The International Monetary Fund (IMF) has again urged South Africa to implement its economic reforms “ambitiously”, while arguing for priority to be given to reforms in the electricity and logistics sectors that pose binding constraints to higher growth.

An IMF staff mission visited South Africa from November 11 to 25 for the 2024 Article IV annual consultation, and a report was published on November 26 that included an IMF growth forecast of 1.1% for this year and 1.5% for 2025.

The 2024 outlook is in line with the National Treasury’s own forecast, while the 2025 outlook is slightly below the 1.7% outlined in the Medium-Term Budget Policy Statement.

The IMF describes the Government of National Unity (GNU) as an opportunity to place South Africa’s economy on a path toward higher and more inclusive growth on the back of ongoing reforms to safeguard macroeconomic stability and address impediments to growth.

The mission welcomed the reform progress made under ‘Operation Vulindlela’, which has been retained by the GNU,  to address sectoral bottlenecks in electricity, freight logistics, digital communications and visa management, while encouraging the implementation of additional reforms.

South Africa, it said,  should continue to develop a competitive wholesale electricity market, establish a fully independent transmission system operator, and put in place regulatory frameworks for transmission and distribution.

“Expanding the transmission network is essential to allow connecting new renewable energy capacity to the grid.

“Private-sector participation in transmission can be facilitated by advancing with planned Independent Power Transmission projects, streamlining the regulatory framework, and exploring innovative financing options to de-risk investments.”

The statement also calls for an acceleration of reforms aimed at attracting private-sector participation in freight rail and ports, including by establishing fully independent transport and ports regulators, finalising the legal framework for a competitive rail sector, and ensuring competitive and transparent concession processes.

The IMF also pointed to the need for ongoing reforms in the areas of water infrastructure and to digitalise the payments system and public services.

Also highlighted were opportunities to streamline business procedures and regulations to support small and medium-sized entities, improve governance processes and tackle labour market “rigidities”.

In response, the National Treasury said that priority would be given to continued restructuring of Eskom and to establishing a competitive energy market with adequate supply for a growing economy.

It also agreed that transport reforms that opened the freight rail network to private operators would reduce inefficiencies and costs, while highlighting the progress made in rolling out 5G infrastructure to lower data costs and expanding connectivity.

The National Treasury also noted the visa reforms implemented by the Department of Home Affairs to attract skills and boost tourism, including an eVisa system for 34 countries, a trusted employer scheme and revised immigration regulations from May 2024.

Water sector reforms being prioritised by Operation Vulindlela, meanwhile, included independent regulation, the strengthening of local water services by licensing water service providers, legal proceedings on non-compliance by municipalities and trading services reforms.

“The National Water Resources Infrastructure Agency Bill, signed on 27 August 2024, creates an independent agency to oversee bulk water resources.

“The Water Services Amendment Bill, allowing for intervention in failing municipalities, has received public comment and will soon be submitted to Cabinet for approval.”