A new report by the Bureau for Economic Research (BER) assessed whether structural reforms are translating into measurable improvements in economic performance.
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A new report by the Bureau for Economic Research (BER) has found that while South Africa’s structural reform agenda is beginning to deliver some economic improvements, the country’s recovery remains slow and uneven, with several key sectors still constraining growth.
The report assessed whether the government’s flagship reform initiative, Operation Vulindlela, is translating into measurable gains in economic performance. Operation Vulindlela was designed to accelerate structural reforms that unlock investment and growth by coordinating implementation across critical sectors such as energy, logistics, water and telecommunications.
According to the report, the reform programme has delivered partial progress. South Africa’s real GDP growth rate doubled between 2024 and 2025, increasing from 0.5% to 1.1%. However, the BER noted that this improvement was driven largely by stronger household consumption rather than a broad-based investment recovery.
Household spending expanded for seven consecutive quarters by the fourth quarter of 2025, supported by easing inflation and improving real incomes.
“Between 2024 and 2025, the real GDP growth rate doubled from 0.5% to 1.1%. However, the recovery was largely due to strong household consumption,” the report said.
Investment, which Operation Vulindlela aims to stimulate, is only beginning to recover after a prolonged period of weakness. Gross fixed capital formation grew for a second consecutive quarter, rising by 1.3% quarter-on-quarter after increasing by 1.4% in the previous quarter.
Private sector investment also regained momentum toward the end of the year, expanding by 2.4% quarter-on-quarter in the fourth quarter after slowing earlier in 2025.
Despite these improvements, the report found that production-side performance remains weak in several critical sectors.
Manufacturing, mining and electricity production continue to weigh on overall economic growth, highlighting persistent structural constraints within South Africa’s productive industries.
On the other hand, the services sector has been the main driver of economic expansion. Finance, trade and personal services made the largest contributions to growth, while the agriculture sector rebounded strongly after earlier setbacks.
The report also noted that domestic demand has been the primary source of economic growth. Government consumption made a positive contribution, while investment activity picked up modestly, supported by spending on machinery, software and construction.
However, external demand remains subdued. Exports declined, largely due to logistics bottlenecks and the impact of tariffs imposed by the United States.
One area where reforms have begun to show tangible results is electricity generation. Private renewable energy projects have surged in recent years following regulatory changes that opened the sector to greater private participation.
Approvals by the National Energy Regulator of South Africa have triggered a wave of private generation registrations since 2022, particularly in renewable energy projects.
By 2025, this had increased installed private generation capacity to roughly 18 gigawatts, supported by an estimated R361 billion in investment over seven years.
However, the report cautioned that progress in electricity sector reform remains closely tied to the restructuring of Eskom.
The unbundling of Eskom into separate generation, transmission and distribution entities is seen as a crucial test of policy credibility and implementation.
Under Operation Vulindlela, government committed to establishing a fully independent Transmission System Operator to manage the national grid and attract private investment into the electricity market.
Investor concerns emerged last year when Electricity and Energy Minister Kgosientsho Ramokgopa suggested that Eskom might retain transmission assets within a subsidiary rather than transferring them to a new independent entity.
More recently, President Cyril Ramaphosa reaffirmed the original reform plan, confirming that a fully independent state-owned transmission company will take over the management of the national grid.
The report also highlighted ongoing challenges in the water sector. While regulatory and policy reforms have advanced, service delivery at municipal level remains weak.
Although improvements have been made to water licensing processes and regulatory oversight programmes such as Blue Drop, Green Drop and No Drop assessments, widespread noncompliance and infrastructure maintenance backlogs continue to affect water services.
Municipal financial distress and limited institutional capacity remain major obstacles to improving service delivery and infrastructure performance.
Overall, the BER concluded that South Africa’s economic recovery has stabilised but remains fragile.
“Growth has stabilised, aided by increased domestic demand, declining inflation, and improved business confidence. Additionally, reforms in electricity and logistics are beginning to alleviate some significant constraints," it said.
"However, ongoing infrastructure issues, limited municipal capacity, and external risks still hinder the pace of expansion and investment. Ultimately, the effectiveness of South Africa’s reform agenda will be judged not by policy commitments but by whether reforms translate into sustained investment, improved infrastructure performance, and faster economic growth.”
BUSINESS REPORT