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Frederick Mitchell
December 6, 2024

South African Economic Performance

GDP, Economic growth and Inflation for 2024Q3

South’s economy unexpectedly contracted by 0.3% in Q3 2024, with six out of ten sectors growing. The agricultural sector significantly declined by 28.8%. Positively, manufacturing and finance showed growth, contributing to overall resilience. However, consumer demand and elevated prices in the economy remain concerns, while expected growth for 2024 is estimated at just 0.7%. Addressing policy clarity and structural reforms could enhance business confidence and stimulate growth.

Out of ten sectors, six experienced growth, while general government, transport, storage, communication, and trade sectors faced contractions. The agricultural sector was the largest detractor, with a significant decline of 28.8% quarter-on-quarter, contributing 0.7 percentage points to the overall economic contraction. This downturn is unexpected, especially considering employment in agriculture rose from 896,000 in the second quarter to 935,000 in the third quarter.

On a positive note, manufacturing grew by 0.5%, bolstered by improved Purchasing Managers’ Index (PMI) figures and fewer electricity supply constraints, as evidenced by a 1.6% growth in the electricity sector. The finance sector, the largest contributor to GDP, grew by 1.3%, similar to the previous quarter’s 1.5% growth, adding 0.3 percentage points to help mitigate the slowdown caused by the agricultural decline.

However, the trade sector’s notable slowdown remains concerning. Consumer demand, reflected in this sector, contracted by 0.4% quarter-on-quarter and another 2.0% year-on-year, following a previous 2.0% decline. High inflation, elevated interest rates, and stagnant wages continue to pose challenges for consumers.

For 2024, overall growth is estimated at 0.7%, the same as in 2023, which is insufficient to significantly address South Africa’s high unemployment crisis. However, increased market optimism, reductions in load-shedding, and a 50-basis point cut in interest rates could positively influence economic activity for the remainder of 2024 and into 2025.

Key challenges persist for businesses, and the government must deliver on promises related to policy clarity and tangible progress on structural reforms announced earlier this year. By addressing these key issues, there is potential to enhance business confidence, which is essential for driving higher economic growth in the coming months—something South Africa urgently needs.

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More Coverage

A View on Demand in the Economy: Retail Sales Performance

In 2024, South Africa’s retail sales rose by 6.3%, significantly surpassing the expected 2.1% increase, indicating a rebound in consumer demand. Key contributors included substantial growth in general dealers and household goods. Lower inflation and a potential interest rate cut could further enhance consumer optimism and spending moving forward.

Consumer Inflation

Inflation in South Africa rose slightly from 2.8% in October to 2.9% in November, driven mainly by housing and utilities, food, and miscellaneous goods. Despite price increases, there are signs of slowing growth. The MPC’s recent 25 basis point interest rate cut may ease financial pressures on consumers, supporting future demand and economic momentum.

Manufacturing Production

In 2024, South Africa’s manufacturing production rose by 0.8%, following a 1.4% increase in September. Key contributors included significant growth in petroleum, food, and basic iron and steel sectors. Despite a decline in the motor vehicle sector, the manufacturing industry remains vital, employing 1.6 million people and driving economic growth.

Challenges, Changes, and New Horizons

To reflect on 2024, what a remarkable year it has been! There were significant developments both locally and globally—not just economically but politically as well. We can all agree, “what a year it has been!”

Mining Production and Sales

Mining South Africa rose by 1.4% in October 2024, building on a solid 4.9% growth from September. Key contributors included significant increases in iron ore, platinum group metals, and diamonds. Mineral sales also increased by 1.6%. Despite some challenges, the sector is rebounding strongly, supporting over 484,000 jobs. With improved economic confidence and a focus on stabilising production, the future looks promising for South Africa’s mining industry.
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