‘Sad picture’ for South Africa’s economy

 ·18 Apr 2024

The latest downgrade of South Africa’s GDP growth prospects paing a worrying picutre for the country’s ability to tackle some of its biggest challenges.

The International Monetary Fund (IMF) published its 2024 World Economic Outlook, dropping its GDP growth projections for South Africa from 1.0% to 0.9%.

Projections for 2025 were also reduced by 0.1% to 1.2%, with growth of only 1.4% expected by the end of the decade.

Notably, South Africa’s growth prospects effectively halved from the October outtlook of 1.8% for 2024.

“The IMF’s latest World Economic Outlook Report slashing of 2024 GDP growth rate for South Africa paints a bad picture of the country’s ability to address its challenges despite all the efforts Government has put in place,” said Don Consultancy Group Chief Economist Mr Chifi Mhango.

“A sad picture being painted on the South African economy, where its GDP growth rate … is the second worse performing in the Sub-Saharan region, with Equatorial Guinea at 0.5% for 2024. While Economies such as Nigeria are being depicted to grow by 3.3% in 2024 from 2.9% in 2023.”

“Adding further to the sad news, is the IMF projection of rising unemployment for South Africa to 33.5% come end 2024.”

Mhango, who used to work for ArcelorMittal South Africa, PetroSA and Nedbank, said that the South African government has to be more active in deality with the structure challenges facing the country, such as its electricty, water and logistical infrastructure issues.

Mining companies, for instance, have recently cut production due to the inability to export products at the nation’s ports, which has also affected the exporting of manufactured goods.

In addition, personal consumption, which accounts for roughly 65% of GDP, is also seeing a declininng picture due to the high debt levels among consumers as well as the spending patterns being depressed by high costs of living.

Unemployment levels are also currently standing at 32.1%.

“The South African economy’s ability to attract the much-needed investment is also being eroded by the structural challenges mentioned above, hence the level of Investment to GDP is still below 20%, at almost 15%,” said Mhango.

“The Government fiscal constraints are also limiting the ability to divert resources to the productive side of the economy, as fiscal debt ballons.”

“The South African economy’s ability to trade effectively is also being limited due to the uncompetitive productive landscape such as rising costs of doing business (ie. electricity costs, logistical costs).”

Some businesses within the sector, including manufacturing, have either shut down or reduced operations amid the uncompetitive industry landscape, where imports are effectively gaining market share against local products.

“The year 2024 is an election year in South Africa, and that alone may provide grounds of uncertainty on policy matters, with predictions of coalition Government even at National level holding strong in international discussions.”

The only positive for South Africa’s economy is that GDP is still expected to grow from the 0.6% in 2023.

Mhango said that this means that not all is not lost for the South African economy to achieve much higher GDP growth rates, if efforts are geared to ensure that towards addressing the structural challenges in the economy.

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