In 2024, South Africa’s GDP grew by just 0.6%, the slowest in four years, due to logistical issues, weak consumer spending, and drought. Only select sectors contributed positively, while agriculture and trade dragged down the performance. However, forecasts for 2025 suggest potential growth driven by increased consumption and investments.
In 2024, South Africa’s economy grew at the slowest rate since the pandemic, with a modest 0.6% increase compared to 0.7% in 2023. This stagnation was attributed to logistical issues, low consumer spending, drought conditions, and decreased fixed investment. The country’s GDP stood at this level due to several adverse factors impacting most sectors’ growth.
Statistics South Africa reported that the economic growth was the worst since the height of COVID-19 disruptions in 2020. Notably, the South African rand appreciated by 0.5% against the dollar during this time. Investors are keenly awaiting the March 12 budget from Finance Minister Enoch Godongwana for strategies to enhance economic growth after previous spending proposals were rejected due to tax increase plans.
Only three sectors—finance, personal services, and electricity, gas, and water—contributed positively to growth, achieving expansions of 3.5%, 1.7%, and 3.5% respectively. The improvements in electricity largely stemmed from better performances by Eskom Holdings post severe power cuts. Agriculture and trade sectors, however, performed poorly, contracting by 8% and 1.4% respectively, with fixed capital formation declining by 3.7%, marking the lowest performance since the pandemic.
Bloomberg Economics predicts a rebound in growth in 2025, driven by increased consumer demand and improved investment, particularly as reforms in the energy and rail sectors take effect. This optimism comes despite the overall economic performance fall in 2024, which had shown some recovery in the last quarter with a 0.6% growth, largely supported by advancements in agriculture and finance.
In summary, South Africa’s economy has experienced its slowest growth since the pandemic, with significant contributions from a limited number of sectors. Prospects for 2025 appear more promising, contingent upon consumer spending and sector reforms. Yet, the growth remains inadequate in addressing the country’s high unemployment and poverty levels, indicating a need for stronger economic strategies.
Original Source: financialpost.com
