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. The country plans to hold its next general election in May 2019.

    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 forecasted. This has resulted in several downgrades of South Africa’s credit rating.

    The South African economy grew by 1.3% in 2017. The World Bank estimates 2018 growth at 1%, picking up to 1.3% in 2019. 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. Strengthening investment, including foreign direct investment, 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 and free access to basic services, real income growth, as well as decelerating inflationary pressure on households, the expansion of credit, and growth in publicly-provided 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 increased slightly, estimated at 19% in 2018. High unemployment remains a key challenge, standing at 27.2% in the second quarter of 2018. The unemployment rate is even higher among youths, at around 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%.

    Last Updated: Oct 31, 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.

    The WBG is currently preparing its next Country Partnership Framework. In preparation, the WBG prepared a Systematic Country Diagnostic, in broad consultation with South Africans. The five binding constraints to reducing poverty (the focus of the next Country Partnership Framework) are: (i) insufficient skills; (ii) the skewed distribution of land and productive assets, and weak property rights; (iii) low competition and low integration in regional and global value chains; (iv) limited or expensive connectivity and underserviced historically disadvantaged settlements, and (v) climate change: transition to the low-carbon economy and water insecurity.

    Last Updated: Oct 31, 2018

  • The South African portfolio has five active projects valued at US$4.1 billion, comprising two International Bank for Reconstruction and Development (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). 

    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.

    The second IBRD project is the Land Bank Financial Intermediation Loan Project (US$93 million), which was approved by the World Bank Board of Executive Directors in January 2017. The Land Bank project aims to sustainably scale-up the Land Bank's financing in agriculture, especially to benefit emerging farmers. The project is a Line of Credit to support Land Bank in refocusing its operations on wholesale lending for agriculture financing through intermediaries. The project also supports Land Bank’s new approach to help integrate emerging farmers into established value chains. The disbursements under the project started in June 2018.

    Urban development

    A second Urban Reimbursable Advisory Service (RAS) Agreement worth $11.25 million was signed with SA National Treasury on September 6, 2018. The new RAS supports government efforts aimed at turning around the apartheid spatial legacy of South African cities and improving spatial efficiencies. The above 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. The above complements the ongoing financial support from SECO (additional $9 million BETF signed in September 2015), in addition to a parallel engagement with the Ministry for Cooperative Governance and Traditional Affairs (US$2.2 million BETF), focusing on secondary and fast-growing cities. The SECO BETF is 70% disbursed and will be completed ahead of the BETF closing date of 2020.

    Jobs and Inequality

    The 11th edition of the South Africa Economic Update: Focus on Jobs and Inequality, assesses the potential impact of a combination of various policy interventions on jobs, poverty, and inequality. This report presents a scenario in which the number of the poor could be reduced by more half, dropping to 4.1 million by 2030 from 10.5 million in 2017. In addition, the Gini index of inequality would reduce to 56 in 2030 from 63 in 2017 and 800 thousand jobs could be created with the economy increasing at an annual rate of 2.2% as a result of these interventions.

    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: Oct 31, 2018

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

    Last Updated: Oct 31, 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