Page 147 - Risk Report 2024

IRMSA
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RISK REPORT 2024/25

NEO MONAE LOURENS VAN DER ISAAC WERE DR FRANCOIS VAN MICHAEL DUNCAN
Finance Analyst COLF Head of Consulting DYK Fellow
National Treasury Independent RSM Botswana Independent Interna- Consultant and
Governance, Risk, tional Finance, Risk, Non-Executive Director
Compliance, Audit, and and Strategy Advisor
Forensic Professional

PERFORMANCE

Economic Indicator 2022 2023 2024F 2025F
(Real) GDP Growth Rate 3.44% 2.25% 2.57% 2.98%
Public Debt (as % of GDP) 64.41% 67.97% 66.32% 64.72%
Inflation (average annual consumer price change) 11.66% 13.28% 13.01% 10.7%
Net Foreign Direct Investment (as % of GDP) 1.05% 1.81% 2.35% 2.59%
Official Reserves (months of imports) 5.33 5.01 4.87 4.67
Source: International Monetary Fund

In the past few years, SADC’s economic performance was affected by climate change shocks resulting in droughts,
cyclones and floods, and damage to infrastructure, crops and livestock. These were exacerbated by the adverse
effects of COVID-19 and geopolitical conflicts, which affected budget financing, commodity prices, food security, and
overall economic growth. Most member states also underperformed on the agreed Macroeconomic Convergence (MEC)
indicators targets for inflation, fiscal deficit, and public debt. Public debt continues to rise, and FDI to the region
remains moderate.

OUTLOOK AND POTENTIAL RISKS AND ITS IMPLICATIONS

In the medium-term, SADC member states are projected to progress towards achieving the agreed MEC indicators,
however, none is likely to meet all MEC primary targets. Weak performance on the MEC programme poses a significant
risk to the regional integration agenda and its outcomes. The outlook for commodity markets depends on the duration
of specific geopolitical conflicts and the extent of associated sanctions. If prolonged, changes in commodity trade
patterns are likely to continue. Growth will be depressed, and higher inflation will remain, with the potential to erode
consumers’ purchasing power, widening income inequality and poverty. Upside price risks include possible disruptions
in the supply of energy and metals. Food and energy prices may continue to remain elevated. The region may continue
to experience elevated prices of petroleum products and fertilisers, with a significant impact on inflation and high
agricultural input costs, and a high risk around the availability, access and affordability of food in the region. The region
remains susceptible to adverse weather conditions, including floods, droughts, frost and strong winds. The effects of
climate change could manifest in the near-term, adversely affecting infrastructure, agricultural production, and thus
economic, food and energy security. As a result, national budgets may be pressured as governments intervene to relocate
displaced people and distribute relief aid and food. All these risks could worsen the fiscal situation, undermining
governments’ ability to respond to crises.