One thing that could go right for South Africa

 ·8 Mar 2024

Amid power outages, low growth, high unemployment, collapsing infrastructure and political tensions ahead of the 2024 elections, South Africa’s economy could get a much-needed boost from China.

This is at least one potential silver lining emerging from a week of bland-to-bleak economic news, headlined by fractional GDP growth for 2023 and South Africa barely avoiding a technical recession.

According to the Bureau for Economic Research (BER), it was much ado about nothing when it came to GDP figures this week, where barely-there quarterly growth of 0.1% helped the country escape a technical recession.

While it is true that the country skipped two consecutive quarters of decline, the reality is that the GDP print was poor and hardly a cause for celebration.

“The economy grew by a mere 0.6% in 2023. Taking a slightly longer-term perspective, it is depressing to note that the economy is barely 1% larger than it was in pre-pandemic 2019Q4,” the BER said.

South Africa’s economy struggled across the primary and sectors – and most of the country’ post-pandemic growth has been driven by the tertiary (services) sector, the group said.

“On the back of a very poor and volatile performance by the agriculture sector in recent quarters, the primary sector has now dwindled lower once more.

“The secondary sector, mainly manufacturing and construction, has moved sideways over the last three years without ever recovering to pre-Covid levels.

“On the expenditure side, investment is the biggest drag on growth, and lost further momentum in 2023Q4,” the BER said.

Worryingly, the RMB/BER BCI for Q1 suggests that sentiment among businesspeople in the South African economy remained very poor. This means that non-energy investment is set to remain lacklustre.

However, a potential silver lining for the South African economy could be stronger demand for local commodities from China, given the country’s economic stimulus drive, the economists noted.

“The Chinese government announced it is aiming for another ‘around 5% growth rate’ in 2024, after it achieved and slightly exceeded this in 2023. This is a much more ambitious goal than it ever was for 2023, as 2024 will not benefit from a low (zero-COVID-induced) base the year prior,” the BER said.

However, the BER said that, while this could prove to be positive for South Africa’s growth, it is not something to bank on just yet.

“It seems like there are too few targeted interventions to support the ailing property sector for it to have positive spillovers for our exports. In addition, the policy support announced so far has been underwhelming,” it said.

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