Economic growth across Southern Africa is expected to strengthen over the next two years, but the region’s overall recovery continues to be weighed down by the sluggish performance of its largest economy, South Africa. This is according to the World Bank’s latest Africa’s Pulse report.

While much of Sub-Saharan Africa is poised to expand at a faster pace in 2025 than previously predicted, the World Bank warns that persistent structural weaknesses and slow reform momentum in South Africa are curbing the region’s full potential. The report forecasts South Africa’s GDP to grow by just 0.9% in 2025, up from 0.5% in 2024, with projected growth averaging only 1.2% in 2026 and 2027, well below the projected regional growth rate of 4.4%.

Despite a slight pickup in the second quarter of 2025, when South Africa’s economy grew by 0.8% quarter-on-quarter, compared to 0.1% in the previous quarter, the World Bank notes that this rebound was largely temporary. The uptick was driven by manufacturing, mining, and trade, with manufacturing benefiting from: “front loading of orders and shipments ahead of tariffs being introduced by the United States (US).”

On the expenditure side, stronger household consumption and weaker imports contributed to the improvement, but the Bank cautioned that fixed investment declined for a third consecutive quarter, a troubling sign for long-term growth prospects. The report said: “Economic activity is unlikely to pick up strongly in the near term as US tariffs may hit manufacturing activities, for instance automobiles and citrus fruits, and hinder investments.”

By contrast, several neighbouring economies in the Southern African region are performing considerably better. The World Bank expects growth across the region to accelerate in 2025, supported by stabilising currencies, easing inflation, and recovering private investment. Improved terms of trade and more stable fiscal conditions in countries such as Botswana, Zambia, and Mozambique are expected to sustain this momentum.

However, the report says that South Africa’s underlying economic fundamentals remain the single biggest drag on the regional average. It said: “Persistent structural constraints such as high unemployment, skill deficits, weak business environment and logistics bottlenecks, especially in the transportation sector, explain the country’s underwhelming performance.”

South Africa’s economic malaise has been compounded by weak global demand and still elevated interest rates. Although the South African Reserve Bank cut its rate to 7% at the end of July, the World Bank says this is unlikely to translate into a sharp rebound in lending or investment.

The World Bank emphasised that faster structural reforms are essential if South Africa is to lift its growth potential and support regional prosperity. It called for urgent action to address the country’s chronic infrastructure problems, particularly in energy and logistics, and to make the public sector more efficient.

The report said: “Accelerating structural reforms to improve the business climate, including in energy and transportation, as well as enhancing the efficiency of public expenditure, remains critical for boosting economic growth.”

For the wider region, the World Bank remains optimistic. Southern Africa’s medium-term outlook has improved thanks to better policy management, steady export performance, and stabilising inflation. But without a meaningful turnaround in South Africa, the continent’s most industrialised economy, the region’s performance will remain below its potential.