South Africa’s reforms show progress but fall short of growth target, Moody’s says

South Africa’s gradual structural reforms are helping to revive parts of the economy, but remain insufficient to lift growth to the government’s 3.5% target, according to Moody’s Ratings.

Africa’s most industrialised nation has struggled with economic stagnation for more than a decade, expanding by less than 1% annually amid decaying infrastructure, power shortages, logistics bottlenecks, crime, and corruption, Bloomberg reported.

The coalition government formed after the African National Congress lost its parliamentary majority in last year’s elections has prioritised reforms aimed at driving growth to as much as 3.5% by 2030.

“We don’t see in our baseline that the current reform progress to date — and our expectation of how reforms will progress — will be sufficient to raise economic potential beyond 2%,” Evan Wohlmann, Vice President – Senior Credit Officer at Moody’s, said in an online briefing on Tuesday.

A study by Investec Wealth & Investment International found that South Africa’s economy is at least 37% smaller than it would have been had it tracked its emerging-market peers and maintained annual growth of 4.5% since 2010.

Moody’s forecasts growth of 1% this year and 1.6% in 2026. The slow recovery is expected to weigh on the government’s fiscal management efforts, Wohlmann said.