South Africa in bigger trouble than you think

South Africa’s GDP data published this week was worse than economists expected, showing that the country’s economy is stalling and the promise of recovery is fading fast.

While showing negligible growth of 0.1% for the first quarter of the year, the country’s overall GDP growth for 2024 was also revised downwards to 0.5%.

Economists anticipated flat growth for the quarter, but the downward revision for 2024 wasn’t expected. This spells big trouble for the country on multiple levels.

Firstly, it shows that long-term growth over the past 10 years or so has been incredibly flat, and the damage done to the economy through poor fiscal policy and lack of reforms has delivered a decade of wasted years.

The Organisation for Economic Co-operation and Development (OECD) published a South African review on Thursday (5 June) showing that GDP growth averaged just 0.7% over the last 10 years, not keeping up with population growth.

In real terms, the country has just been getting poorer.

Secondly, and more concerning, though, is that the latest GDP data shows that even the promise of growth from the waves of positive sentiment following the 2024 National Election have gone nowhere.

Bureau for Economic Research (BER) chief economist, Lisette IJssel de Schepper said that economic surveys have started swinging from hopeful around the end of 2024 to uncertain and bearish.

While many had once spoken of South Africa’s “reslience” and “bullish” outlooks, the economic reality is telling a very different story.

Notably, she said it was telling that 2% GDP growth was considered bullish, as South Africa needs 3%+ growth to actually turn the ship around, but even that target is now far gone.

She said that the BER’s “business cycle clock”, which pointed to an expansion in the past three quarters, moved back into recession territory in the second quarter.

Following the 0.1% print for Q1 2025, the BER’s forecast for full year growth is likely going to be cut again, dropping from 1.5% to 1%.

Several other economists, including Dawie Roodt, have said even 1% growth would be a miracle. Nedbank is also only forecasting GDP growth of 1% in 2025.

“Growth should improve to an average of 1.5% in the next three years, underpinned by easing structural constraints and higher consumer spending,” it said.

However, without rapid economic reform and a completely different approach from the government on spending, it is unlikely the country will see the growth it needs to change course.

There is more trouble ahead

If it was only the GDP print hanging over South Africa’s head, that would be one thing. But other data coming out this week has not been great.

Adding to the “depressing” mix of data was fixed investment declining in the first quarter, busines confidence sinking in the second quarter and the Absa Purchasing Manager’s Index also declining.

The BER said that the overall outlook for the country’s economy is bleak—a view echoed by South African Reserve Bank (SARB) governor Lesetja Kganyago, who said it was “not a pretty picture”.

Kganyago noted that South Africa is particularly vulnerable to global risks, and these, too, have again flared up significantly.

Geopolitical tensions are high, with peace talks between Russia and Ukraine stalling; the humanitarian crisis in Gaza continues to worsen; and US President Donald Trump’s trade war is heating up again.

Tensions between China and the US re-escalated this week, with Beijing accusing Washington of “severely” violating their trade agreement just days after Trump claimed China had “totally” breached the deal.

China’s Commerce Ministry criticised new “discriminatory and restrictive” measures, including US export controls on AI chips, and vowed to defend its interests.

According to official summaries, both sides agreed to continue talks, offering some glimmer of hope that the hold on the 100%+ tariffs will continue, but the situation remains in flux.

Meanwhile, the US doubled tariffs on steel and aluminium imports to 50% on Wednesday, particularly hitting close allies like Canada and Mexico.

The other axe that the world is waiting to drop is the end of the 90-day pause on Trump’s “reciprocal” tariffs announced in April, which included a 30% tariff on South Africa.

While South Africa has since been to the US to meet with the Trump administration over trade deals, no official news or announcement on the outcomes of said deals has been made.

The BER said that global trade disruptions are mounting, and the impact is already being felt in multiple markets.

“China’s export restrictions on critical minerals have already forced some European auto parts plants to halt production. BMW has warned that rare earth shortages are now affecting its supply chain,” it said.