Overview

«

»

Context
Strategy
Results
Partners

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 next general elections will be held on May 8, 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 pressure on South Africa’s sovereign credit ratings.
The South African economy grew by 1.3% in 2017 and 0.8% in 2018. The World Bank projects 2019 growth at 1.3%, accelerating further to 1.7% in 2020. Given population growth, gross domestic product (GDP) per capita growth has been close to nil since 2014, leaving little room to reduce poverty. Commodity prices remain important for South Africa, a major exporter of minerals and importer of oil. 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 the international poverty line of US$1.90 per day, (2011 Purchasing Power Parity (PPP), exchange rates), 18.8% of South Africans were poor in 2015, following a decline from 33.8% in 1996. Factors driving this progress include, among others, real income growth, expansion of social safety nets, access to basic services including subsidized housing credit. Yet progress towards poverty reduction has slowed in recent years, with the US$1.90 per day poverty rate increasing from 16.8% to 18.8% between 2011 and 2015. This is partly due to structural challenges and weak growth since the global financial crisis of 2008, but increasingly too by labor market developments that demand skills that the country’s poor currently lack. Unemployment remains a key challenge, standing at 27.1% in the fourth quarter of 2018. The unemployment rate is even higher among youths, at around 54.7%.
South Africa remains a dual economy with one of the highest inequality rates in the world, with a consumption expenditure Gini coefficient of 0.63 in 2015. Inequality has been persistent, having increased from 0.61 in 1996. High inequality is perpetuated by a legacy of exclusion and the nature of economic growth, which is not pro-poor and does not generate sufficient jobs. Inequality in wealth is even higher: the richest 10 percent of the population held around 71% of net wealth in 2015, while the bottom 60 percent held 7% of the net wealth. Furthermore, intergenerational mobility is low meaning inequalities are passed down from generation to generation with little change in inequality over time. Not only does South Africa lag its peers on level of inequality and poverty, it lags on the inclusiveness of consumption growth.

Last Updated: Mar 28, 2019
A 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, based on a Systematic Country Diagnostic, which the WBG developed in broad consultation with South Africans. The diagnostic identifies the following five binding constraints to reducing poverty and boosting shared prosperity 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: Mar 28, 2019
The South Africa portfolio has five active projects valued at $4.1 billion, comprising two International Bank for Reconstruction and Development (IBRD) financed projects ($3.8 billion) and three trust-funded projects ($300m). The Eskom Investment Support Project ($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 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 World Bank Group is supporting a number of technical assistance and advisory services.
The second IBRD project is the Land Bank Financial Intermediation Loan Project ($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 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 ($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.
Education
The 12^th edition of the South Africa Economic Update: Tertiary Education Enrollments Must Rise: shows that enhancing South Africa’s socio-economic inclusion through equitable access to the tertiary education in a tight fiscal environment will require rebalancing financial support to students with comprehensively improving the quality and admission capacity of country’s post school education and training system. It asserts that strengthening the quality of education in Technical Vocation Education and Training, community colleges distant education institutions and historically disadvantaged universities will increase enrollment and expand admission capacity in a sustainable manner.
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: Mar 28, 2019
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: Mar 28, 2019