South Africa Slips to Fourth in Africa’s Economic Ranking Amidst Stagnant Growth

South Africa's position as an African economic leader is waning as it declines to fourth place in RMB's Invest in Africa 2024 report. With Seychelles, Mauritius, and Egypt now ahead, South Africa has relinquished its former stronghold, notably only leading in foreign exchange stability and liquidity. The nation, confronting substantial economic hurdles, trails in GDP growth predictions and faces persistent issues of income inequality and unemployment.

This decline is marked by South Africa's economic growth stagnating over the past decade, registering mere 1% annual GDP growth, effectively causing the standard of living to drop due to a population growth rate of 1.6%. Previously, the country enjoyed the status of Sub-Saharan Africa's most favorably-rated sovereign in terms of foreign debt, a position now occupied by Ivory Coast.

Amidst such fiscal downtrends, Standard Bank Group CEO Sim Tshabalala points out that South Africa is falling behind in the race for economic development and investment attraction. Standard Bank's African revenues exceeded its domestic earnings for the first time in 2023, a stark indication of the South African economy's troubles.

Despite these challenges, change is on the horizon—but it necessitates prompt and solid action from political leaders and investors. RMB emphasizes that a Government of National Unity and renewed investor confidence could spearhead a turnaround for South Africa, albeit a gradual process.

Smart money is already following growth as Standard Bank's operations outside South Africa surged by 49% in headline earnings. Conversely, domestic business growth was tepid, exemplifying the broader malaise. Cementing investor attractiveness in the face of competition from other African nations and emerging markets requires South Africa to implement meaningful fiscal and policy reforms.

South Africa now finds itself in a critical juncture, as it must revitalize investor confidence by demonstrating progression in reform strategies and overcoming systemic challenges. With investment returns in the rest of Africa surpassing those at home, Tshabalala emphasizes the need for competitiveness in attracting the necessary capital for infrastructure and corporate projects, deficit financing, and overall economic growth.