Page 146 - Risk Report 2024

IRMSA
146 RISK REPORT 2024/25

10.1 Global, African, And SADC Economic Performance,

Outlook, And Risks

SA is part of SADC, SSA, and Africa. As a leading African country, SA affects other African
countries, but it is arguably also affected by developments, issues and risks in Africa and
the regions and communities that it is part of – hence upside and downside risks remain
an in-play reality with potential impact. These risks are summarised on tne next page:

ECONOMIC PERFORMANCE, OUTLOOK AND RISKS

GLOBAL
Global economic growth slowed from 3.4% in 2022 to 3.1% in 2023, and (according to the OECD), is projected
to remain steady at 3.1% for 2024, followed by a slight pick-up to 3.2% in 2025. The decline in 2023/2024 was
due to subdued economic activity, central bank interest rate hikes and the impact of geopolitical conflicts.
The latter resulted in disruptions in the production and trading of commodities in which affected countries
are key exporters, including energy, grains, and fertiliser. This triggered high inflation, high cost-of-living and
capital outflows from emerging markets, and tighter monetary and financial conditions. The impact of tight
monetary conditions continues to be felt, particularly in housing and credit markets, but global activity is
proving relatively resilient, the decline in inflation continues, and private sector confidence is improving.

AFRICA CONTINENTAL
The AfCFTA promotes a single continental market for goods and services, with free movement of people and
investments across Africa. It aims inter alia to support intra-African trade by reducing tariffs and non-tariff
barriers, which currently impede optimal continental benefit from foreign investment, economic diversification,
industrialisation, job creation, regional value chains, and ultimate global competitiveness. The agreement
specifically includes small and medium-sized enterprises, women, and youth in its economic participation
aims. For this to happen, Africa needs less complex and more harmonised trade policies across the continent,
providing a more predictable, secure trading environment. The new Pan African Payment and Settlement
System will facilitate cross border transactions that will not be reliant on the USD. However, implementation
is challenged by inadequate infrastructure, varying economic development levels, and existing trade barriers,
including extremely complex tax and transfer pricing regimes (almost always requiring International legal,
financial and tax experts to resolve to the benefit of companies wishing to operate and/or expand across
African borders). Africa requires significant investment in transport, energy, and digital infrastructure, as well
as policy reforms, and capable, competent human capital. AfCFTA necessitates strong political will, effective
governance, and cooperation among member states to deliver any benefit to Africa’s almost 1,5bn people.

In SSA, economic growth slowed from 4.1% in 2021 to 3.6% in 2022, and further to 3.1% in 2023, due to the
persistent sluggishness of the global economy, high inflation rates and high debt levels. Growth is estimated
at 3.7% and 3.9% in 2024 and 2025, respectively. High inflation, fuelled by rising food and energy prices, weaker
currencies and low investment growth continues to constrain African economies, creating uncertainty for
consumers and investors. In addition, the following should be noted:
• Western and Central Africa countries continue to outperform Eastern and Southern Africa on GDP growth,
and the latter are also experiencing a sharper slowdown in investment growth.
• Inflation is set to remain high, and above central bank target bands for most countries.
• Fiscal deficits continue to widen due to weak growth, combined with fast accumulation of public debt. The
number of SSA countries at high risk of external debt distress, or already in debt distress, stands at 22.
• FDI (in)flows to Africa remain moderate and mostly in line with other developing regions.