South Africa

South Africa sits at the southern tip of Africa, sharing borders with Namibia, Botswana, Zimbabwe, Mozambique, and Eswatini, while completely surrounding Lesotho. The country’s population was estimated at 63 million in 2025 (women 51%, men 49%). Youths (ages 15-34) number around 20.8 million. South Africa recognizes 12 official languages, including English, Afrikaans, isiZulu, isiXhosa, and South African Sign Language.

Since transition to democracy in the mid-1990s, notable social advances have been achieved. The poverty rate declined from 58% to 49% between 2006 and 2011, stagnated in the early 2010s, then dropped again from 46.7% in 2015 to 37.9% in 2023. Inequality also decreased during this period.

South Africa continues to face infrastructure gaps and service delivery challenges which weigh on living standards and investor confidence. Crime remains elevated, affecting social cohesion and economic activity.

At the same time, reforms are advancing. The government is working to support growth through Operation Vulindlela, a joint initiative of the National Treasury and the Presidency to accelerate structural reforms in key sectors such as energy, logistics, and telecommunications. These efforts have contributed to easing electricity shortages and strengthening priority sectors, with backing from the World Bank Group.

In the May 2024 national elections, no single party won a majority, leading to the formation of a Government of National Unity (GNU) under President Cyril Ramaphosa. The GNU has committed to rebuilding South Africa’s economy through faster growth, better services, and more jobs, signalling a new phase in the country’s political and economic direction. South Africa is expected to hold local elections between November 2026 and February 2027. Key campaign issues are likely to include municipal service delivery failures (e.g., water, electricity), governance and financial crises in municipalities, crime, unemployment, and deteriorating local infrastructure.

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South Africa is the second-largest economy in Africa and home to one of the continent’s most diversified production bases, spanning mining, agriculture, manufacturing, and services, including a well-developed and deep financial sector and strong tourism potential. It is also the region’s leading transport and logistics hub, a major outward investor, and home to some of the largest firms in Africa. At the same time, South Africa remains a dual economy, characterized by low growth, high inequality, and insufficient job creation.

Economic growth picked up modestly in 2025 and is expected to strengthen further in 2026, but remains too weak to materially improve jobs and poverty outcomes. Income per capita remains below 2007 levels, and close to 60% of South Africans are estimated to live below the upper-middle-income poverty line. Unemployment remained above 30% in 2025, averaging 32.4% and affecting more than 8 million people. Inflation eased to 3.2% in 2025, from 4.4% the year before. Fiscal pressures are beginning to ease, supported by strong revenue collection in 2025 and the expiration of Eskom’s debt relief at the end of the fiscal year, though a small residual payment is still scheduled for 2028/29. Improved electricity availability has supported the recovery, but persistent bottlenecks in logistics, water, and other network services continue to weigh on investment, productivity, and living standards.

Growth is expected to strengthen gradually over the medium term, supported by improved electricity supply, easing inflation, and continued reform efforts. Faster and more inclusive growth will depend on sustained progress in improving service delivery, crowding in private investment, and raising productivity and employment.

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Over the past decade, South Africa’s economy has grown by just 0.7% per year, much slower than other middle-income countries, leaving real GDP per capita below 2007 levels. Inequality remains among the highest in the world, despite some progress. About 40% of working-age population, mainly youth and women, are unemployed or discouraged, giving the country one of the highest jobless rates in the world.

Still, South Africa has a chance to revitalize its economy. Policymakers recognize that restoring growth is vital to rebuilding public trust. A World Bank study offers analysis and practical steps to overcome barriers to inclusive growth and pave the way for a brighter future. The report  Driving Inclusive Growth in South Africa: Quick Wins with Competitive Markets and Efficient Institutions  outlines a roadmap for job creation and poverty reduction, focusing on four priority areas:

1. Improve efficiency of public spending by coordinating social programs, expanding e-procurement, and redirecting funds to high-impact job-creating investments.

2. Deliver affordable, high-quality infrastructure by opening energy and transport logistics to private operators, linking transport financing to performance, and prioritizing climate-resilient projects.

3. Unlock cities as growth engines through integrated urban planning, better public transport, and interventions connecting residents to jobs, markets, and services.

4. Boost private sector growth by simplifying investment incentives, enabling mobile payments for the unbanked, and fostering competition across key sectors.

The report stresses that inclusive growth does not require more money or regulations but more efficient institutions, competitive markets, and practical, feasible reforms. Quick wins in these areas can deliver visible results, build trust, and lay the foundation for lasting change.

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The current World Bank Group (WBG) Country Partnership Framework (CPF) for South Africa will expire in June 2026. It was built upon previous strategies to support South Africa’s post-apartheid socioeconomic transition. Aligned with the National Development Plan for a more inclusive and resilient economy, the CPF focused support on: (i) fostering competition and a better business environment, and strengthening micro, small, and medium enterprises to drive job creation; (ii) increasing resilience to climate and health shocks; and (iii) improving the infrastructure investment framework and selected services. These were complemented by cross-cutting themes of harnessing the digital economy, empowering women and girls, strengthening public sector institutions and governance, and promoting regional and continental integration.

The WBG’s support emphasizes mobilizing private sector investment through the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA). Differing from past approaches, the government signalled in FY21 its intent to expand use of International Bank for Reconstruction and Development (IBRD) financing under the CPF. Consequently, IBRD lending commitments to South Africa reached $3.22 billion in FY26. Development financing in South Africa has also been shifting: while initially centered on analytics, technical assistance, and development policy loans, it is now expanding to include new investment projects and program-for-results initiatives.

The WBG Guarantee Platform, has an active exposure of $651 million in South Africa, ranking it the 5th largest host country in MIGA’s portfolio within Africa and highlighting the country’s strategic importance. This exposure spans the energy, agribusiness, and financial sectors. Products available under the Platform include Transfer Restriction, Expropriation, War and Civil Disturbance, and Breach of Contract, alongside Credit Enhancement solutions and Trade Finance guarantees.

Partners

Partners include the International Monetary Fund (IMF), United Nations, African Development Bank (AfDB), Development Bank of Southern Africa, New Development Bank, United Kingdom’s Department for International Development (DfID), Kfw Development Bank, and the State Secretariat for Economic Affairs of Switzerland (SECO).

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The World Bank Group is supporting the establishment of a Credit Guarantee Vehicle through the South Africa Blended Finance Platform for Resilient Infrastructure Program. The initiative includes $350 million to capitalize the facility, which will issue credit guarantees to reduce investor risk and mobilize an expected $10 billion in private capital for infrastructure in electricity, water, and transport.

The World Bank is backing South Africa’s Metro Trading Services Program (MTSP), an initiative which includes a $925 million World Bank loan to strengthen the performance and financial sustainability of services in eight large municipalities.

The Infrastructure Modernization Development Policy Loan is enhancing infrastructure efficiency and sustainability, supporting inclusive growth and job creation. The $1.5 billion operation builds on the COVID-19 Response Development Policy Loan and the Sustainable and Low-Carbon Energy Transition Development Policy Loan. Results from the latter include a reduction in nationwide power cuts, with Eskom's Energy Availability Factor rising from 55% in 2023 to 63% in 2024.

The $150 million Wildlife Conservation Bond demonstrates how private capital can support conservation and promote employment. With support from the Global Environment Facility (GEF), the Bond has supported over 2,600 beneficiaries and increased rhino populations by nearly 8%, surpassing the 4% target.

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