SA's falling GDP per capita

20 October 2025 — Will the standard of living in South Africa improve? Is South Africa a lawless country? Which way are the political winds are blowing? Why is the Department of Health targeting medical tax credits?

SA's falling GDP per capita

Measured by real per capita output – a nation’s economic output divided by its population – the average standard of living in South Africa is projected to fall further.

The International Monetary Fund’s (IMF) October World Economic Outlook forecasts South Africa’s real per capita output to contract by 0.3% in 2025, and once more by 0.3% in 2026. That is following on a 0.8% contraction in 2024 and a 0.5% contraction in 2023.

Of the countries and regions listed in the table in question, South Africa is the only one where real GDP per capita is expected to shrink in 2025 and 2026. By contrast, Nigerian real per capita output is forecast to grow by 1.8% this year and by 2.1% in 2026; India’s by 5.7% and 5.2%, respectively; and Brazil’s by 2% and 1.6%, respectively.

In line with CRA projections, the IMF forecasts South Africa’s real GPD to grow by 1.1% in 2025, an upward revision by 0.1 percentage points compared to the July Outlook, and by 1.2% in 2026, a downward revision by 0.1 points. These economic growth rates remain at or below the population growth rate, which Stats SA reports as being 1.23% in 2025.

The IMF’s inflation forecast for South Africa is relatively mild, with consumer prices projected to rise by 3.4% in 2025 and by 3.7% in 2026, both in the vicinity of the lower bound of the South African Reserve Bank’s 3%-6% inflation band target.

Slippery slope of lawlessness

The World Security Report, compiled by Allied Universal, the world’s largest security company, reported a 28% rise in physical threats against top company executives in South Africa, while also noting that South African companies were among the best prepared globally to counter such threats. G4S Africa regional president, Christo Terblanche, said over 75% of South African companies had reported being targeted criminal violence last year, among the highest rates globally.

This aligns with the crime risk identified in the Risk Alert of 25 August 2025, which noted South Africa’s 7^th place on the 2023 Global Organised Crime Index, behind only Myanmar, Colombia, Mexico, Paraguay, the Democratic Republic of the Congo, and Nigeria.

The Index shows declining state resilience to organised crime, with law enforcement scored at 4.5/10, the weakest in southern Africa. Government’s declining capacity to contain organised crime creates space for malign actors to fill these vacuums.

As African National Congress (ANC) dominance wanes, its patronage networks fracture. Groups reliant on state contracts may resist challenges to their illicit interests through intimidation and violence, for example in the construction, water, and transport sectors. As local government elections approach, violence against businesses and political actors is likely to rise, especially where state tenders are contested.

By-elections show which way the political winds are blowing

Recent by-election results show the ANC’s vote share continuing to decline as South African politics becomes yet more competitive. While the ANC can no longer take its voters for granted, no single other party has yet managed to position itself as the default home for those disaffected ANC supporters.

By-elections generally see lower voter turnout than local government elections and do not cover the entire electorate. Still, they often provide early signals regarding shifts in political support. With this caveat in mind, by-elections over the last twelve months indicate that the ANC’s electoral decline is set to continue in the next local government elections, which will take place between November 2026 and January 2027.

During the latest round of by-elections last week, the ANC lost two wards to the Patriotic Alliance (PA), one to ActionSA, and retained three wards. It lost support in two of those wards and grew it in one.

The party dropped by 16 percentage points to 23% in Ward 29, Noordgesig, Soweto, losing the ward to the PA. As elections analyst Wayne Sussman points out, the PA is the only party to have taken wards off the ANC in Johannesburg since 2021.

In Ward 7, Ramotshere Moiloa, North West, ActionSA won its first-ever by-election by just two votes, relegating the ANC to second place in one of its strongholds. ANC support dropped by 25 points, to 33%. In this contest, ActionSA was given a boost by its decision earlier in the year to partner with the Forum 4 Service Delivery.

In Ward 6, Swellendam, Western Cape, ANC support dropped by 22 points, and the party lost the ward to the PA, which secured 51% of the vote. The PA’s candidate, Julian Matthysen, was previously the ANC ward councillor but defected to the PA. Some years ago, he had defected from the African Christian Democratic Party to the ANC.

ANC support also declined in the ANC stronghold provinces of Limpopo and the Eastern Cape: by 11 points in Ward 2, Musina, Limpopo, and by 7 points in Ward 15, Dr AB Xuma (Engcobo), Eastern Cape. Despite the fall in support, the ANC retained both those wards.

Against the trend, the ANC increased its support in Ward 4, Langeberg, Western Cape, from 37% in 2021 to 47% in last week’s by-election. Here, its candidate was the former Freedom Front+ candidate from 2021, who brought some of his FF+ voters with him.

The picture that emerges overall is that ANC support is declining. Some of the departing voters are joining the country’s growing ranks of non-voters, while others are bestowing their favours across a spectrum of other parties, with the PA and ActionSA benefitting in the latest by-elections. As voters become more willing to experiment and more discriminating in who they vote for, parties will have compete harder for their votes.

Health department targets tax credits

The implementation of the National Health Insurance (NHI) scheme remains a core part of ANC policy and the government is pressing ahead with it. This even though the scheme faces multiple legal challenges and could cost around R1 trillion per year to implement, according to business group Sakeliga.

Last week the health department confirmed it was working with the Treasury on imposing medical tax credit thresholds as part of its NHI implementation. Imposing thresholds is the first step in a process aimed at eliminating such credits entirely. Once in place, this will increase the tax burden on medical aid members substantially and render private medical cover unaffordable for many members.

The deputy director-general for NHI at the health department, Dr Nicholas Crisp, views medical tax credits as a loss to the fiscus of about R34 billion that should instead be used for the NHI.

Dr Katlego Mothudi, the managing director of the Board of Healthcare Funders, noted that Dr Crisp had recently submitted an affidavit to the high court stating that the government was not considering the removal of medical tax credits in the short or medium term. This plainly contradicted his subsequent admission in parliament that discussions with the Treasury were in fact underway to phase them out.

Dr Mothudi added that phasing credits out would punish people for trying to fund their own healthcare and push many out of the system entirely, placing further pressure on a public sector that was already stretched. Supporting his view, the chair of the health policy unit at the Free Market Foundation, Mike Settas, said that Dr Crisp’s statement that the tax credits were a loss to the fiscus of R34 billion was simplistic and one sided. It failed to consider that medical aid members mostly did not make use of the public health system, thereby reducing the financial burden on the state to deliver healthcare.

With an effective moratorium in place that prevents medical schemes from offering low-cost benefit options (LCBOs), the removal of medical tax credits would force many private medical scheme members to rely entirely on the public health system. Even though the Council for Medical Schemes formed stakeholder forums in 2019 to design and implement LCBOs, it has yet to permit any of these reforms.