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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
September 12, 2024

Gross Operating Surplus

Gross Operating Surplus: A View on Company Profits

Gross Operating Surplus impacts both investors’ returns and government tax revenue, influencing policy decisions and the broader economy.

Company profitability is a key concern for both investors and the government. Investors evaluate the potential returns they can expect, while the government considers the impact of policy changes on tax revenue and the broader economy.

A fundamental method for assessing the profitability of a sector is to estimate the Gross Operating Surplus (GOS) at specific intervals, in this case, quarterly. In South Africa, the GOS appears to be erratic but generally aligns with GDP inflation trends, as illustrated in the accompanying graph. In the second quarter of 2024, company profits were one percent higher than inflation for the same period, indicating that profits grew faster than production inflation.

The overall growth in GOS is positive news, as rising profitability enhances the likelihood of investment and further economic growth. Particularly, the manufacturing sector has demonstrated significant growth, marked by increases in employment, production, and overall profitability.

The notable rise in total GOS is encouraging, reflecting a positive market sentiment that seems to resonate throughout the economy. This increase boosts production output and returns for all market participants, potentially leading to a much-needed rise in investment in South Africa.

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More Coverage

Employment Statistics in South Africa

Q1 2025
The employment statistics for the first quarter of 2025 present a mixed picture across different sectors, as detailed in the table above. Some sectors experienced increased employment compared to the fourth quarter of 2024, while others saw a decline in job opportunities during this period. Overall, the unemployment rate edged higher from 31.9% in the previous quarter to 32.9% in Q1 2025. Meanwhile, the expanded unemployment rate decreased slightly from 41.1% to 40.3% during the same timeframe.

A Positive Turning Point for Global Trade and Markets

Analysing the Impacts of the US-China Deal and Its Broader Economic Implications
The recent negotiated agreement between the United States and China marks a significant milestone in international trade relations, providing a much-needed breather for the global economy. By agreeing to reduce tariffs for a 90-day period—U.S. tariffs cut from 145% to 30%, and Chinese tariffs from 125% to 10%—both nations have demonstrated a renewed commitment to cooperation.

Manufacturing Production

March 2025
In March 2025, manufacturing production in South Africa declined by 0.8%, following a 3.2% contraction in February. This decrease contrasted with the upward movement in the Purchasing Managers’ Index (PMI), which rose from 44.7 in February to 48.7 in March.

Navigating International and Domestic Winds

South Africa’s Economic Prospects
In a world of interconnected economies, global developments unfailingly ripple through national borders. For South Africa, recent international and domestic events offer a complex tapestry of challenges and opportunities that could shape its economic trajectory.

Gold and Foreign Exchange Reserves

April 2025
The African International Liquidity Position, reflected by Net Gold and Foreign Exchange Reserves, grew in both USD and Rand terms as of April 2025. Despite a nearly 60c Rand depreciation against the dollar, reserves increased, boosted by a 4.7% rise in gold prices, which remain 41.4% higher than in 2024.
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