South Africa is in considerable economic trouble. The youth unemployment rate is above 50% and jobs are being lost, rather than created. The economy is hovering on the brink of recession, while gross domestic product (GDP) per capita has shrunk for the past two years. The most optimistic forecasts for the next three years put economic growth at less than 2% of GDP.

Key indicators of business, investor, and consumer confidence are at deep lows. Capital outflows are accelerating, and little new direct investment is taking place. Government debt has almost doubled in the past eight years, while bond yields have risen sharply. The currency has weakened dramatically. Interest rates are rising and consumers are under great pressure. The fiscal deficit is already preventing the government from implementing many of its plans.

Downgrades to sub-investment rankings are likely by year-end. This will significantly weaken the country’s financial position and complicate any subsequent attempts at reform. It is essential that South Africa’s government avoids these looming downgrades by adopting an effective economic turnaround strategy.

Building on many years of research and analysis, the IRR has developed such a turnaround strategy. Unlike other plans, this strategy is simple and workable. The strategy has four steps, each of which builds on those already taken – and all of which can be initiated by the government within months.

The strategy is designed to be fully implemented over the years 2016 to 2018. Its first aim is to halt the current economic descent. Thereafter, it seeks to bring about an economic turnaround on which the country can build following the 2019 election. Without it, the economic crisis will be very much worse by then and will become even more difficult to repair.

Report by the Institute for Race Relations