Economic research institution the Impumelelo Economic Growth Lab, at the Bureau for Economic Research (BER), launched a new barometer on March 11 that assesses whether structural reforms are translating into measurable improvements in South Africa’s economic performance.

The barometer shows that progress remains slow and uneven. Between 2024 and 2025, the real GDP growth rate doubled from 0.5% to 1.1%; however, the recovery was largely owing to strong household consumption, which had risen for seven consecutive quarters by the fourth quarter of 2025.

Fixed investment improved for a second consecutive quarter following a bleak streak since mid-2023, and expanded 1.3% quarter-on-quarter, after a 1.4% rise in the third quarter of 2025.

However, on the production side, the latest figures show that manufacturing, mining and electricity production are still dragging on growth, which underscores the need for reform.

“There has been some progress, particularly in reforming regulatory and legal frameworks. However, emerging issues, such as the slow pace of water-sector reform and ongoing municipal financial distress, expose the gap between policy design and operational outcomes,” the report says.

The Reform Barometer shows that progress on reforms in electricity is positive, but that risks are emerging.

The initially-marginal addition to the energy mix from private generation is now becoming a structural shift in electricity supply. Project pipeline data shows that a significant share of capacity is already operational, with further projects at financial close or under construction and relatively few stalled.

With a strong pipeline and improving execution, this year is expected to be a record year for grid-connected solar, wind and battery storage projects, with momentum likely to continue through 2027 and 2028 alongside ongoing growth in rooftop solar installations, the report says.

However, State-owned Eskom is currently facing challenges owing to a decline in grid demand and the implementation of high tariff increases aimed at recovering lost revenue.

Recent judicial rulings have criticised the utility for obstructing customer self-generation, and heightening scrutiny of its role in the rapidly changing electricity market, says Impumelelo Labs.

“The critical question is whether the current pricing structures and reform measures will lead to lower electricity costs, more efficient grid utilisation and sustained investor confidence in the sector.”

The unbundling of Eskom is more than just a structural reform; it is a test of policy credibility and implementation, the report states.

Further, the barometer similarly shows that the progress of reforms around logistics are positive, but uneven.

State-owned Transnet’s recovery gained momentum in 2025, with stronger rail and port performance lifting trade volumes. Container throughput rose by 3.2% year-on-year, bulk cargo increased by 4.4% and vehicle volumes rose by 15%, supported by fleet renewal and operational improvements.

Throughput at Durban Container Terminal (DCT) Pier 2 has recovered modestly since late 2023, which provides a firmer operational base ahead of the International Container Terminal Services concession early this year.

However, sustained underperformance at the Cape Town Container Terminal escalated into a material export risk during the 2025/26 deciduous fruit season.

The poor performance points to structural weaknesses, including labour management, equipment reliability, operational controls and accountability failures, reflected in crane productivity falling persistently below global benchmarks, the report says.

Additionally, export volumes for deciduous fruit declined year-on-year, despite strong production conditions, which resulted in substantial rerouting through Eastern Cape ports and Walvis Bay at elevated costs.

The scale and persistence of these failures are eroding exporters’ margins, straining rural economies and undermining South Africa’s reputation as a reliable, time-sensitive agricultural exporter, Impumelelo Labs says.

Meanwhile, in terms of digital public infrastructure, the Reform Barometer rates the progress of reforms as strongly positive, with citizens having zero-rated access to the gov.za domain across South Africa.

SLOW PROGRESS
However, in terms of reforms on water and local government, the barometer shows slow progress.

Water sector reforms continued to progress at the policy and regulatory levels in 2025, and faster approvals of water-use licence application are supporting investment. However, service-delivery outcomes at the municipal level remain weak, the report says.

Despite the reintroduction of Blue, Green and No Drop oversight in 2021, and a new water pricing strategy scheduled for implementation this year, service performance continues to deteriorate.In terms of visas and spatial integration, the progress of reforms is rated as neutral.

Widespread noncompliance, high non-revenue water and a growing maintenance backlog highlight the persistent gap between reform progress and the reality on the ground, Impumelelo Labs says.

The 2023 Blue Drop and 2022 Green Drop results reveal a systemic deterioration in municipal water performance, which cuts across every province and is not confined to isolated pockets of failure.

Large clusters of underperforming municipalities in the Free State, Northern Cape, Mpumalanga and the Eastern Cape point to deep-rooted institutional weaknesses.

Further, the inclusion of several major economic centres displaying systemic deterioration in municipal water performance shows that infrastructure decline is no longer a peripheral or rural issue.

This core of critical and poor scores signals structural governance, funding and accountability failures within the local water sector, which raises serious concerns about service reliability, economic resilience and public health if corrective action is not accelerated.

Additionally, local government reforms recorded modest but tangible progress, particularly in strengthening metro finances and advancing system-wide framework, although fiscal strain persists in municipalities, resulting from weak revenue collection and negative cash positions.

However, despite reform initiatives aimed at strengthening governance and service delivery, municipalities continue to face significant financial and operational constraints.

“Central to the reform agenda is the professionalisation of municipal administrations that emphasises capable, merit-based management as a foundation for improved service delivery, financial sustainability and governance outcomes.”

South Africa’s economic recovery is steady but uneven. Sustaining the recovery will depend on whether improved sentiment and reform momentum translate into stronger fixed investment and measurable improvements in economic performance, Impumelelo Labs says.

The effectiveness of South Africa’s reform agenda will be judged by whether reforms translate into sustained investment, improved infrastructure performance and faster economic growth.