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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
September 15, 2025

Gross Opertating Surpluss

A View on Company Profits 2024Q4

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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More Coverage

Gold and Foreign Exchange

September 2025
The South African International Liquidity Position, measured by Net Gold and Foreign Exchange Reserves, showed growth in both USD and Rand terms for September 2025.

Private Sector Credit Extension (PSCE)

August 2025
In August 2025, credit demand grew by 5.9%, slightly below the anticipated market prediction of 6.0% for the month. Since the initiation of interest rate cuts in September 2024, there has been a noticeable acceleration in overall credit growth, with most subcategories showing increases, particularly in July.

Internation Trade and Trade Balance

August 2025
International trade measures South Africa’s demand for foreign goods and services relative to its demand for domestically produced products in the global market.

The Rand’s Journey Against the Dollar in 2025

Unpacking the Undervaluation and Economic Implications
As of October 2025, the South African Rand is trading at R17.15 against the US Dollar, a significant figure in the context of an estimated average exchange rate of R18.20 from January to September 2025. Market analyses leveraging the Purchase Power Parity (PPP) exchange rate – calculated using inflation differentials between South Africa and the US from 2020 to 2025 – indicate that the Rand remains undervalued. This disparity suggests an alignment closer to R14.30 in a conservative estimation and potentially as low as R11.30, revealing a risk premium embedded in the current forex dynamics.

Unlocking South Africa’s Potential

Bold and Radical Shift in Policies are required.
South Africa’s economy recorded modest growth of just 0.8% during the second quarter of 2025, continuing a pattern of sluggish expansion that has persisted over the past decade. With the economy still struggling to break free from its constraints, serious reforms and strategic policy adjustments are essential if South Africa is to achieve sustainable growth rates significantly higher than the current 0.8% average.
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