Real GDP, after growing by an estimated 2.8% in 2010-held back by consumer and business caution in the aftermath of recession-is forecast to stage a more significant recovery in 2011, with growth accelerating to 3.7% as a result of higher consumer spending, more business investment and stronger external demand. Although growth will be too slow to make an impact on unemployment, higher wages for those in work will support consumer demand, as will low interest rates and subdued inflation. Business, which has been cautious about investing in the wake of the recession, will regain confidence in line with the wider upswing and increase the pace of investment in new capacity. The government will also remain supportive of growth via an ongoing fiscal stimulus, directed in particular towards investment in infrastructure.

The outlook for 2012 is brighter, and we expect growth to quicken to 4.6% as the country rebuilds momentum following the recession, helped by a more favourable global environment and ongoing public and private investment. Job creation, a lagging indicator, will also pick up, boosting household demand, especially in the expanding middle-class segment. Credit availability will improve as banks adopt less conservative lending policies. Growth in both 2011 and 2012 will benefit from spin-offs from the 2010 football World Cup such as extra tourism, although there is a risk of electricity shortages re-emerging (especially in 2012, when growth quickens) until new base-load power stations come on stream in 2013-15, which will constrain energy-intensive sectors. Electricity prices are set to rise sharply, raising costs and fostering energy efficiency. The roll-out of new submarine fibre-optic cables in 2011-12 will improve South Africa's connectivity and boost the telecommunications sector.

Prospects thereafter are a little gloomier, and we expect growth to retreat to 3.8% in 2013 and 3.6% in 2014 because of persistent structural constraints, including skills shortages, high unemployment, crime, corruption and inefficient parastatals, while uncertainties in the build-up to the 2014 election will act as an additional constraint. Both household and government consumption will feel the impact of fiscal consolidation, although private and public infrastructure projects will underpin investment. Growth will recover marginally, to 4% in 2015, helped by the start-up of new power stations and transport networks, but other structural constraints will persist.

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