2025: South Africa’s Defining Moment

Two weeks after President Cyril Ramaphosa delivered the State of the Nation Address (SONA), and the 2025 Budget that is being presented by the Minister of Finance today, South Africa finds itself at a critical juncture – one where political stability, economic growth, and global leadership are all at stake.

The Government of National Unity (GNU) will complete its first full year in July, amid a persistent set of myriad socioeconomic challenges facing the country. The country’s SOEs, which the African National Congress (ANC) insists must play a developmental role, continue to struggle, have difficulty accessing capital markets without government guarantees and are forever in need of bailouts to service debt and fund turnaround plans. National Treasury simply no longer has the money to bail these SOEs out.

Burgeoning public expenditure pressures, including the increasing social grant burden on the national fiscus at R387bn in 2024/25, in addition to the very high debt-to-GDP ratio of 75% and debt-servicing costs of R382bn in the current fiscal year, all point to the challenging moment the country finds itself in.

Following a decisive 2024 election, in which the hitherto governing ANC lost its electoral majority, the GNU was formed, bringing together former political rivals in an attempt to provide much needed checks and balances at governance level. While markets and some sections of the population praised the GNU formation, latent tensions among the key partners, the ANC and the DA, immediately became manifest and, in some instances, escalated over contentious policies such as the NHI, BELA, foreign policy and now the Expropriation Act.

For its part, the ANC-led tripartite alliance, with the SACP, COSATU and civil society formation SANCO, remains divided over the GNU’s ideological direction. The SACP, in the main, remains opposed to the GNU, while COSATU and SANCO have reservations about some of its aspects. The SACP is charging that, by entering into a coalition with remnants of erstwhile oppressors, the DA and FF+, the ANC has weakened its ideological positioning, leading to a dilution of its historical revolutionary focus.

The DA also seems to be at odds with itself. For instance, the party’s Ministers in government have backed the BELA and Expropriation Acts, while the party is taking government to court over the same laws. The duplicity of the DA may see the leadership of John Steenhuisen at risk and at odds with Federal Council Chair Hellen Zille. While, the DA has stated that it will not leave the GNU, even though it is unhappy with the way some things are unfolding, its supporters may grow disillusioned with the party seemingly unable to influence government policies as it had initially thought.

Despite the unhappiness, it is logical for the DA to remain in the GNU, lest the ANC enters into a coalition with either the EFF or MKP, or both. The party will be hoping that some of its electoral promises form part of the soon to be adopted Medium-Term Development Plan (MTDP) – formerly the Medium-Term Strategic Framework (MTSF) and that its Ministers are put in charge of executing them.

• Ending Loadshedding, after over a decade of rolling blackouts, South Africa has managed to sort of stabilise its energy supply, this success is largely attributed to the country’s Energy Action Plan, specifically Eskom’s Generation Recovery Plan, implemented since March 2023, which has improved the performance of the utility’s coal-fired fleet, reduced unplanned outages and enhanced operational efficiency. Despite progress in stabilising electricity supply, Eskom still faces a major debt challenge (about R412.2bn), tariff shortfalls, winter energy risks (potential higher stages of loadshedding), and corruption-related inefficiencies.  For its part, the Energy Action Plan advances market reforms, private investment (22GW projects), and transmission restructuring.
• The collapse of South Africa’s rail and port infrastructure has significantly impacted exports and economic productivity. However, the government, through the National Logistics Crisis Committee (NLCC), has been implementing key interventions to stabilise and improve operations. South Africa’s Freight Logistics Roadmap and R47 billion Transnet guarantee are driving port efficiency (73% fewer anchored vessels, 36% reduced wait times), rail recovery (10Mt freight restored, 65% fewer security incidents), and governance reforms (28 PRASA rail lines revived), but logistics inefficiencies still cost R1 billion daily, requiring sustained private-sector investment and structural improvements.
• The GNU’s budget deficit reduction and municipal finance stabilisation efforts align with the MTDP 2024-2029, but GDP growth is projected at only 1.7% in 2025, below the 3% target needed for job creation, necessitating fiscal reforms, debt restructuring, and investment-friendly policies.

