The latest GDP figures might show a small quarter-on-quarter improvement at the end of 2024 but only confirm that despite the business optimism sparked by the formation of the GNU, South Africa is still stuck in a low-growth trap.
Stats SA announced on March 4 that growth hit 0.6% in Q4 2024, compared with a -0.1% contraction in the previous quarter, and that full-year growth was also 0.6%.
That all-but-flat performance does not bode well for South Africa as it navigates the global turbulence stirred by the new US administration. And since President Donald Trump took office, South Africa’s relations with its second-largest trading partner and biggest export market have worsened dramatically.
In his abandoned budget address, finance minister Enoch Godongwana — optimistically — would have projected growth of 0.8% for 2024. The figure for 2023 was 0.7%.
Citi economist Gina Schoeman says the biggest takeaway is how low 2024 nominal GDP growth was. “If we use the numbers the National Treasury was working off — of the budget that never was — that would be a big downside surprise to what the Treasury would have hoped to bring in in revenue.
“That to me is ... the biggest negative, because to climb back up to what they had forecast for the 2024/2025 financial year in terms of nominal GDP growth, it would just be unrealistic and that would be a natural, large and significant downside risk to the budget.”
The rebound in Q4 was driven by agriculture. The finance and trade sectors helped, but transport, manufacturing and general government services were a drag on growth.
Joe de Beer, deputy director-general for economic statistics, says 2024 was pretty much a repeat of 2023.
“If you compare 2023 and 2024 ... you can see agriculture had a negative impact [in 2023],” he says. “There was still load-shedding, so you can see a negative impact, but it recovered in 2024. Construction remained negative. Business services remained positive … Overall, it gave you relatively the same picture of 0.7% and 0.6%.”
The latest figures show South Africans are effectively worse off than they were in 2007.
Chris Hattingh, executive director at the Centre for Risk Analysis, says that for now, “there is a clear separation between positive sentiment and real meaningful positive economic activity, investment, higher consumer spending ... Those things you would look for if you were going to say South Africa is on a different path than it was before the GNU.”
Our sails have gaping holes. When the winds are against us, we will be blown around violently
— Chris Hattingh
He notes that between 2012 and 2023, “our growth averaged 0.8%, so we are very much in our range for annual growth”. The figure for 2024 “confirms once again South Africa’s low-growth challenge and poses that challenge to the GNU to start to lift that growth rate”.
The postponement of the budget due to the refusal of some cabinet ministers to go along with the two percentage point hike in VAT — which Godongwana presented to them at the last minute — was a major pothole for the GNU.
The DA and other parties have pushed for pro-growth policies instead of regressive taxation. The Stats SA data shows household consumption drove the expenditure side of the budget; a VAT increase would likely have further dampened growth.
Hattingh says 0.6% growth in 2024 is below the population growth rate and indicates that GDP per capita will continue downwards.
“World Bank data shows real GDP per capita was lower in 2023 than in 2007, so with the confirmation of the barely noteworthy growth in 2024, it shows that South Africans are becoming poorer and poorer over time. That has a spillover effect in terms of societal instability and rising poverty, and puts more pressure on the GNU.”
Other factors complicating the economic outlook are Trump’s hostility to the Ramaphosa government and the global trade war he has initiated. South Africa is fully integrated into the global market and is vulnerable to volatility, protectionism and the shifting geopolitical landscape, Hattingh says.
He says the GNU has to make South Africa more attractive for capital formation and real investment. “The latest GDP figures confirm that South Africa must get some of those growth fundamentals right and must move a lot faster at it.”
The education system and labour market are out of sync with the country’s economic structure. Manufacturing and mining, which in the past have been the mainstays of creating jobs for unskilled workers, are in decline.
Hattingh criticises the way South Africa exports raw materials to China and other countries instead of pursuing local beneficiation, which would grow the manufacturing sector.
“Our sails have gaping holes,” he says. “When the winds are against us, we will be blown around violently. We have to begin taking growth seriously to ensure South Africa is buffered against the coming storm.”
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