved by the Board in January 2017.  The Land Bank project aims to sustainably scale-up the Land Bank's financing in agriculture, especially to benefit emerging farmers.

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

    The Eskom Investment Support Project ($3.75 billion) seeks to enhance South Africa’s power supply and energy security in an efficient and sustainable manner. The synchronization of the first 800 MW generating unit at the Medupi power station has been done successfully and the unit has been connected to the national grid. An additional 100MW from the Sere Wind Farm also came online in December 2014. The project has been restructured and extended to December 2019.

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

    Growth, Jobs and Private Sector Development

    The 10th  edition of the South Africa Economic Update series focusing on innovation for productivity and inclusiveness was launched in September 2017. It found that harnessing South Africa’s untapped potential for innovation could help create jobs and reduce poverty reduction by commercializing better goods and services. It suggests improving the business climate for startups by encouraging skilled immigration, facilitating trade, encouraging competition in ICT, and more effective public support for innovation

    Urban development

    The Urban Reimbursable Advisory Service (RAS) worth $5 million, is now under full implementation, supporting the government's efforts to turn around the apartheid spatial legacy of South African cities and improve spatial efficiencies. There is a multi-global practice work program for metropolitan-level support, with a World Bank (WB) team acting as principal technical advisor to National Treasury (NT) on a range of critical policy areas.  Work is being scaled up with financial support from NT ($5m RAS and likely second phase request) and SECO (additional $9 million BETF signed in September 2015), in addition to a potential engagement with the Ministry for Cooperative Governance and Traditional Affairs, (CoGTA) focusing on secondary and fast-growing cities.

    Service delivery and human capital

    A landmark common treatment protocol for TB in the mining sector was signed in Johannesburg in 2014. This was followed by launch of an ambitious three-year initiative that aims to screen 100% of all mineworkers and communities with the highest concentrations of mining and achieve zero infections of TB by 2018.

    Last Updated: Apr 19, 2018

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

    Last Updated: Apr 19, 2018

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LENDING

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

*Amounts include IBRD and IDA commitments



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Additional Resources

Country Office Contacts

Main Office Contact
Postal Address
P.O. Box 12629
Hatfield, 0028
Pretoria, South Africa
+27 (0)12 742 3100
For general information and inquiries
Zandi Ratshitanga
Sr. Communications Officer
+27 (0)12 742 3100
zratshitanga@worldbank.org
For project-related issues and complaints
southafricaalert@worldbank.org