Africa-Press – South-Africa. South Africa’s economic trajectory under the ANC has significantly worsened over the past 15 years, with growth averaging 1.1% per year since 2010.
However, the decade prior to that saw economic growth average 3.6%, which marked a notable recovery from the three-year recession before 1994.
This rise and fall trajectory has shown that the South African economy, with the right policies in place, can grow quickly and absorb hundreds of thousands of workers.
Coronation’s economics unit said democratic South Africa’s history offers valuable lessons about what drives economic growth.
It explained that economies can only really grow in three ways – adding to its capital stock, productively absorbing more people into the labour market, and combining the existing capital and labour resources in more productive ways.
This productivity growth enables an economy to grow at a pace greater than its limited labour and capital resources would otherwise accommodate.
Productivity growth is particularly important for an economy, as it is self-reinforcing and creates a positive flywheel that drives faster growth over the long run.
South Africa has not been on the receiving end of such a virtuous cycle in the past decade, which has been characterised by steadily declining economic growth and increased financial pressure on households and the state.
This was not always the case, with the ANC-led government in 1994 doing a remarkable job in stabilising South Africa’s economy and getting it to grow again.
Prior to 1994, South Africa suffered a three-year recession, with the country suffering from extreme financial instability and declining living standards.
From 1995 to 2000, the ANC-led government managed to drive South Africa’s economy to achieve an annual growth rate of 2.6%. While small, it marked a substantial improvement from the prior five-year period.
South Africa’s economic growth picked up strongly from 2000 onwards, as the government avoided bankruptcy, halted the decline of the rand, and made it easier to do business by reducing regulation on the private sector.
As a result, from 2000 to 2009, South Africa’s economic growth averaged an annual rate of 3.6% and peaked at over 5% between 2005 and 2007.
“The economy took off. It took a couple of years to gain momentum, but then it did really well. In 2008, South Africa’s ten-year average annual growth rate was 4%,” Stanlib chief economist Kevin Lings said.
“We have achieved it. It is not impossible. We have hit 4% GDP growth, and the economy has created more than 500,000 jobs a year, with government debt being reduced to 26% of GDP.”
Hero to zero
Things changed drastically after 2008, with a new ANC administration coming into power that pushed up government spending excessively and enabled widespread corruption to destroy billions in tax revenue.
This marked the end of South Africa’s decade-long virtuous cycle, where productivity growth created a self-reinforcing feedback loop.
Economic growth slowed sharply, partly as a result of the Global Financial Crisis, and it never recovered as the era of State Capture and financial mismanagement of the state’s resources continued.
Coronation noted that economic growth slowed to an average annual rate of just 0.7% in the decade from 2015 to 2025.
Outside of periods of extreme uncertainty in South Africa, such as 1990 to 1994 and the Covid-19 pandemic, this is the weakest period of growth since 1945.
In per capita terms, real GDP peaked in 2013 and has been falling ever since. This means South Africans have been getting poorer, on average, for more than a decade.
Coronation’s economics unit explained this decline in economic growth as a function of declining productivity from South Africa’s labour force.
A large part of this is simply due to the share of unemployed South Africans, who do not contribute to economic activity as strongly as those with jobs, rising significantly since 2010.
It said that from 2008, the labour component of economic growth shrunk rapidly and productivity growth effectively collapsed.
After 2010, productivity across key sectors fell sharply as capacity collapsed and state-owned enterprises absorbed billions in capital without increasing their output.
For example, Eskom’s capital stock doubled between 2010 and 2019, yet electricity production plummeted, resulting in severe load-shedding.
Mining and construction also lost efficiency as energy and logistics constraints deepened, with the economy pivoting towards less productive sectors, such as public administration and community services.
The graph below, courtesy of Coronation, shows the various factors that contributed to South Africa’s rising economic growth in the 2000s and its plunge in the 2010s and 2020s.
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