After losing its parliamentary majority in 2024, the African National Congress (ANC), once the unchallenged steward of post-apartheid governance, is now navigating the complexities of a Government of National Unity (GNU). The National Dialogue Convention, held in August 2025, was intended to set the tone for inclusive governance.
However, it faced significant setbacks after key civil society organizations, including the Thabo Mbeki Foundation and Desmond and Leah Tutu Foundation, withdrew, citing concerns over government control, inadequate preparation, and violations of core democratic principles.
With just 40% of the vote during the 2024 elections, the ANC must now broker deals with rivals like the Democratic Alliance (DA), the Economic Freedom Fighters (EFF), and Jacob Zuma’s uMkhonto weSizwe (MK) Party, which surged to become the third-largest party in Parliament.
The outcome of these coalition talks will shape not only the political landscape but also the country’s struggling industrial sector, where unemployment remains at 32.9%, with Youth unemployment at 62.4% as of 2025, one of the highest unemployment rates globally, Statistics South Africa (Stats SA). This makes the South Africa 2025 economy outlook one of the most closely watched in Africa.
The Stakes: South Africa’s Economic Future in Balance
From 2019 to 2024, GDP growth averaged just 0.8%, hampered by electricity shortages, transport bottlenecks, weaker commodity prices, and policy uncertainty. The ANC now finds itself negotiating with partners whose economic philosophies diverge sharply.
lllustration of South Africa’s post-election political landscape for ANC: DA vs. EFF/MK economic ideologies
Coalition Government Options and Economic Implications
DA: Pro-business, market-oriented, and investor-friendly. A DA alliance could stabilize markets but may alienate ANC’s traditional base.
EFF: Advocates radical transformation: land redistribution and nationalization, which could reshape the investment landscape and deter foreign capital.
MK Party: With a populist economic agenda and strong regional support, MK complicates policy consensus. Zuma’s legal disqualification from Parliament adds further uncertainty.
South Africa’s Manufacturing Crisis and Job Creation Opportunities
For South Africa’s industrial workers, these political machinations have immediate consequences. Manufacturing employment has declined steadily over the past decade, contributing significantly to the overall unemployment crisis. However, sectors like automotive, mining and renewables hold potential for job growth.
Automotive Industry: Contributes 4.9% to GDP and employs over 110,000 people, benefiting from global demand and trade agreements.
Mining Sector: Remains a cornerstone with potential in critical minerals for batteries and hydrogen technologies.
Renewable Energy: Supported by initiatives like the Eskom Just Energy Transition Project, solar and wind projects are creating jobs and attracting investment.
Barriers to Industrial Growth: Corruption, Infrastructure, and Skills Gaps
The coalition negotiations present fundamental tensions between political survival and economic pragmatism. Each potential partner brings policy positions that could either accelerate or impede industrial growth.
Political instability emerges as the primary barrier to sustained industrial growth. Investors require predictable policy environments to commit long-term capital, yet coalition governments often struggle with policy consistency.
The DA’s emphasis on fiscal discipline, public-private partnerships, and market-friendly policies aligns with investor expectations but conflicts with the ANC’s historical commitment to transformative economic policies. Conversely, an alliance with the EFF could satisfy the party’s progressive base but potentially trigger capital flight.
Manufacturing sector challenges compound these political uncertainties. South Africa’s industrial base faces competition from lower-cost producers, deteriorating infrastructure, and critical skills shortages. These trends highlight the need for a comprehensive industrial policy roadmap and capacity-building efforts.
Policy Implementation Challenges in South Africa’s Public Sector
Policy implementation capacity presents another significant obstacle. Even with political agreement on industrial policy directions, South Africa’s public sector has struggled with execution challenges. Corruption concerns, bureaucratic inefficiencies, and capacity constraints continue to hamper development efforts.
Global Economic Pressures and the Need for Adaptive Policies
External forces, supply chain disruptions, commodity volatility, and tech shifts require agile governance. Coalition governments often struggle to coordinate rapid responses, leaving South Africa exposed.
Risk Assessment: What Happens If Coalition Talks Fail?
A failure in coalition talks could plunge South Africa into political and economic turmoil. In a worst-case scenario, the absence of a stable government could lead to:
Policy Paralysis: Governance could stall, delaying reforms in energy, logistics and industrial policy.
Social Unrest: With youth unemployment at 62.4%, prolonged instability could spark protests.
Radical Policy Shifts: Failure to form a centrist coalition could push the ANC toward the EFF or MK, risking nationalization policies that deter foreign investment.
Four Solutions to Boost South Africa’s Economy and Job Market
1. Transparent Coalition Charter
The ANC should draft a public coalition agreement, like Germany’s 2021 traffic-light coalition, committing to pro-growth policies, addressing equity without extreme measures. Regular updates could reassure investors searching for South Africa economic policy clarity.
2. Strengthen Anti-Corruption Measures
Corruption scandals erode trust. South Africa can adopt Zambia’s 2024 model, empowering an independent National Prosecuting Authority with real-time audits. Digital tracking of funds, inspired by Rwanda’s e-governance, could ensure SEZ budgets are used effectively.
3. Expand SEZ Incentives for Industrial Investment
Expanding initiatives like Nigeria’s Industrial Training Fund , which skilled 500,000 workers within 5 years, could prepare South Africans for manufacturing jobs by 2030, reducing youth unemployment and supporting rural development. Partnerships with firms like Dangote Group could fund apprenticeships in rural areas like Limpopo.
A rectangular flowchart with arrows indicating a solutions roadmap for South Africa
Roadmap for South Africa’s Industrial Revival
The GNU must prioritize institutional reform and industrial policy execution. A National Industrial Development Council could oversee long-term strategies, resolve conflicts, and ensure accountability.
Performance metrics should include:
Job creation
Investment attraction
GDP growth
Manufacturing output
A Make-or-Break Moment for South Africa’s Economic Transformation
South Africa stands at a pivotal moment. Coalition negotiations offer a rare chance to align political necessity with economic opportunity. Business leaders, labor organizations, and international partners must engage constructively to support industrial transformation.
Key Takeaways
Coalition Necessity: ANC must form alliances to govern, creating both risks and opportunities.
Economic Crisis: Youth unemployment at 62.4% employment and stagnant growth (0.8%) demand urgent action.
Policy Crossroads: ANC faces a choice between market-friendly DA or radical EFF/MK partners.
Critical Barriers: Instability, corruption, and skills gaps deter investment.
Required Actions: Stability, anti-corruption, SEZ incentives, and vocational training are essential for recovery.
Dramatic, vibrant, irritating, and occasionally inspiring, African politics defy simple categorization. Here, ancient traditions collide with modern governance, while colonial legacies linger in the contours of power. To understand African...
In April 2025, Kenyan President William Ruto initiated a pivotal state visit to Beijing, marking a watershed in Kenya-China relations. During his third visit to China as president, President Ruto...
With President Donald Trump in his second term in the White House, U.S.-Africa relations are entering a complex and pivotal phase. From shifting immigration policies to Congressional oversight, climate considerations,...
.jpg)
