South Africa’s economic landscape was bleak for the better part of a decade, Bianca Botes, director at Citadel Global, says. “Gross Domestic Product (GDP) growth averaged less than 1% per year, plagued by logistical challenges, crime, corruption and gross mismanagement. No surprises for guessing the South African economic climate for 2024 is looking pretty rocky at first glance. Economists are predicting a sluggish 1% growth in 2024 as the South African economic climate battles both global and domestic challenges. Unless otherwise indicated, references in this website to a ‘member firm’ or ‘member firms’ are references to member firms of KPMG International who are members in, or have other legal connections to, KPMG International, an English private company limited by guarantee. KPMG is the brand under which the member firms of KPMG International Limited (KPMG International) operate and provide professional services.

South Africa Economic Outlook January 2025

• Furthermore, manufacturing, construction, mining, and trade industries also contracted — of those, manufacturing and mining have faced more challenging circumstances due to ongoing electricity shortages, weaker freight and logistics capacity, and — in the case of mining — lower commodity prices.
• The Trade and Development Agency also has been actively involved in funding feasibility studies and identifying investment opportunities in South Africa for U.S. businesses.
• President Cyril Ramaphosa and the GNU have set an ambitious goal of achieving 3% GDP growth, but experts say this will require precise execution of reforms, increased investment, and strong public-private sector collaboration.

The South African economy remains under pressure going into 2024, mainly due to supply-side constraints in the electricity and logistics sectors. The economy only posted 0.3% year-on-year growth over the first three quarters, including a decrease of 0.2% year-on-year in the third quarter of 2023. Outlooks for 2024 and beyond have also moderated and are dependent on the (historically slow) speed of structural reforms, largely to address record levels of load shedding experienced during 2023. These are important steps in the right direction, but they remain paced and the results of greater confidence, and a continued focus on reforms and unlocking fixed investment spending will still take time to trickle through to faster and job-creating economic growth. And there will likely be bumps along the way, not least from the challenges that come with a coalition government (including divergent views on crucial policy areas, as already seen), but also from possible downside risks to growth in the global environment, linked to inflation, geopolitics, continued economic weakness in China, and others.

The economic costs of failure and inefficiency in these sectors have mounted over the past year, partly due to lack of investment but also due to mismanagement, corruption, and even theft. Reforms in the electricity sector – including lower restrictions on self-generation and reforms to encourage private investment – are expected to add over 11GW of renewable sources to help curb the power crisis in the medium term. With the electricity supply crisis continually weighing on economic growth, it is critical that these reforms continue to be implemented to curb power cuts, unlock investment and get the economy back on course. Still, the final reading of 2023 came in at 5.1% y-o-y in December, marking the second lowest reading of the year. The South African Reserve Bank (SARB) noted in its Monetary Policy Committee (MPC) meeting in January 2024 that although headline inflationary pressures at a global scale appear to be moderating, core inflation remains sticky. The MPC would like to see South African inflation trend further towards the midpoint of its targeting band of 3%-6% and subsequently made the unanimous decision to keep the policy rate unchanged at 8.25%, noting that risks to the upside remain for the inflation outlook.

Trade unions

South African companies which provide services related to the Space industry, also increasing, and with the correct government legislation and support, this sector is expected to grow in South Africa. In addition, household final consumption expenditure dropped, with decreases reported for durable goods, semi-durable goods and services. Business Tech reports that the United Nations’ (UN) World Economic Situation and Prospects report for 2024 believes South Africa’s debt crisis is likely https://www.momentum.co.za/ to worsen.

SA economy in 2024: bad news for rand, GDP and unemployment

As noted in a previous edition of this publication,32 various plans have been set in motion to address supply-side constraints via the reform program, Operation Vulindlela (OV), launched in 2020. The first phase of the program has focused on sectors including energy, rail, water, and telecommunications.33 The finance minister announced that this program will be expanded to include other areas as part of phase 2. In the first phase, reforms under OV have attracted over 390 billion rand in investment in the energy sector.34 The focus on the https://www.sanlam.co.za/ ongoing implementation of structural reforms—although at times painful and resulting in short-term trade-offs—is at the core of the GNU’s medium-term strategy.

Economy of South Africa

Compounding the problem, South Africa grapples with ongoing water and logistics crises, exacerbated by years of neglected infrastructure. Although the government has laid out plans to address these issues, tangible progress is expected to take years. Following the national elections on May 29, 2024, the African National Congress, in power since 1994, received only 40.2% of votes.1 Thus, unable to secure a parliamentary majority, it formed a coalition government with the centrist and pro-market Democratic Alliance—its main opposition—as well as other small parties.

Private enterprises have been driving the fixed-investment agenda and effective delivery of, in particular, energy infrastructure. However, they have also shown reluctance to invest given structural constraints, including tough operating conditions, crime and corruption, weak demand, and overall limited business confidence. Unlocking faster growth will require greater capital formation, and effective ways to deliver infrastructure to create the foundation for the economy to grow in the future. Household final consumption expenditure increased in the second quarter, with the highest growth rates reported for services and semi-durable goods. The main positive contributors to the increase in household final consumption expenditure were spending on the ‘other’ category, clothing and footwear and food and non-alcoholic beverages. In the second quarter GDP increased by 0.3%, with six of the 10 manufacturing divisions reporting positive growth in finance, real estate, business services and manufacturing.

Navigating toward a new normal: 2023 Deloitte corporate travel study

Furthermore, consumer confidence will likely remain low, largely due to high unemployment, but exacerbated by loadshedding and election uncertainty. In fact, top-of-mind issues for voters are unemployment, loadshedding, corruption, and crime,12 which have all taken a toll on the country’s growth performance for years. As part of an international attempt to modernize infrastructure, South Africa has faced increasing pressure to invest government funds into its water and electricity sectors. At current, these sectors are underfunded by approximately US$464 billion (This is according to the G20 GI Hub). This is characterised by several comprehensive government programs and organisations that provide resources and services to females, both adult and adolescent.

Botes says the formation of the GNU was seen as positive by market participants and assisted in the unwinding of some risk priced into the rand. She pointed out that the currency’s relative strength cannot be attributed only to South African factors. Annabel Bishop, chief economist at Investec, said at the beginning of the year that the most probable outcome for the rand was to end the year averaging between R18.17 and R19.09. The rand is now on track for its worst December performance since 2015 and its biggest quarterly decline in more than motsepe investment platform two years. From mounting debt, to the influence of elections, we look into our crystal ball to forecast the South Africa economic climate in 2024. “The Monetary Policy is expected to loosen further in 2025 as inflation remains below the target rate,” he concludes.

Software Architecture For Business

The slashed has further reduced South Africa’s growth outlook, taking off another 0.1 percentage points and 0.9% for the year. The IMF’s latest World Economic Outlook report stated that South Africa experienced a bleak output this year after the IMF slashed its growth outlook to 1% from 1.8% in January. South Africans, investors, and businesses will now look to 2025 and beyond, hoping for the fulfillment of promises that could steer the economy toward sustained growth. Despite the immediate challenges, the IMF has maintained its projections for 2025 and 2026 at 1.5% and 1.6%, respectively, with a gradual recovery expected over the medium term. Stats SA’s data for the third quarter of 2024 showed a surprising 0.3% contraction in GDP, with the agriculture, forestry, and fishing sectors taking a particularly hard hit, shrinking by a staggering 28.8%. Deloitte Insights and our research centers deliver proprietary research designed to help organizations turn their aspirations into action.