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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
March 6, 2025

Gross Operating Surplus

A View on Company Profits

2024 Q4

Company profitability is vital for investors and the government. In South Africa, the Gross Operating Surplus (GOS) indicates positive growth, with profits surpassing inflation in late 2024. Notable gains in the Agricultural sector (68.8%) contrast with modest growth in Mining and Personal Services, reflecting an optimistic economic outlook post-election.

Company profitability is a critical concern for both investors and the government. Investors assess the potential returns they can expect, while the government evaluates the effects of policy changes on tax revenue and the overall economy.

A key method for assessing the profitability of a sector is estimating the Gross Operating Surplus (GOS) at regular intervals, specifically quarterly in this case. In South Africa, the GOS shows some fluctuations but generally aligns with trends in GDP inflation, as depicted in the accompanying graph. During the third and fourth quarters of 2024, company profits outpaced inflation, indicating that profits grew faster than production costs during this period.

The overall increase in GOS is encouraging news, as rising profitability raises the prospects for investment and stimulates further economic growth. Notably, the Agricultural sector exhibited remarkable annual growth, with “gross profits” soaring by 68.8%. In comparison, profits in the Mining and Personal Services sectors rose by 6.5% and 8.0%, respectively.

The significant increase in total GOS reflects a positive market sentiment that pervaded the economy throughout 2024, especially following the general elections and the establishment of the Government of National Unity (GNU), along with a more stable electricity supply since May 2024. This uptrend boosts production output and returns for all market participants, paving the way for a much-needed increase in investment in South Africa.

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