Gross Operating Surplus

Company profits is a significant concern for both investors and the government. Investors assess potential returns, while the government evaluates how policy changes affect tax revenue and the broader economy.

A fundamental way to gauge profitability in an economic sector is by estimating the Gross Operating Surplus (GOS) at specific intervals, such as quarterly. The latest data from Statistics South Africa (Stats SA) for the third quarter of 2024 shows that GOS can be erratic but generally follows GDP inflation trends, as demonstrated in the accompanying graph. In Q3 2024, company profits were 2.9% lower compared to the previous quarter but increased by 4.5% compared to the same period in 2023. This rise in profits slightly outpaced GDP inflation, indicating a marginal growth in profitability.

The overall annual growth in GOS is a positive sign, as rising profitability enhances the potential for investment and further economic expansion. Notably, profits in the mining, transport, and personal services sectors grew at rates exceeding inflation during this period. Such profitability increases often lead to higher employment, production, and overall sector profitability in the medium term, if the trend continues.

The sustained annual rise in total GOS reflects encouraging market sentiment throughout the economy. This growth enhances production output and returns for all market participants, positioning South Africa for a much-needed increase in investment over the medium to long term.