Government policy remains firmly and obstinately locked into its failure to prioritise pro-growth policies.
Economists and analysts expressed frustration this week as Stats SA reported that the economy expanded by an underwhelming 0.1% in the first quarter of 2025, in line with the country’s long-running low growth trajectory.
The sliver of growth was mainly due to a strong performance in the agriculture sector and slight improvements in consumer spending. But key industrial sectors — mining, manufacturing and transport — offset these gains, leading to the slump from the previous quarter’s 0.4% increase.
Wits University economist Kenneth Creamer tells the FM that there is an urgent need for a shift in thinking about policy domestically.
“The GDP data reveals a continuation of South Africa’s growth crisis, which is resulting in increasing unemployment and poverty and putting pressure on public finances,” says Creamer.
“The international environment is unstable and hostile, but of greater concern is that, despite many pronouncements, government policy is failing to prioritise growth. Repeatedly, poorly designed policies are announced that undermine the country’s growth prospects. Investments in key sectors such as mining, manufacturing and construction are being discouraged by red tape and dysfunction.”
Creamer, who is a member of President Cyril Ramaphosa’s economic advisory council, says that to achieve economic growth, government policy proposals should be subjected to quality checks before they are announced. South Africa will not achieve inclusive growth on the back of “anti-growth policies”, he adds.
“Before economic policy proposals are put into the public domain, the government should require that a central unit in the presidency — such as a strengthened policy co-ordination and advisory service — undertake impact assessments to make sure that policy proposals pass the test of being pro-growth and inclusionary.”
During his visit to the White House last month, Ramaphosa insisted to US President Donald Trump that South Africa is open for business. However, at the same time, he had to explain policies and laws such as the Expropriation Act, which, under certain circumstances, provides for no compensation when expropriating property. The DA, partner of the ANC in the GNU, has argued that the act dampens investor sentiment as it is seen as a direct threat to property rights.
Investments in key sectors such as mining, manufacturing and construction are being discouraged by red tape and dysfunction
— Kenneth Creamer
Mining contracted sharply by 4.1%, shaving 0.2% off GDP. The sector has been constrained by policy uncertainty, logistics failures and international factors, according to a report by Mining Dialogues 360 (MD 360), produced for the Minerals Council South Africa last year.
The report highlighted outdated policy and policy uncertainty as key deterrents to further investment, says MD 360 CEO David Perkins. And just last week, the sector was reeling over mining minister Gwede Mantashe’s gazetting of a draft bill to amend the Mineral & Petroleum Resources Development Act, which miners warn could end up in court. Water shortages and municipal failures are also holding back investment in mining and manufacturing.
Citibank economist Gina Schoeman says the numbers are discouraging. “Coming off a disappointing 0.6% for 2024, this economy is going to have to work even harder for the next three quarters if we’re going to get even the 1.2% GDP growth that we’re currently forecasting at Citi, which is what the Reserve Bank has now also moved to.”
Citi had also downgraded its expectations on the back of global turmoil — but the GDP numbers raise serious concerns about the domestic environment.
“What exactly has happened in terms of the reform progress that we’ve all acknowledged, we can all see, and why isn’t it translating into any meaningful growth?” asks Schoeman. “My concern is that for an economy that desperately needs to change its track record when it comes to GDP growth, we are again balancing on a very fine line — whether 2025 will [deliver] a better GDP than 2024.”
The FM understands that while load-shedding and reforms in the energy sector are largely on track, there is concern in government circles over Transnet’s persistent underperformance. Centre for Risk Analysis executive director Chris Hattingh says the parastatal’s continued struggles, combined with global factors, mark a “perfect storm” for the country’s economy.
In Hattingh’s view, the low rate of investment is linked to business efficiency in South Africa rather than policy. “Investors [focus on] high crime rates, electricity, logistics and labour markets. Is it easy to hire people? This is about basic business operationality as well as the policy environment.” He says crime and municipal failures are critical negatives.
Analysts agree that the 3% growth rate punted by Ramaphosa and big business is unlikely to materialise this year, or even next, particularly as the GNU limps along.
Ramaphosa’s second term is shaping up to be as disappointing as his first when it comes to delivering on the central pillar of his reform push: economic growth.
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