As the 2024 February Budget Review approaches, attention will be on measures and reforms https://www.investec.com/ to support fiscal consolidation, and the better management of state-owned entities. This is a critical time for South Africa, especially with elections posing additional challenges to public expenditure, and even more so as the country enters uncharted political waters. Despite recording the worst year of loadshedding1 on record (so far) in 2023 (more than 6,700 hours of loadshedding were recorded in 2023,2 compared to about 3,700 in 2022),3 South Africa managed to avoid a technical recession. Real GDP growth stood at 0.6% last year.4 In the first half of 2023, businesses and households alike invested in self-generation and rooftop solar power, boosting investment spending, and aiding to bridge energy shortfalls. But household final consumption expenditure growth has been flat, given the high cost of living and the country’s energy crisis. This, together with heightened operational challenges in rail and port infrastructure, has been a drag on investment and much-needed growth both on the demand and supply side.
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One of the most significant focus areas in the medium term will need to be investment in infrastructure to stimulate economic growth. This will require the government to enhance infrastructure delivery by upping both quantity and quality. It needs to crowd in more private sector financing for larger projects, review the public-private partnership framework, and establish an agency to support finance and implementation of infrastructure.The need for continued progress on structural economic reforms, specifically in the electricity and logistics sectors, is now more urgent than ever. While government looks to maintain fiscal prudence and macroeconomic stability, two key focus areas stand out in its plan to spur on economic growth. One, the relentless commitment to implementing structural reforms to create a more productive and competitive economy; and two, the focus on unlocking growth-enhancing infrastructure investments, although mostly from the private sector, to boost fixed investment spending.31 This is not new thinking, but it is important—and this is now gaining wider traction in creating a more pro-business environment in South Africa. The economic costs of failure and inefficiency in these sectors have mounted over the past year, partly due to lack of investment but also due to mismanagement, corruption, and even theft.
A sector-by-sector view of the economy
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- In its January 2025 World Economic Outlook update, the IMF revised GDP growth expectations to just 0.8%, a marginal improvement from the 0.7% recorded in 2023, the country’s worst year of load shedding.
- Machinery and transportation equipment make up more than one-third of the value of the country’s imports.
- On the supply side of the economy, various plans that have been set in motion to address supply-side constraints will need to be executed.
The first phase of the program has focused on sectors including energy, rail, water, and telecommunications.33 The finance minister announced that this program will be expanded to include other areas as part of phase 2. In the first phase, reforms under OV have attracted over 390 billion rand in investment in the energy sector.34 The focus on the ongoing implementation of structural reforms—although at times painful and resulting in short-term trade-offs—is at the core of the GNU’s medium-term strategy. These are important steps in the right direction, but they remain paced and the results of greater confidence, and a continued focus on reforms and unlocking fixed investment spending will still take time to trickle through to faster and job-creating economic growth. And there will likely be bumps along the way, not least from the challenges that come with a coalition government (including divergent views on crucial policy areas, as already seen), but also from possible downside patrice motsepe trading platform risks to growth in the global environment, linked to inflation, geopolitics, continued economic weakness in China, and others.
South Africa economic outlook, November 2024
For near- to medium-term growth, South Africa’s prospects remain constrained due to subdued export prices, low demand, a weaker rand, and the mentioned supply-side constraints to growth, together with high sovereign credit risks that increase borrowing costs and limit investment and growth. In the third quarter GDP decreased by 0.3%, despite positive signs of economic growth that led economists to expect the economy to grow by up to 0.5%. The drop was driven by the agriculture, forestry and https://satrix.co.za/ fishing industry decreasing by 28.8%, primarily due to decreased economic activities reported for field crops.
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“This concrete and ongoing delivery of the action african gold capital investment south africa plan has boosted business confidence with credit rating agencies and banks stating Eskom’s performance recovery is a key contributor towards positive sentiments as far as South Africa’s GDP growth prospects of up to 2% are concerned,” said Dan Marokane, Group Chief Executive of Eskom. Mining has been the main driving force behind the history and development of Africa’s most advanced economy. Large-scale and profitable mining started with the discovery of a diamond on the banks of the Orange River in 1867 by Erasmus Jacobs and the subsequent discovery and exploitation of the Kimberley pipes a few years later. Gold rushes to Pilgrim’s Rest and Barberton were precursors to the biggest discovery of all, the Main Reef/Main Reef Leader on Gerhardus Oosthuizen’s farm Langlaagte, Portion C, in 1886, the Witwatersrand Gold Rush and the subsequent rapid development of the goldfield there, the biggest of them all. South Africa’s GDP decreased in the first quarter of 2024 as economists expected, with six industries recording negative growth between the fourth quarter of 2023 and the first quarter of 2024, including manufacturing, mining, construction and agriculture. Lower inflation, reduction of congestion at the ports and better electricity supply will also go some way to buoy the economy.
Only the finance, transport, and personal services sectors grew more than 1%—by 1.8%, 4.3%, and 2%, respectively.5 Furthermore, business sentiment has been flat as companies juggle multiple challenges, including high costs of business, high lending rates, noteworthy power and transport constraints, as well as policy and political uncertainty linked to the upcoming elections, among other things. Household final consumption expenditure increased in the second quarter, with the highest growth rates reported for services and semi-durable goods. The main positive contributors to the increase in household final consumption expenditure were spending on the ‘other’ category, clothing and footwear and food and non-alcoholic beverages.
Stats SA’s data for the third quarter of 2024 showed a surprising 0.3% contraction in GDP, with the agriculture, forestry, and fishing sectors taking a particularly hard hit, shrinking by a staggering 28.8%. Deloitte Insights and our research centers deliver proprietary research designed to help organizations turn their aspirations into action. Given some of the constraints under discussion, but also stemming from various uncertainties such as heightened geopolitical tensions in the Middle East, climate change risks, still-tight financing conditions, and South Africa’s upcoming elections on May 29, there are notable downside risks to growth. Deloitte Insights and the our research centers deliver proprietary research designed to help organizations turn their aspirations into action. South Africa held its first non-restricted racial elections in 1994, leaving the newly all-African elected African National Congress (ANC) government the daunting task of trying to restore order to an economy harmed by sanctions, while also integrating the previously disadvantaged segment of the population into it.
The domestic telecommunications infrastructure provides modern and efficient service to urban and rural areas. Unemployment in South Africa was underscored by weak economic activity in 20245, with one in three people unemployed. Botes says the formation of the GNU was seen as positive by market participants and assisted in the unwinding of some risk priced into the rand. She pointed out that the currency’s relative strength cannot be attributed only to South African factors. From mounting debt, to the influence of elections, we look into our crystal ball to forecast the South Africa economic climate in 2024.