A new report by global credit insurance firm COFACE has warned that South Africa has fallen far behind its emerging market peers, with chronic energy and labour market failures locking the country into a cycle of low growth, high unemployment, and widening inequality.

The report, Cracks in the BRIC(K)S: Why South Africa Fails to Thrive, finds that South Africa’s GDP per capita in 2024 remained below its 2007 level, despite two decades of integration into global markets and abundant natural resources. It says South Africa is now the weakest performer among comparable economies such as Brazil, Chile, Colombia, and Malaysia.

COFACE attributes this underperformance mainly to two structural weaknesses: the collapse of the electricity system and a highly distorted labour market.

On energy, the report says Eskom’s ageing coal-fired fleet, most of which was built before 1996, has become the single biggest brake on growth. Years of underinvestment, poor maintenance, and mispriced tariffs left the utility financially unsustainable, forcing repeated government bailouts that now equal to between 5% and 6% of GDP. Corruption scandals and municipal non-payment have deepened the crisis, with load-shedding eroding industrial output and investor confidence.

The second constraint, according to COFACE, lies in the labour market. South Africa’s unemployment rate stood at 33.2% in 2025, with 35% among blacks compared to 7% among whites.

Employment gains have concentrated in low-productivity service sectors, while manufacturing has shed nearly half a million jobs since 2008. The report links this to deindustrialisation, skill mismatches, and spatial exclusion that still reflects apartheid-era geography.

COFACE also points to the dominance of South Africa’s historic: “minerals–energy complex,” where large conglomerates and state monopolies have shaped capital flows and policy for a century, hindering diversification.

Public finances, it warns, have deteriorated as spending has focused on wages rather than investment, pushing debt from 28% of GDP in 2008 to 76% in 2025.

Still, the report notes faint signs of renewal. The formation of a coalition government in 2024 has opened the way for a more business-friendly agenda, while reforms to the energy and transport sectors could stabilise Eskom and attract private capital.

COFACE concludes that South Africa remains a regional powerhouse, with deep financial markets and capable institutions, but warns that without reliable electricity and a more dynamic labour market, the economy will remain trapped in stagnation.