South Africa's economy sees fragile growth despite sector challenges

While South Africa’s economy clawed its way to a gross domestic product (GDP) gain of 0.6% last year, marking its strongest growth since mid-2023, the fragile recovery indicated an uneven economy with a persistent decline in manufacturing, mining, and energy.

Although mining and manufacturing let the economy down, Statistics South Africa’s economic wrap for 2024 found that agriculture, trade, and the finance sectors came to the rescue, driving the 0.6% growth rate. The farming sector was lifted by improved yields and global demand, while trade and finance added vital momentum.

At the same time, it seems that consumers are spending more, with household expenditure gaining 2.3% in volume terms during the last quarter. This signals tentative improved consumer confidence as inflationary pressures ease. As of February, inflation was at 3.2% with the March print due out of Wednesday.

Economists expect increases in the cost of living to remain within the South African Reserve Bank’s three to six percent range, although an increase in VAT will push this figure up. Retail sales are gaining, with Statistics South Africa suggesting that there could be a “a re-emergence of Black Friday”.

It said: “Although December accounted for the biggest slice of consumer spending in the fourth quarter, there was a sharp year-on-year increase in retail trade sales in November 2024.”

“Positive festive cheer and stronger retail sales were mirrored by employment numbers in the formal non-agricultural sector.

The trade industry created 42 000 jobs in the fourth quarter of 2024, making it the largest positive contributor to overall employment growth,” it said.

Yet, the official statistical body stated that several “industries performed poorly with manufacturing and transport, storage and communication the most significant negative contributors”. Mining, previously a key economic driver had what Statistics South Africa called a “economic wobble,” which carried through from the fourth quarter of last year to January 2025.

Mining production was down 9.6% year-on-year in February, as gold, iron ore, coal, and platinum group metals floundered. Coal accounted for nearly two-thirds of South Africa’s energy supply in 2024. Manufacturing, also vital to the economy, contracted 3.2% year-on-year in February, extending a nine-month decline in automotive parts production.

Construction and wholesale trade also stumbled, though road freight and passenger transport showed resilience.

There are bright spots, according to Statistics South Africa, with tourism-related sectors – including restaurants, accommodation, and retail trade – gaining last year.

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