For several years, the South African economy has been bemoaned on the continent as a sleeping giant that is not reaching its full potential. Despite significant optimism in July 2025 that South Africa was on the right track to achieve economic growth of 1.8%, this was not achieved as the country grappled with deep-rooted challenges.
As we enter February, focus once again shifts to Cape Town and the presentation of the National Budget at the end of the month. While there is not expected to be the drama that came with last year's budget, many interested eyes will be eager to see what Finance Minister Enoch Godongwana presents in a municipal election year. Dr Farai Nyika, Academic Programme leader at the Mancosa School of Public Administration, points out that there are a few low-hanging fruits that the Minister can lean on.
"If I were the Minister of Finance, this is where my focus would be," says Dr Nyika.
Tackle unemployment
One of the first challenges Dr Nyika would address would be the unemployment crisis. According to Statistics South Africa, as of the third quarter of 2025, South Africa's official unemployment rate is 31.9%. Statistics South Africa adds that the country's youth unemployment rate (ages 15–34) is 43.7% as of the third quarter of 2025.
"We must be wary of quick fixes to our economy's problems. The largest hindrance to job creation was energy instability, but that has been addressed. The next major obstacle concerns the decline of the agricultural and manufacturing industries. South Africa is de-industrialising rapidly, as many major manufacturers have retrenched and left the country. In addition, there is a lot of red tape that is preventing mining and exploration activity from expanding, as it takes up to 20 years for new mines to come online," warns Dr Nyika.
He adds that, within five years, a mine should be producing. Also, as a nation, we do not appreciate vocational education enough, as many TVETs are not adequately funded. "Many young people studied at universities, doing programmes that did not have strong employment demand. The Minister is encouraged to allocate more funding to vocational education as young people would acquire practical skills that allow them to be self-employed," says Dr Nyika.
Finally, Dr Nyika points out that we have thousands of teachers and doctors sitting at home. At the same time, every year, primary and secondary schools are understaffed, and people wait months for specialised hospital procedures. The Minister is encouraged to allocate additional funding for employing government educators and healthcare workers.
"Investors are attracted by clear policy guidance, incentive structures and economic stability While the economy appears to be emerging from a 16-year slump, international investment is struggling and could be increased by reconsidering major equity-related policies. But Treasury cannot do this; ANC conferences determine policies. This is problematic because we now have a GNU and are thus stuck with policy uncertainty," says Dr Nyika.
The shifting political landscape and fragile trade relations
One significant challenge is that South Africa needs to find its place in a world marked by a shifting international political landscape, with trade relations suffering as a consequence. While South Africa is hard at work repairing its trade relationship with the US, more needs to be done, as we cannot afford to lose a significant trading partner during our economic rebuild.
"While a lot of work is being done to repair trade relations with the US, South Africa cannot be blind to other opportunities," says Dr Nyika, "there are opportunities to easily increase our exports to African countries, by linking the countries' immigration policies to trade, and restoring rail infrastructure. Partnering with African countries with Chinese investment to restore and establish effective and reliable rail links across the continent will accelerate trade that is currently done by road networks."
Infrastructure development
South Africa is entering a municipal election year, with many of its citizens concerned about the lack of service delivery and the reasons behind it. Dr Nyika points out that more needs to be done to ensure the efficient rollout of maintenance programmes and the establishment of oversight committees that will benefit South Africans and enable economic growth.
"Parliamentary oversight of ministerial spending already exists, in addition to scrutiny by the auditor-general. Treasury has also placed conditions on certain ministries and municipalities regarding revenue allocations to address the concerns raised by South Africans about the lack of service delivery. The reason we keep being presented with challenges is the difficulties the justice system faces in punishing reported cases of corruption or cases in which civil servants are not performing their jobs to the best of their ability. There is nothing that Treasury can do to fix the justice system challenges," says Nyika.
One of the significant challenges in the past has been the misallocation of the budget, with some areas receiving significant funding while others in desperate need receive very little. This needs to be addressed with urgency.
"This will take time to address. One of the major developments in the public sector is the drive to professionalise it. Many public servants are not capacitated for the work they do. In addition, as government becomes increasingly digitalised, it will be easier to track and monitor underspending or misallocations much earlier, so that interventions occur," says Nyika.
An ambitious undertaking
For centuries, the South African economy has been built on the backbone of strong commodity demand and a booming mineral sector. However, since the Covid-19 pandemic, there have been significant fluctuations in commodity demand, signalling the need for countries to consider seriously diversifying their economies. In his 2025 State of the Nation address, President Cyril Ramaphosa announced ambitious plans to make South Africa one of the largest digital economies on the continent. However, this also comes with significant challenges, such as access to connectivity and varying levels of technological skills among learners and tertiary education students.
"South Africa lacks two main attractions for global tech firms to locate their plants in the country; that is, cheap labour and cheap energy. Digital technology is highly energy-intensive, and our wages cannot compete with those in South and East Asia. It is better to focus on areas where we do have comparative advantages, rather than trying to be leaders in every sector. However, we also cannot be left behind, and we have to improve our tech skills before the rest of the world develops at a rate that we cannot keep pace with," says Dr Nyika.
Government should sharpen its focus
South Africa's economy remains at a crossroads. Optimism alone will not deliver growth; decisive action on unemployment, diversification, and service delivery is essential. As Dr Farai Nyika notes, vocational education, infrastructure renewal, and clear policy guidance are low‑hanging fruits that can unlock opportunity.
Repairing trade relations with the US while deepening African partnerships will strengthen resilience in a shifting global economy. At the same time, professionalising the public sector and tackling corruption are critical to restoring confidence. Ambitions to build a tech‑driven economy must be grounded in comparative advantage and realistic investment pathways.
If the Minister of Finance seizes these opportunities, South Africa can awaken its 'sleeping giant' potential and chart a path toward inclusive, sustainable prosperity.