One of the biggest opportunities for South Africa in 2025 is its presidency of the G20, the first time an African country has been given this responsibility. South Africa’s G20 Presidency (Dec 2024 – Nov 2025) is focused on promoting climate finance, economic justice, and trade reforms for Africa and the Global South, with key initiatives like the “Road to Johannesburg Campaign” for renewable energy, multilateral financial reforms, and AfCFTA trade expansion, ensuring tangible progress before the U.S. takes over as the next G20 President. This milestone comes at a time of geopolitical flux, amplifying questions about Pretoria’s ability to navigate global fault lines, particularly with the return of U.S. President Donald Trump.

South Africa’s AGOA participation is uncertain under President Trump’s administration, despite former President Joe Biden’s 2024 extension. A February 2025 Executive Order has halted U.S. aid to South Africa, citing confiscation of land belonging to white people and BRICS+ ties, while Republican lawmakers push to revoke AGOA eligibility. If AGOA is revoked, key industries (automotive, agriculture, and manufacturing) risk billions in losses, forcing South Africa to strengthen intra-Africa trade, through the AfCFTA, and accelerate trade with the BRICS+ bloc and the European Union. The South African government has reaffirmed its commitment to diplomacy, with Minister of International Relations Ronald Lamola stating that engagements with the Trump administration will be pursued to prevent further economic fallout. However, Lamola is also facing challenges as he has reported that the U.S. has not been responding to attempts to discuss Trump’s Executive Order. With the Trump administration taking a more protectionist stance, South Africa must navigate both trade and foreign policy challenges carefully to mitigate economic risks and maintain its access to key export markets.

Additionally, the government faces the same challenge it did in 2022, in which ministers make bold claims before the government has taken a definitive decision on an issue. In 2022, this was seen when former Minister of International Relations Naledi Pandor initially condemned Russia’s invasion of Ukraine, before South Africa took on a non-aligned stance. This year, Minerals Minister Gwede Mantashe made the claim that South Africa should withhold minerals from the U.S. over their aid freeze, which has the potential to escalate an already volatile situation. Such statements have the potential to further strain relations with partners, especially since we have learned that President Trump does not necessarily base his decisions on factual evidence, but rather on what makes the loudest noise in the media.

• Political Uncertainty within the GNU – Tensions among coalition partners remain a significant threat. Ideological differences between the ANC, DA, and other smaller parties over policies like land reform, economic regulation, and foreign policy could lead to instability, policy paralysis, or even a coalition collapse before 2026.
• The cost of living crisis – South Africa is currently grappling with a severe cost of living crisis, driven by a combination of economic, political, and global factors. Rising prices for basic goods and services, coupled with stagnant wages and high unemployment, have put immense pressure on households, particularly those in lower-income brackets. The expected personal income tax and VAT increases in the Budget this afternoon will certainly further compound this crisis, driving South Africans deeper into economic quagmire.
• Youth Unemployment and Slow Job Creation – Despite government interventions, youth unemployment remains alarmingly high at 42.6%. Economic growth projections (1.7% in 2025, below the required 3%) indicate that South Africa is not creating enough jobs to absorb new labour market entrants, exacerbating social and economic inequality.
• State-Owned Enterprises (SOE) and Governance Risks – While Eskom and Transnet reforms show some progress, inefficiencies, debt burdens, and corruption concerns continue to weaken investor confidence. Transnet inefficiencies cost the economy R1 billion daily, requiring urgent private-sector partnerships.
• Policy Inconsistencies and Investor Confidence – Repeated instances of ministers making bold statements before official policy decisions create uncertainty. This was seen with Minerals Minister Gwede Mantashe’s call to halt mineral exports to the U.S., a stance not officially adopted but one that heightened tensions in a fragile trade environment.
• Global Economic and Trade Risks – The Trump administration’s protectionist policies and uncertainty around AGOA renewal put key South African exports (automobiles, agriculture, and manufacturing) at risk. Additionally, global economic slowdowns, interest rate hikes, and currency fluctuations could impact foreign investment and trade stability.
• Foreign Policy and Diplomatic Strains – South Africa’s non-aligned stance on the Russia-Ukraine conflict, siding with Palestine on the Israeli-Palestinian conflict and holding close ties with BRICS+ have strained relations with Western allies, particularly the U.S. This has led to uncertainties in trade agreements and potential economic consequences, requiring careful diplomatic balancing.